SMT. SARIFABIBI MOHMED IBRAHIM AND ORS.versusCOMMISSIONER OF INCOME TAX, GUJARAT

A            SMT. 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.

H         The Income-tax authorities sought to levy Capital Gains tax on the
                                      264
                  SMT. SARIFABIBI v. COMMR. OF LT.                        265

consideration received by the appellants treating the said land as non- A
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
                                                                            B
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
                                                                                 E
      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]

      1.2. Whether a land is an agricultural land or not is essentially a
question of fact and has to be answered in each case having regard to the        F
facts and circumstances of that case. There may be factors both for and
against a particular point ofview. The Court has to answer the question on
a consideration of all them. -a process of evaluation. The inference has t9 be
drawn on a cumulative consideration of all the relevant facts. [271-A, BJ

       1.3. The facts of the case-the appellants entering into the agreement G
to sell the land for housing purposes, obtaining permission to sell the land
for non-agricultural purposes under s.63 of the Bombay Tenancy and
Agricultural Land Act, 1948 and its sale soon thereafter, the land being
not cultivated for a period of four years prior to its sale coupled with its
location, the price at which it was sold, - do establish that the land was H
    266                   SUPREME COURT REPORTS [1993] SUPP. 2 S.C.R.

A   not an agricultural land when it was sold. The appellants had no intention
    to bring it under cultivation at any time after 1965-1966 • certainly not
    after they entered into the agreement to sell the same to a Housing
    Co-operative Society. Though, a formal permission under s.65 of the Land
    Revenue Code was not obtained by the appellants, yet their intention is
    clear from the fact of their application for permission to sell it for a
B   non-agricultural purpose under S.63 of the Bombay Tenancy and Agricul-
    tural Lands Act. [277-F-H, 278-A]

          C. WT. ,.1 ndhra Pradesh v. Officer-in-charge (Court of Wards), Paigah,
    105 I.T.R. 133, relied on.
c         Commissioner of Income Tax v. Raja Benoy Kumar Sahas Roy, 32
    I.T.R. 466, referred to.

        Sarojini Devi v. Sri Krishna, A.I.R. (1944) Madras 401; Commissioner
  of Income Tax, Gujarat-II v. Siddharth !.Desai, 139 I.T.R. 628 and Commis-
D sioner of Income-Tax v. VA.Trivedi, 172 I.T.R. 95, approved.

          CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4001-
    4004 (NT) of 1982.

         From the Judgment and Order dated 17.4.81 of the Gujarat,High
E   Court in I.T.R. Nos. 92, 72, 73 and 87of1976.

          B.K. Mehra and S.C. Patel for the Appellants.

         S.C. Manchanda, K.P. Bhatnagar and Ms. A. Subhashini for the
    Respondent.
F
          The Judgment of the Court was delivered by

          B.P. JEEVAN REDDY, J. Assessees are the appellants in these
    appeals preferred against the judgment of the Gujarat High court, answer-
G   ing the question referred to it in favour of the Revenue and against the
    assessees. The question referred under Section 256 (1) of the Income-tax
    Act is to the following effect :

             "Whether, on the facts and in the circumstances of the case, the
             Tribunal was right in holding that the land in question admeasuring
H            3085 sq. yds. excluding 2607 sq. yds. which was admittedly non-
       SMT. SARIFABIBI v. COMMR. OF LT. (JEEVAN REDDY, J.)              267

        agricultural land, was an agricultural land within the meaning of A
        section 2 (14) of the Income-tax Act, 1961 and therefore on sale
        thereof tax on capital gains resulting therefrom was not leviable ?"

     The assessees year concerned herein is 1970-71.

      The appellants in these four appeals are co-owners of a plot of land     B
admeasuring in all 30,885sq. yds., situated within the revenue limits of
Navagaon village. It is situated within the municipal limits of Surat
Murucipality and is situated at the distance of one km. from the Surat
railway station. This plot of land was purchased on 1st February, 1934 by
the ancestor of the appellants for a consideration of Rs. 5,425. After the     C
death of the said ancestor, the land as inherited by the father of the
assessees, who died on 10th February, 1966.

      On 28th March, 1958, a portion of the said plot to an extent of 2067
sq. yds. was converted to non-agricultural purposes after obtaining requi-
site permission under Section 65 of the Bombay Land Revenue Code. A \D
chaw! was built thereon. The remaining extent continued to be registered (
as agricultural land in the revenue records and land revenue was also being
paid by the assessees father. In these appeals, we are concerned only with
the said balance extent.

