TaxTMI 
TaxTMI 
1986 (1) TMI 129
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed for agricultural purposes till the valuation dates and beyond, i.e., till its sale in December 1979. (iii) No application was made for its conversion to non-agricultural use by the assessee. (iv) It is surrounded by building sites and is in the heart of the developed area and within the municipal limits. (v) It is covered under Town Planning Scheme since long. (vi) The assessee entered into an agreement dated 8-11-1975 to sell the lands to a housing co-operative society. The agreed price was Rs. 175 per sq. yd. This agreement could not be carried out until the year 1979 due to a number of reasons as recorded by the AAC, i.e., non-fulfilment of conditions in the sale agreement, i.e., division of lands and issue of no objection under the Tenancy Act and also the Land Ceiling Act, by reason of which the land could not be sold. 3. The WTO held the land to be non-agricultural applying the decision of the Gujarat High Court in the case of CIT v. Sarifabibi Mohmed Ibrahim [1982] 136 ITR 621. The assessee had put forward the valuation at the rate of Rs. 10 per sq. yd. supported by the valuation report of a registered valuer. However, the WTO put the value at Rs. 175 per ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a high price showed that the assessee considered the land to be non-agricultural and that ultimately the sale in fact had taken place at that very price agreed upon though after three years. Regarding the valuation he stated that the reality of the price mentioned in the agreement was borne out by the ultimate actual sale and it was that price which was very near the valuation date which should be adopted. He countered the arguments of the assessee's counsel that the land could not be sold on the valuation date by saying that hypothetical market had to be presumed relying upon the Supreme Court decision in the case of Ahmed G.H. Ariff v. CWT [1970] 76 ITR 471. 7. The first question is whether the land is agricultural or not. This question has to be decided in the light of all the facts and it is the totality of the circumstances which decides the issue. This proposition has been laid down several times in various decisions by the Supreme Court and the High Courts. In the case of Officer-in-Charge (Court of Wards) it has been stated as follows: "... We agree that the determination of the character of land, according to the purpose for which it is meant or set apart and can be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een stated to be the essence of contract in the said clause 4. Thus, the assessee is benefiting by way of a high price because of the risk taken by the purchaser. He gets that price in spite of the fact that the said permission had not been obtained, because of the possibility that they may be granted which is the risk of the purchaser housing society. It is this possibility which is the basis of a high price. Now can it be said that the possibility of converting the land to non-agricultural use and sale for that purpose would make the land non-agricultural in character on the date when the agreement was entered into ? We are not inclined to hold that it would, particularly in view of the fact that the land was cultivated and used for agricultural purposes till its sales in 1979, i.e., four years after the agreement. This is a land of which the value has increased like non-agricultural land. But that does not make it non-agricultural. Its value has gone up because of its potential use as non-agricultural land but as observed by the Supreme Court in the case of Officer-in-Charge (Court of Wards): "... What is really required to be shown is the connection with an agricultural purp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in municipal limits and covered by Town Planning Scheme. These are relevant factors but only along with the other factors within the assessee's control. For these factors the assessee is not responsible. It would be difficult to say that the character of the assessee's land has changed because of the actions of others. In order to decide that question the most important factors to be taken into consideration are those for which the assessee himself is responsible. That is why the above agreement has been taken into account. 13. The WTO has relied upon the decision of the Gujarat High Court in the case of Sarifabibi Mohmed Ibrahim but in that case no agricultural operations such as growing wheat, bajra, jowar, rice, etc., had been carried out at any time during four years before the material date. Only grass for fodder was grown in the last year. No doubt, the Gujarat High Court applied the crucial two-fold test but it did so in the totality of the facts and circumstances. After summarising all the important circumstances of the case which included the fact that no agricultural operations except growing grass were carried out, it observed at page 626 that "all these facts and the....