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

CIVIL APPEAL No. 4001/1982Supreme Court1993 INSC 29414 September 1993Bench: 2 JudgesAuthor: B.P. JEEVAN REDDY, S.P. BHARUCHA SMT. SARIFABIBI MOHMED IBRAHIM AND ORS.15 pages
AI SummaryDismissed

What were the facts?

The appellants, co-owners of a plot of land measuring 30,885 square yards within municipal limits of Surat and revenue limits of Navagaon village, appealed against a capital gains tax levy. A portion of the land was converted to non-agricultural use in 1958. The remaining land was registered as agricultural and land revenue was paid. In March 1967, the appellants agreed to sell the land to a Housing Cooperative Society for construction. They obtained permission under Section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, for non-agricultural transfer and executed sale deeds in May 1969. The purchaser immediately began construction. The Income Tax Officer and Appellate Assistant Commissioner rejected the appellants' claim that the land was agricultural and thus exempt from capital gains tax. The Tribunal initially held it was agricultural, but the High Court, on reference by the Revenue, ruled against the assessees.

What did the Supreme Court hold?

The Supreme Court held that the High Court was correct in ruling that the land was not agricultural land at the time of its sale and that the income from its sale was not exempt from Capital Gains Tax. The Court emphasized that whether land is agricultural is a question of fact determined by cumulative consideration of all circumstances. The facts against the appellants included the agreement to sell for housing purposes, obtaining permission for non-agricultural transfer under Section 63 of the Bombay Tenancy and Agricultural Lands Act, the land not being cultivated for four years prior to sale (1965-66 to 1968-69), its location within municipal limits near a railway station, and the price at which it was sold. These factors, the Court found, outweighed the arguments in favour of it being agricultural land. The intention to use the land for non-agricultural purposes was clear from the application for permission and subsequent sale, even without formal permission under Section 65 of the Land Revenue Code. The Court dismissed the appeals.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the land in question, admeasuring 30,885 sq. yds. (excluding a portion admittedly non-agricultural), was an agricultural land within the meaning of Section 2(14) of the Income-tax Act, 1961, and therefore, tax on capital gains resulting from its sale was not leviable? Assessee's contentions: The land was under actual cultivation, registered as agricultural land in revenue records, and land revenue was paid. It was surrounded by agricultural land, never used for non-agricultural purposes by the appellants, and the appellants had no other income. The land's location within municipal limits was irrelevant, as cultivation could occur there. The purchaser's use of the land for housing was irrelevant to its status at the time of sale. Revenue's contentions: Not recorded.

Which sections of the Income-tax Act were involved?

Section 2(14),Section 63,Section 65

AI-generated summary — verify with the full judgment below

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 juri iction 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-agricultur

The order continues below.

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