       On 15th March, 1967, the assessees agreed to sell the said land to a E
Housing Co-operative Society. To enable them to complete the transaction,
they applied, on 12th June, 1968 and 19th March, 1969 for permission
under Section 63 of the Bombay Tenancy and Agricultural Lands Act,
1948. Such a permission is required where agricultural land is sought to be
transferred for a non- agricultural purpose. The permission was granted on F
22nd April, 1969. A number of sale-deeds were executed in respect of the
said land between 9th and 30th of May, 1969. The purchaser (Housing
Co-operative Society) applied thereafter under Section 65 of the Bombay
Land Revenue Court for converting the said land to non-agricultural
purposes i.e., for construction of buildings. Indeed, it appears that it started G
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 contested the same contending that the H
    268                   SUPREME COURT REPORTS (1993) SUPP. 2 S.C.R.

A land sold is an agricultural land. The Income-tax Officer rejected the
    assessees' claim whereupon they approached the App-ellate Assistant
    Commissioner by way of appeals but without success. The appellants then
    approached the Tribunal. Their appeals were heard by a Bench of two
    members who differed among themselves whereupon the matter was
    referred to third member who held that the said extent of land is agricul-
B   tural land and, therefore, no capital gains tax is leviable thereon. The
    Revenue then obtained a reference under Section 256(1) of the Act which
    'Was answered in its favour by a Bench of Gujarat High Court. The High
    court set out the following facts militating against the appellants plea that
    the said land was an agricultural land on the date of sale :
c
            "(1) The land is situated a distance of 1 km. from Surat Railway
            Station.

            (2) It is within municipal limits and within a Town Planning
            Scheme.
D
            (3) It has been sold to a non-agriculturist for a non-agricultural
            purpose. It is sold to a co-operative housing society for construct-
            ing house and buildings.

            (4) It is sold at a per sq. yds. basis at Rs. 23 per sq.yd. on May 30,
E
            1969.

            (5) No agricultural operations such as growing of wheat, Bajra,
            Juwar, rice, groundnuts or cotton crop have been carried on for
            the last 4 years. Only grass for fodder is grown in the last year.
F
            (6) An application for permission to sell the land to a housing
            society under section 63 of the Land Revenue Code was made in
            August 1968 some nine months before the actual sale effected in
            May 1969, and it was granted on February 24, 1969, about a month
            prior to the actual sale.
G                                                                                    (
             (7) More than 15 years back a parcel of 2607 sq. yds. out of this
            very land was converted to non-agricultural user by constructing a
            chawl on it by the owners themselves after obtaining the requisite
            permission to convert the land to non-agricultural user under
H           section 65 of the Land Revenue Code.
       SMT. SARIFABIBI v. COMMR. OF LT. [JEEVAN REDDY, J.]                 269

        (8) Application to convert the land under transaction to non- A
        agricultural user was not made before the sale-deed was executed
        on 30th May 1969. It was subsequently made by the purchaser-
        housing society much latter. (But then permission could have been
        applied for if so desired and could not have been refused arbitrari-
        ly; it is common experience that it is granted almost as a matter B
        of course. In fact it is on record that the purchaser society com-
        menced actual construction on 2nd June 1969, that is to say, within
        3 days of the execution of the sale-deed in it favour by the assessees
        in anticipation of the permission.

        (9) No agricultural operations were carried on since 1964-65 till         C
        the sale in 1Q69."

      The High Court also mentioned the factors which supported the
appellants case. They are:

        "(1) It was still entered as agricultural land in the relevant records.   D
        (2) It was till the date of sale not converted to non- agricultural
        user.

        (3) Application for permission to convert necessary under section         E
        65 of the Land Revenue Code was not made till the date of Sale.

        (4) Agricultural operations were carried on the past."

       On a consideration of the contending factors the High Court held
that it must be held to be as a non-agricultural land.                            p

      Shri B.K. Mehta, learned counsel for the appellants assailed the
correctness of the conclusion arrived at by the High Court. Learned
counsel submitted that (a) the land was registered as agricultural in the
concerned revenue records till it was sold; (b) land revenue was being paid
thereon till the date of sale; (c) the land was under actual culiivation till it G
was sold, as evidenced by Pahani Patraks. At any rate the land was fallow
only during the years 1964-65 to 1967-68 on account of the illness and death
of the appellant's father but it was cultivated again in the year 1968-69; (d)
that the said land is surrounded by the agricultural lands. It was never put
to any non-agricultural use. Only a portion of 2067 sq. was converted to H
    270                    SUPREME COURT REPORTS [1993] SUPP. 2 S.C.R.

