Law: Income Tax Act, 1961

Section: 2,(14)&45

Income-tax----Capital gains---Capital asset---Exclusion from capital asset---Agricultural land---Tests to determine if land is agricultural---Totality of relevant facts must be taken into consideration---Land situated in most important business centre of a city---Land entered in municipal records as urban land and urban land tax paid thereon---Part of land used for construction of non-residential buildings---Mere fact that vegetables were grown in the land as stop-gap activity---Is not conclusive that land was agricultural---Profits on sale of such land assessable as capital gains---Indian Income Tax Act, 1961, Ss.2(14) & 45--[Gemini Pictures Circuit (P.) Ltd. v. CIT (1981) 130 ITR 686 reversed]. The question whether a particular land is agricultural land has to be decided on a totality of the relevant facts and circumstances. There may be circumstances for and against. They have to be weighed together and a reasonable decision arrived at. One has to take a realistic view and see how the persons selling and purchasing it understood it. The tests evolved by the Courts are in the nature of guidelines. No hard and fast rules can be laid down in the matter, for the reason that it is essentially a question of fact. Property comprising 17 acres, 16 grounds and 825 sq. ft. situated on Mount Road, Madras, was purchased by one G in 1944. G sold an extent of 79 grounds 242 sq. ' ft. (roughly four acres and odd) out of it to the assessee under a registered sale-deed, dated October 27, 1950. The extent purchased by the assessee comprised a hotel building as well. After purchasing the said land, the assessee constructed two buildings over an extent of 20 grounds towards the north. A common road of a width of 25 ft. was also constructed. Excluding the area covered by the three buildings, their frontage and the road, an extent of 39.1 grounds was still left vacant. On this land, the assesee raised bananas. From 1962, it grew vegetables thereon. In the year 1966-67, the assessee executed three sale deeds. All these sale-deeds were in respect of the vacant land comprised in the 39.1 grounds aforesaid. In the proceedings relating to its assessment for the assessment year…

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