Agricultural land exemption requires ordinary agricultural use on valuation date; probable compensation and Yanam property were includible in net wealth.

Forest land bearing trees of spontaneous growth was held not to be "agricultural land" for wealth-tax purposes because the decisive test is its ordinary use on the valuation date, not its mere capability of agricultural use. Probable compensation receivable under the abolition and ryotwari statute was treated as an ascertainable debt and therefore includible in total wealth, even though final quantification and future instalments remained pending. The Yanam property was also includible, as exclusion of assets outside India was available only to taxpayers satisfying the statutory conditions, which were not met here. The reference accordingly upheld inclusion of all disputed assets in net wealth.

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Issues: (i) Whether forest lands bearing trees of spontaneous growth constituted agricultural lands exempt from inclusion in net wealth; (ii) whether the probable compensation receivable from the Government under the abolition and ryotwari statute was includible in the assessee's total wealth; (iii) whether the value of the property situate in Yanam was includible in the assessee's total wealth.

Issue (i): Whether forest lands bearing trees of spontaneous growth constituted agricultural lands exempt from inclusion in net wealth.

Analysis: The expression "agricultural land" was construed with reference to its ordinary and natural meaning, namely land ordinarily used for agriculture or for purposes subservient to or allied to agriculture. Mere capability of possible agricultural use was held insufficient. The decisive test was the present character and ordinary use of the land on the valuation date. On the record, the forest lands were not shown to be ordinarily used for agricultural operations or allied purposes.

Conclusion: The forest lands did not qualify as agricultural lands and were not exempt from inclusion in net wealth. The finding is against the assessee.

Issue (ii): Whether the probable compensation receivable from the Government under the abolition and ryotwari statute was includible in the assessee's total wealth.

Analysis: The amount was treated as a debt due to the assessee, even if its final quantification awaited determination. A probable and ascertainable amount already shown by the assessee in the return was sufficient for inclusion. The fact that future instalments or final adjustment remained pending did not prevent the sum from constituting an asset within the wealth-tax definition.

Conclusion: The probable compensation amount was rightly includible in total wealth. The finding is against the assessee.

Issue (iii): Whether the value of the property situate in Yanam was includible in the assessee's total wealth.

Analysis: Exclusion of assets and debts outside India under the wealth-tax provision was available only to persons who satisfied the statutory conditions, which the assessee did not. No other provision entitled her to exclude the Yanam property. The statutory reduction for assets outside India was the only relevant relief, and the inclusion was therefore legally permissible.

Conclusion: The Yanam property was includible in the assessee's total wealth. The finding is against the assessee.

Final Conclusion: All three referred questions were answered in a manner that upheld inclusion of the disputed items in wealth computation, leaving the assessee unsuccessful in the reference.

Ratio Decidendi: Land is "agricultural land" only when, on the valuation date, it is ordinarily used for agriculture or for purposes subservient to or allied to agriculture; a mere possibility of agricultural use does not suffice for exemption under the wealth-tax scheme.

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