A   non-residential purposes in the year 1958 whereupon a chawl was built.
    The remaining land remained and continued to be agricultural land; (e)
    the appellants and their father had no other income except the income
    from this land. The mere fact that the land was situated within municipal
    limits is of no consequence inasmuch as cultivation can be done even on
B   lands situated within municipal limits. Similarly, the fact that the land was
    sold to a Housing Co-operative Society and the further fact that the said
    society used the land for housing purposes is irrelevant on the question
    whether the land was agricultural land on the date of its sale. The learned
    counsel submitted that applying the several tests evolved by the Gujarat
    High Court, on a review of the entire case law on the subject, in Commis-
C   sioner of Income-Tax, Gujarat- II v. Siddhmth J. Desai, (1391.T.R. 628), the
    said land must be held to be an agricultural land on the date of its sale.

           On the other hand, Sri Manchanda, learned counsel appearing for
    the Revenue supported the reasoning and conclusion of the High Court.
D   Counsel submitted that apart from the factors mentioned by the High
    Court in favour of its conclusion, there is the further fact that a town
    planning scheme (draft-scheme) was published in March, 1967 covering the
    said land and that by the date of the execution of the sale-deeds, the draft
    scheme was also declared.
E
           The sale-deeds concerned herein were executed in the month of May
    1969. By virtue of clause (viii) in Section 47 - which clause was inserted by
    the Finance Act, 1970 with effect from April 1, 1970 - "any transfer of
    agricultural land in India effected before the 1st day of March 1970" is
F   exempt from the levy of Capital Gains Tax. By the very same Finance Act,
    it may be mentioned, agricultural lands situated within the jurisdiction of
    municipalities and within a radius of 8 kms. of such municipalities as may
    be specified in that behalf by the Central Government [sub-clauses (a) and
    (b) in clause (iii) of the definition of "Capital Asset" in Section 2(14) of the
G   Act] were excluded from the purview of agricultural land but again with
    effect from april 1, 1970. Inasmuch as the land concerned herein was sold
    in May, 1969, it dies not fall within the mischief of the said sub-clauses (a)
    and (b) in clause (iii) of Section 2(14). If it was agricultural land, it is
    exempt from capital gains tax notwithstanding the fact that it is situated
H   gains with the jurisdiction of Municipality.
       SMT. SARIFABIBI v. COMMR. OF LT. [JEEVAN REDDY, J.]               271

      Whether a land is an agricultural land or not is essentially a question   A
of fact. Several tests have been evolved in the decisions of this Court and
the High Courts, but all of them are more in the nature of guidelines. The
question has to be answered in each case having regard to the facts and
circumstances of that case. There may be factors both for and against a
particular point of view. The Court has to answer the question on a             B
consideration of all of them - a process of evaluation. The inference has to
be drawn on a cumulative consideration of all the relevant facts.


       The first decision of this Court which considered the meaning of the
el;pression "agricultural land" is in Commissioner of Income Tax v. Raja C
Benoy Kumar Sahas Roy, 32 I.T.R. 466. But the question there was whether
the income from forest land derived from sal and piyasal trees, 'not grown
by human skill and labour' constitutes agricultural income? The decision
that directly considered the issue, though under the Wealth Tax Act, is in
C.W.T., Andhra Pradesh v. Officer-in-charge (Court of Wards),Paigah D
(hereinafter referred to as to 'Begumpet Place case') reported in (105
I.T.R. 133). It was an appeal from a Full Bench decision of the Andhra
Pradesh High Court. The High Court had taken the view, following a
decision of the Madras High Court in Sarojini Devi v. Sri Krishna, A.I.R.
(1944) Madras 401 that the expression "agricultural land" should be given E
the widest meaning. It held that the fact that the land is assessed to land
revenue as agricultural land under the State Revenue Law is a strong piece
of evidence of its character as an agricultural land. On Appeal, a Constitu-
tion Bench of this Court held that; (a) inasmuch as agricultural land is
exempted from the purview of the definition of the expression "assets", it
is "impossible to adopt so wide a test as would obviously defeat the purpose F
of the exemption given". The idea behind exempting the agricultural land
is to encourage cultivation of land and the agricultural operations. "In other
words this exemption had to be necessarily given a more restricted meaning
than the very wide ambit given to it by the Full Bench of the Andhra
Pradesh High Court". (b) What is really required to be shown is the G
connection with an agricultural purpose and user and not the mere pos-
sibility of user of land by some possible further owner or possessor, for an
agricultural purpose. It is not the mere potentiality but its actual condition
 and intended user which has to be seen for purposes of exemption. (em-
phasis added). (c) "The person claiming an exemption of any property of H
    272                   SUPREME COURT REPORTS (1993] SUPP. 2 S.C.R.

