“Section 2(14)(iii)”
The decision most relied on for Section 2(14)(iii) is CWT v. Officer-in-Charge (Court of Wards), Paigha (105 ITR 133), cited in 93 judgments on BharatTax.
Leading authorities on Section 2(14)(iii)
The character of land as agricultural land or a capital asset is a question of fact determined by the cumulative effect of all circumstances. Classification in revenue records alone is not conclusive evidence of agricultural use; actual agricultural operations must be proven.
The case is cited for various issues including the definition of capital assets, reassessment procedures under sections 153A and 153C, and the effect of clarificatory amendments.
This case lays down 13 specific tests and factors for determining whether land qualifies as agricultural land under the Income-tax Act. It holds that obtaining permission to sell agricultural land for non-agricultural purposes shortly before the sale does not automatically alter its agricultural character.
The addition of cash deposits to an assessee's income under Section 68 is justified when the Assessment Officer notices huge cash deposits, as the onus is on the assessee to explain their nature and source.
Expenses are to be apportioned among various units based on turnover, a method approved by the Supreme Court. The method of allocating exempt income by way of dividends to total gross revenue is also upheld.
The potential for non-agricultural use or the purchaser's intention does not alter the agricultural character of land for capital gains purposes if it was agricultural at the time of sale and prior use. Market conditions leading to a high price do not change the essential nature of the land.
Transfer of land not falling under section 2(14)(iii) of the Income Tax Act, where the land is recorded as agricultural in revenue records and the assessee is engaged in agricultural operations, cannot be considered a transfer of a capital asset.
If agricultural operations are being carried out on land at the time of sale and revenue records indicate it is agricultural land, a presumption arises that it is agricultural in character, which the revenue must rebut. Permission to convert land to non-agricultural use does not render it non-agricultural if not obtained before the sale.
