Smt. Sarifabibi Mohmed Ibrahim And Ors v. Commissioner Of Income Tax, Gujarat

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SARIFABIBI MOHMED IBRAHIM AND ORS. v. COMMISSIONER OF INCOME TAX, GUJARAT SEPTEMBER 14, 1993 [ B.P. JEEVAN REDDY AND S.P. BHARUCHA, JJ.] Income TaxAc~ 1961-S.2(14)-''Capital asse•s"-Capital Gains Tax--Exemption from-"Agricultural land"-Factors determinative of-Land C situated within revenue limits of a village as well as within jurisdiction of a Municipality-Registered as agricultural land in revenue recordS-Cultivation not done for four years prior to its sal~o intention to bring land under cullivation-Permission w sell land for non-agricultural purposes under s.63 of Bombay Tenancy and Agricultural lands Act 1948 granted-Land Sold to Housing Co-operative society for construction of houses--Held, land was not D an agricultural land at the time of its sale and income arising from its sale was not exempted from Capital Gains Tax. The appellants' predecessor-in-interest was owner of a plot of land admeasuring 30,885 square yards situated within the revenue limits of a village as well as within the municipal limits of a municipality at a distance E or one Kilometre from the City Railway Station. In 1958, a portion of said plot was converted to non-agricultural purpose after obtaining permission under s.65 or the Bombay Land Revenue Code and a chawl was built thereon, but the remaining extent continued to be registered as agricul-tural land in the revenue records and land revenue was being paid thereon. F In March 1967, the appellant-assessees agreed to sell the land to a Housing Cooperative Society. They applied for and were granted permission under s.63 of the Bombay Tenancy and Agricultural Lands Act 1948 to transfer the said land for a non-agricultural purpose. Thereafter, a number of sale-deeds were executed in respect of the said land between 9th and 30th G May, 1969. The purchaser (Housing Cooperative Society) applied under s.65 of the Bombay Land Revenue Code for converting the said land to non-agricultural purposes, that is, for construction of buildings and started the construction activity within three days of the execution of the sale deeds in its favour. The Income-tax authorities sought to levy Capital Gains tax on the consideration received by the appellants treating the said land as non-agricultural land. The appellants claimed that the land sold was an agricultural land, but their claim was rejected by the Income Tax Officer. Their appeals were also dismissed by the Appellate Assistant Commis-sioner. On further appeal, the Trihunal held that the land was agricultural land and, therefore, no capital gains tax was leviable thereon. The refer-ence at the instance of the Revenue was decided iu its favour by the High Court. In appeals to this Court by the assessees, it was contended on their behalf that the land was under actual cultivation, and was registered as agricultural laud in the revenue records till it was sold, and the land C revenue was being paid thereon; the land was surrounded by the agricul-tural land.; it was never put to any non-agricultural use; the appellant's had no other income except the income from the land; the fact that the land was situated within municipal limits was of no consequence inasmuch as cultivation could be done even on lands situated within municipal limits; and the fact that the land was sold to a Housing Cooperative Society D which used the land for housing purposes was irrelevant to the question whether the land was agricultural land on the date of its sale. Dismissing the appeals, this Court HELD : 1. The High Court was right in holding that the land was not an agricultural land at the time of its sale and that the income arising from its sale was not exempted from the Capital Gains tax. [278-A]