A his from the scope of his assets must satisfy the conditions of the exemp-
    tion." (d) "The determination of the character of land, according to the
    purpose for which it is meant or set apart and can be used, is a matter
    which ought to be determined on the facts of each particular case." (e) The
    fact that the land is assessed to the Land Revenue as agricultural land
B   under the State Revenue Law is certainly a relevant fact but if is not
    conclusive.

           That was a case where the question arose with respect to a large
    extent of 105 acres situated in the city of Hyderabad. The land was
    enclosed by a boundary wall, wherein there were two wells. The land was
C   abutting Hussain Sagar Tank. The Full Bench of the Andhra Pradesh High
    Court evolved the following eight indicators to determine whether a land
    is in agricultural land, viz.,:

             "(1) The words 'agricultural land' occurring in section 2(e) (i) of
D            the Wealth-tax Act should be given the same meaning as the said
             expression bears in entry 86 of List I and given the widest meaning;

             (2) the said expression not having been defined in the Constitution,
             it must be given the meaning which it ordinarily bears in the
             English language and as understood in ordinary parlance;
E
             (3) the actual user of the land for agriculture is one of the indicia
             for determining the character of the land as agricultural land;

             (4) land which is left barren but which is capable of being cultivated
F            can also be 'agricultural land' unless the said land is actually put
             to some other non-agricultural purpose, like construction of build~
             ings or an aerodrome, runway, etc., thereon, which alters the
             physical character of the land rendering it unfit for immediate
             cultivation;

G            (5) if land is assessed to land revenue as agricultural land under
             the State revenue law, it is a strong piece of evidence of its
             character as agricultural land;

             (6) mere enclosure of the land does not by itself render it a
H            non-agricultural land;
       Stv!T. SARIFABIBI v. COMMR. OF LT. [JEEVAN REDDY, J.]             273

        (7) the character of the land is not determined by the nature of A
        the products raised, so long as the land is used or can be sued for
        raising valuable plants or crops or trees or for any other purpose
        of husbandry;

        (8) the situation of the land in a village or in an urban area is not
        by itself determinative of its character."                              B
      The court characterised the indicator Nos. 6, 7 and 8 as merely
negative in character. It disagreed with (1) and (4) and observed that only
the 5th indicator was a relevant one though not conclusive. There was no
controversy regarding indicator No.3. Inasmuch as the matter was not            C
examined from the correct point of view, it wa.s remitted to the High Court
for a fresh decision.

      The decision of Gujarat High court in Commissioner of Income Tax,
Gujarat-II v. Siddharth !.Desai, 139 I.T.R. 628, relied upon strongly by the
learned counsel for the appellant, reviewed the several earlier decisions of D
the Gujarat High Court as well as the decision of this Court in Begumpet
Palace and has evolved the following 13 factors/indicators applying which
the question has to be answered. The 13 factors are the following :

        "(1) Whether the land was classified in the revenue records as          E
        agricultural and whether it was subject to the payment of land
        revenue?

         (2) Whether the land was actually or ordinarily used for agricul-
         tural purposes at or about the relevant time?
                                                                                F
         (3) Whether such user of the land was for a long period or whether
         it was of a temporary character or by way of a stop-gap arrange-
         ment?

         (4) Whether the income derived from the agricultural operations G
         carried on in the land bore any rational proportion to the invest-
         ment made in purchasing the land?

         (5) Whether, the permission under section 65 of the Bombay Land
         Revenue Code was obtained for the non-agricultural use of the
         land? If so, when and by whom (the vendor or the vendee)? H
    274                SUPREME COURT REPORTS [1993] SUPP. 2 S.C.R.

A         Whether such permission was in respect of the whole or a portion
          of the land? If the permission was in respect of a portion of the
          land and if it was obtained in the past, what was the nature of the
          user of the said portion of the land on the material date?

