JUDGMENT
1. On being directed by this court under [SECTION] of the [ACT], the Income-tax Appellate Tribunal, Patna Bench, has made statement of the case on the undermentioned question of law :
" Whether, on the facts and in the circumstances of this case, the exclusion of sum of Rs. 18,542 taxed under the head ' Capital gains', from the total income of the assessee by the Tribunal is legal and proper within the meaning of [SECTION] of the [ACT] ? "
2. In terms of [SECTION] of the Act any profits and gains arising from the transfer of " Capital asset" is chargeable to income-tax under the head " Capital gains " and is treated to be the income of the previous year in which the transfer took place. " Capital asset " has been defined in [SECTION] of the Act as not including, inter alia, agricultural land in India. Subsequently, however, by an amendment made in the year 1970, " agricultural land " which is not to be included in the " capital asset" has been restricted. Since, however, the restriction does not affect the assessment in question, it is not necessary to mention it. All that is necessary to be stated is that " capital asset" did not include agricultural land in India.
3. The question involved arises out of sale of land and that is why I have mentioned the relevant provisions of the Act before stating the facts of the case.
4. The facts relevant, as stated by the Tribunal, are that the assessee is an HUF, which sold during the relevant previous year for the assessment year 1967-68, seven kathas six chhatak and thirty square feet of land situated at Hazaribagh Road. [ENTITY], in village Konka, out of holding Nos. 45, 46, 47 and 48 to one Mrs. [ENTITY] for a consideration of Rs. 22,250. The ITO charged the transaction to capital gains tax, on the ground that in the last 2-3 years no agricultural operation had been carried on on the land. According to him, although the land was agricultural in the past, yet because of the development of the town, it had acquired the character of urban properties. On one side of the land there was Lalpur Police out-post and some land had also been purchased by the income-tax department for construction of staff quarters. He also stated that the land had been sold for the purpose of construction of building. On these facts, he held that the character of the land did not retain agricultural character and, therefore, it was transfer of capital asset within the meaning of [SECTION] of the Act, to which income-tax was attracted.
5. The AAC confirmed the action of the ITO of charging the capital gains on the sale of land to tax. The assessee (opposite party) then appealed to the Income-tax Appellate Tribunal which found, on the basis of an enquiry, which was made at its instance, by an inspector of income-tax, fhe following facts:
(i) the Malguzari receipts granted by the State Government indicated the character of the land as Hakast Kheti ;
(ii) The entry in the record of rights showed the land as Raiyati Kriski;
(iii) It was a low land and from local enquiry it was found that it was being used for agricultural purposes previously, but for last 2-3 years it was not being so used;
(iv) The land adjoining on the southern side was being used for growing vegetables, fruits and other crops. Only on its western side some land had been purchased by the income-tax department and on which side also lay the Lalpur police out-post.
6. On the basis of these factual materials, the Tribunal came to the con clusion that the land in question was agricultural land, the transfer of which could not be subjected to tax on capital gains.
7. The department being aggrieved by this decision has got the matter referred for opinion of this court.
8. Mr. [ENTITY] appearing for the department, urged that the Tribunal went wrong in its conclusion, because it had left out of consideration two of the basic facts, namely, (1) the land had been sold for the purpose of construction of building ; and (2) had it not obtained urban character, it could not have fetched a sum of Rs. 22.000 odd for sale of just a small piece of 7 kathas odd of laud. According to Mr. [ENTITY], even if the land had been agricultural in nature, admittedly, it had ceased to have that character at the time when it was sold. He, therefore, submitted that the question must be answered in favour of the department and against the assessee.
9. It cannot be gainsaid that if the seller sells parcels of land for the purpose of constructing house thereon, that fact can be one of the criteria for determining the character of the land; so also the location of the land. If the land is situated in the heart of the town surrounded by residential houses, the normal presumption would be that the land is not an agricultural land, although the presumption could be rebutted. All that we mean to say is that the facts stated by Mr. [ENTITY] could also be some of the criteria for determining the character of the piece of land, but by themselves they would not be sufficient for the purpose. It would all depend upon the facts and circumstances of each case and it is only on an overall view of all the situation pertaining to the land, that the character of the land can be properly determined.
