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IN THE HIGH COURT OF GUJARAT
B.J. Divan, B.K. Mehta, JJ.
Commissioner of Income-Tax, Gujarat-II - Applicant
Versus
Vajulal Chunilal - Respondent
Income-tax Reference Nos. 287 of 1975 and 5, 70 and 71 of 1976
Decided On : 06-02-1979
INCOME TAX - Partition of HUF property - Recognition of partition under section 171 of the Income Tax Act, 1961 - Agricultural land - Sale of agricultural land to a non-agriculturist - Permission under section 63 of the Bombay Tenancy and Agricultural Lands Act - Whether the land was agricultural land at the date of sale - Interpretation of section 171 and section 63.
Fact of the Case:
The assessee, a HUF, owned 23 acres and 17 gunthas of land at Adajan village in Surat District. The land was purchased by the assessee's father in 1929 and was being used for agricultural purposes since then. In 1964, the assessee entered into an agreement to sell 43,985 square yards of land to a firm called Skyline Land Corporation. In 1968, there was a partial partition of the land belonging to the family and an area covering 43,985 square yards of land was given to the assessee. On the same day, the assessee executed a sale deed in favour of Kalpana Co-operative Housing Society for the aggregate sum of Rs.7,11,237. The assessee applied to the Collector of Surat for permission under section 63 of the Bombay Tenancy and Agricultural Lands Act to sell the land to a non-agriculturist. This permission was granted by the Assistant Collector of Olpad Division, Surat. The land was not converted to non-agricultural use as contemplated by section 65 of the Bombay Land Revenue Code prior to the date of sale, but on an application made by the chairman of the Kalpana Housing Society, permission for non-agricultural user was granted by the District Development Officer, Surat, on March 10, 1969.
Finding of the Court:
The Tribunal held that the partition was valid but that the land was non-agricultural land on the date of sale. The Tribunal also held that the assessee was not entitled to recognition of the partial partition under section 171 of the Income Tax Act, 1961.
Issues: 1. Whether the Tribunal was right in holding that the land sold to Kalpana Co-operative Housing Society was non-agricultural in character when it was sold? 2. Whether the Tribunal was right in holding that there was a valid partition of the land in question and, therefore, the capital gains arising out of the sale transaction between Devidas Sunderlal and the Kalpana Co-op. Housing Society were not taxable in the hands of the assessee.
Ratio Decidendi: 1. The Tribunal erred in law in disregarding the presumptions arising from the actual user of the land for agricultural purposes and the entries in the revenue records. The Tribunal also erred in considering the effect of the permission granted under section 63 of the Bombay Tenancy and Agricultural Lands Act. 2. The partition was valid and the assessee was entitled to recognition of the partial partition under section 171 of the Income Tax Act, 1961.
Final Decision: Question No. 1 referred to us in References Nos. 70 and 71 of 1976 which is at the instance of the assessee, must therefore be answered in the negative, that is, in favour of the assessee and against the revenue. For the same reasons, the question referred to us in Reference No. 287 of 1975 is answered in the negative, that is, in favour of the assessee and against the revenue. Question in Reference No. 5 of 1976, as we have already indicated, must be answered in the affirmative, that is, in favour of the assessee and against the revenue.
JUDGMENT :
B.J. Divan, J.
All these four references arise out of the same set of facts and are inter-related. The order of the ITO in Reference No. 287 of 1975 is by way of protective assessment in case the department loses in the case out of which Reference No. 71 of 1976 arises. Similarly, I.T. Reference No. 5 of 1976 is also in connection with the same transaction out of which I.T. References Nos. 70 and 71 of 1976 arise. Hence, all these four matters are being disposed of by this common judgment. In I.T. References Nos. 70 and 71 of 1976, two questions have been referred to us, one at the instance of the assessee and the other at the instance of the revenue for our opinion. Question No. 1 is:
2. This question has been referred to us at the instance of the assessee. The second question is:
3. This question No. 2 has been referred to us for our opinion at the instance of the revenue.
4. We are concerned in this case with assessment year 1969-70, the relevant previous year being Samvat 2024. Samvat 2024 ended on October 21, 1968. The assessee is a HUF in the name of Vajulal Chunilal-HUF. The assessee-family owned 23 acres and 17 gunthas of land at Adajan village in Chorashi Taluka of Surat District. These lands were purchased by Vajulal Chunilal on June 29, 1929. At that time, the lands were in four survey numbers, namely, survey Nos. 464, 465, 470 and 471 on Adajan village. The total area aggregated to 25.17 acres. Between 1929 and 1964-65, some parts of survey Nos. 464 and 465 were acquired under the Land Acquisition Act for construction of roads and two acres of land were taken away from the family under the Land Acquisition Act, leaving the family with 23 acres and 17 gunthas of land that means 1,13,375 square yards of land. On July 22, 1964, the joint family entered into an agreement with a firm called Skyline Land Corporation to sell 43,985 square yards of land out of its total holding and the price which was agreed was Rs.45,001 per bigha which works out to Rs. 16.17 per square yard. In Surat District, one acre is equivalent to 1.75 bighas of land. The agreement to sell, dated July 22, 1966, mentioned that the agreement was to sell 25 to 30 bighas of land but on actual measurement, it was subsequently ascertained with reference to the map and other documents that the agreement to sell covered 43,985 square yards of land. On May 8, 1968, there was a partial partition of the land belonging to the family and on that partial partition, out of the several coparcener's of the family, an area covering 43,985 square yards of land was given to Devidas, who is the assessee in Income-tax Reference No.287 of 1975. It may be pointed out that Vajulal Chunilal who purchased the land in 1929 died in 1950 leaving behind him six grandsons. Vajulal had only one son, Sunderlal, and Sunderlal predeceased Vajulal, having died on June 1, 1947. After 1950, that is, after Vajulal's death, the joint family consisted of six sons of Sunderlal and their descendants. The six sons were Natwarlal, Vadilal, Manharlal, Harshadray, Yashwantray and Devidas. Under the deed of partition, an area aggregating to 43,985 square yards was allotted to Devidas Sunderlal. Devidas was entitled to one-sixth share in the joint family properties. Devidas agreed with his five brothers to pay each of them a sum of Rs. 1,09,795.83 as the share of each of them in the lands admeasuring 43,985 square yards. On the very day on which the partition de
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