          (6) Whether the land, on the relevant date, had ceased to be put
B         to agricultural use? If so, whether it was put to an alternative use?
          Whether such cesser and/ or alternative user was of a permanent
          or temporary nature?

          (7) Whether the land, though entered in revenue records, had
          never been actually used for agriculture, that is, it had never been
c         ploughed or tilled? Whether the owner meant or intended to use
          it for agricultural purposes?

          (8) Whether the land was situate in a developed area? Whether
          its physical ch~racteristics, surrounding situation and use of the
D         lands in the adjoining area were such as would indicate that the
          land was agricultural?

          (9) Whether the land itself was developed by plotting and providing
          roads and other facilities?

E         (10) Whether there were any previous sales of portions of the land
          for non-agricultural use?

          (11) Whether permission under section 63 of the Bombay Tenancy
          and Agricultural Lands Act, 1948, was obtained because the sale
          or intended· sale was in favour of a non-agriculturist was for
F         non-agricultural or agricultural use?

          (12)_Whether the land was sold on yardage or on acreage basis?

          (13) Whether an agriculturist would purchased the land for agricul-
          tural purposes at the price at which the land was sold and whether
G
          the owner would have ever sold the land valuing it as a property
          yielding agricultural produce on the basis of its yield?

              At the risk of repetition, we may mention that not all of these
          factors would be present or absent in any case and that in each
H         case one or more of those factors may make appearance and that
       SMT. SARIFABIBI v. COMMR. OF LT. (JEEVAN REDDY, J.)                275

         the ultimate decision will have to be reached on a balanced A
         consideration of the totality of circumstances."

      In Commissioner of Income-Tax v. VA. T1ivedi, 172 I.T.R. 95 a
Division Bench of the Bombay High Court, of which one of us (S.P.
Bharucha, J.) was a member, considered this question again. In this case          B
the assessee had purchased the land of an extent of seven acres in February
1966. The land was covered by the Nagpur Improvement Trust Scheme. In
August 1966 he obtained permission to convert the said land to non-
agricultural use. In June 1968 he entered into an agreement with a Housing
Cooperative Society to sell three acres out of it. The sale-deed was ex-
ecuted in October 1968. In this assessment proceedings the assessee               C
claimed that the surplus income arising from the sale of land was exempt
from tax inasmuch as it was agricultural land at the time of its sale. The
matter reached the High Court. The Division Bench referred to several
facts established from the record. Some of them supported the assessee's
stand while some others militated against his contention. The facts found         D
in favour of the assessee were: (1) at the time of its purchase by the
assessee, the Ajni land was agricultural land; (2) it had been under cultiva-
tion by the assessee till the date of its sale, (3) it continued to be assessed
to land revenue as agricultural land until it was sold, (4) the intention of
the assessee, when he purchased it, was to acquire agricultural land for          E
agricultural purposes, (5) the assessee's use of it was the normal use by an
agriculturist, (6) it was nor within any Town Planning Scheme, and (7) no
materials has been produced to show any development or building activity
surrounding it. The facts which militated against the assessee's stand were
three in number - namely: (1) the location or the Ajni land within the
Corporation and the improvement trust limits; (2) the action of the asses-
                                                                                  F
see in obtaining on August 8, 1966, permission to convert the user of the
Ajni land to non-agricultural purposes, and (3) the agreement to sell and
the sale of the Ajni land for non-agricultural, i.e., building purposes.

      The Bench observed that to ascertain the true character and the G
nature of the land, it must be seen whether it has been put to use for
agricultural purposes for a reasonable span of time prior to the relevant
date and further whether on the relevant date the land was intended to
be put to use for agricultural purposes for a reasonable span of time 'the
future. Examining the facts of the case from the said point of view, the H
    276                   SUPREME COURT REPORTS (1993) SUPP. 2 S.C.R.

A Bench held that the agreement entered into by the assessee with the
    Housing Society is the crucial circumstance since it showed that the asses-
    see agreed to sell the land to Housing Society admittedly for utilisation for
    non-agricultural purposes. The sale-deeds were executed four months after
    the agreement of sale and even if any agricultural operations were carried
    on within the said span of four months, - the Bench held - it was evidently
B
    in the nature of a stop-gap arrangement. On the date the land was sold,
    the Bench held, the land was no longer agricultural land which is evident
    from the fact that the assessee had obtained permission even in August
    1966 to convert the said land to non-agricultural purposes.