10. Agricultural land has not been defined in the Act and there have been a series of cases on the question relating to the criteria to determine the character of a land, claimed to be an agricultural land. The Supreme Court in the case of [PRECEDENT], has said that the classification and assessment of the land to land revenue as " agricultural land " is one of the criteria. The other criterion as has been laid down in the case of [PRECEDENT] and in the case of [PRECEDENT], is whether agricultural operations are carried on on the land. " Agricultural operations " in the said two cases has been defined as denoting the cultivation of the field by tilling the land, sowing of the seeds, planting and similar operations on the land. The third criterion is, whether the land is capable of agricultural operations. There may be cases in which, for one reason or the other, actual agricultural operations might not have been carried on and yet the owner has always intended to use it for agricultural purpose. The intention of the owner, as has been pointed out in one of the decisions of this court in the case of [PRECEDENT], however, should not be a fluctuating and ambulatory intention, but something definite and more objective, something related to the nature and character of the land and not varying from time to time,
11. We can very easily visualize a case, where a cultivator being forced by circumstances has to abandon his old house and has to construct a thatched house on some portion of his agricultural land, which although he starts using in that manner, but with an intention to go hack to his old house and thereafter restore the land for his agricultural purposes. The example which we have quoted above, gives us an idea of another criterion which has to be kept in mind for determining the character of land, namely, that a mere temporary user of a land in a particular fashion, either for agricultural purposes or for non-agricultural purposes, will not be a safe criterion. What has to be determined is the intention of the owner about the purpose for which he is retaining the land.
12. In fact, the Gujarat High Court in the case of [PRECEDENT] has expressed the same view. It has held that in order to determine whether a particular land is agricultural land or not, one has first to find out the use to which it is being put: If it is used for agricultural purposes, the presumption is that it is agricultural land ; if it is used for non-agricultural purposes, the presumption is that it is non-agricultural land. The presumption, however, is rebuttable because there may be cases where land which is admittedly non-agricultural land is being used temporarily for agricultural purposes.
13. The fourth criterion is the character of the adjoining lands. If the surrounding lands are agricultural lands, the presumption would be in favour of holding that the land in question was also agricultural land.
14. The fifth criterion is the description of the land in the official records. It goes a long way in the direction of helping determination of the character of the land.
15. These are some of the criteria which we have been able to find out. There may be several more, but the whole point is that one criterion or two criteria by themselves will not be a safe guide to the determination of the character of the land as to whether it is agricultural land or non-agricultural land.
16. Now, as Mr. [ENTITY] suggested, there were two factors (which he has stated) which went to show that the land was a non-agricultural land. " As we said earlier, those two factors by themselves will not be a safe guide to the determination of the character of the land. For the matter of that, judging from the number of criteria on each side, whereas the number of criteria in favour of the department are only two, in favour of the assessee are at least double that number. Be that as it may, the question which has to be decided is whether the criteria which the Tribunal has adopted for determining the nature of the land were valid and correct. We have already quoted the various factors which the Tribunal has taken into consideration for determining the nature of the land and we must say that each one of them is a very valid and cogent factor for the purpose of determining the character of the land. The two criteria, about which Mr. [ENTITY] spoke, may be relevant even as supporting the view which the Tribunal has taken, the land may lie near an urban area and the land may have fetched a good price, may hold good in cases of agricultural land also. Since the land has been recorded in the official records as agricultural land, if the department wanted to show that the entry was wrong, it should have given some concrete facts in that direction. For example, it could have shown that the land lay within the municipal limits of the town of [ENTITY] or that the assessee had made his entire plot of land into parcels and was selling each one of them for the purpose of constructing a house thereon. The fact that the purchaser has purchased it for the purpose of constructing his house has no relevance, because so far as the seller is concerned, he Will be deemed to have parted with the agricultural land in the form of agricultural land, unless it is proved otherwise. The department has not brought up any such material on the record by which it could be said that the criteria adopted by the Tribunal for determining the character of the agricultural land was wrong. In our view, on the facts as stated by the Tribunal, its conclusion that the land sold by the assessee was an agricultural land is valid and correct.
17. In the result, the question is answered in the affirmative and against the department. The assessee will be entitled to costs and hearing fee, Rs. 250.