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

Citation: [1993] SUPP. 2 S.C.R. 264 · Decided: 14-09-1993 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed

Judgment (excerpt)

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 
Court. 
B 
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 
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 
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 
E 
F 
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 

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