C        Now let us examine the facts of the case before us in the light of the
  principles flowing from the above decision. But before we do that, it would
  be appropriate to clear the ground regarding the user of of the land till the
  date of sale. The land was undoubtedly under cultivation upto and inclusive
  of the agricultural year 1964-65. For the years 1965-66, 1966-67 and 1967-68
D the land was admittedly not cultivated. Certain grass naturally growing
  thereon appears to have been utilised. So far as the year 1968-69 is
  concerned, there exists a good amount of doubt whether it was or was not
  cultivated. The appellant's case was that they raised 'loni' grass said to be
  used as fodder for horses. They relied upon the entry in Pahani Patrak in
  this behalf. The third member of the Tribunal (to whom the matter was
E referred on a difference of opinion arising between two members who first
  heard the appeal) found the following facts which are mutually inconsis-
  tent: (a) there were unprecedented floods in the Tapti river in the Year
  1968 which rendered the said land useless for cultivation for a couple of
  months because of heavy accumulated layers of mud and slush; (b) the next
F monsoon sowing soon would have started in June, 1969 but even before
  that the land was sold in May, 1969; (c) there is evidence of agricultural
  cultivation and raising of 'loni' grass during the year 1968-69; (d) for a
  period of seven months from October 1968 to April 1969, the land
  remained uncultivated. In our opinion the above findings considered
  together do negative the theory of actual cultivation of the said land during
G any part of the year 1968-69. If there were floods in the Tapti river in the
  year 1968 - this must be during the months June to September - and there
  was no cultivation during the period October, 1968 to April, 1969, it is
  difficult to see when was the grass raised in the said land. We conclude,
  on the basis the facts found by the learned third Member, that there was
H no cultivation even during the year 1968-69.
       SMT. SARIFABIBI v. COMMR. OFI.T. [JEEVAN REDDY,J.]              277

        Now, we may consider the various circumstances appearing for and A
 against the appellant's case. The facts in their favour are: land being
 registered as agricultural land in the Revenue records; payment of land
 revenue in respect thereof till the year 1968-69; absence of any evidence
 that it was put to any non-agricultural use by the appellants; that the land
was actually cultivated till and including the agricultural year 1964-65; that B
there were agricultural lands abutting the said land and that the appellants
had no other source of income except the income from the said land. As
against the above facts, the fact appearing against their case: the land was
situated within the municipal limits - it was situated at a distance of one
kilimeter from the Surat railway station; the land was not being cultivated
from the year 1965-66 until it was sold in 1969; the appellants had entered
                                                                             c
into an agreement sale with a Housing Cooperative Society to sell the said
land for an avowed non-agricultural purposes namely construction of
houses; they had applied in June, 1968 and March, 1969 for permission to
sell the said land for non-agricultural purposes under Section 63 of the
Bombay Tenancy and Agricultural lands Act and obtained the same on D
22nd April; soon after obtaining the said permission they executed sale-
deeds in· the following month i.e., in May 1969; the land was sold at the
rate of Rs. 23 per sq. yd. and the purchaser-society commenced construc-
tion operations within three days of purchase. What is the inference that
flows from a cumulative consideration of all the aforesaid contending facts? E
This question has to be answered keeping the criteria evolved in Bequmpet
Palace case set out hereinbefore. In our opinion, the entering into the
agreement to sell the land for housing purposes, the applying and obtaining
the permission to sell the land for non-agricultural purposes under Section
63 of the Bombay Tenancy and Agricultural Lands Act an its sale soon p
thereafter and the fact that the land was not cultivated for a period of four
years prior to its sale coupled with its location, the price at which it was
sold do outweigh! the circumstances appearing in favour of the appellants'
case. The aforesaid facts do establish that the land was not an agricultural
land when it was sold. The appellants had no intention to bring it under G
cultivation at any time after 1965-66 - certainly not after they entered into
the agreement to sell the same to a Housing Cooperative Society. Though
a formal permission under Section 65 of the Land Revenue Court was not
obtained by the appellants, yet their intention is clear from the fact of their
application for permission to sell it for a non-agricultural purpose under
                                                                             H
    278                  SUPREME COURT REPORTS [1993) SUPP. 2 S.C.R.

A Section 63 of the Bombay Tenancy and Agriculturals Land Act.
           We are, therefore, of the opinion that the High Court was right in
    holding that the said land was not an agricultural land at the time of its
    sale and that the income arising from its sale was not exempt from the
    Capital Gains Tax. The appeals accordingly fail and are dismissed. No
B   costs.

    R.R.                                                   Appeals dismissed.