Land classified as agricultural cannot be deemed urban unless legally reclassified; prior agricultural status remains unless changed.

(Judgment of the Court was delivered by Dr.G.Jayachandran J.)

These Tax Case Appeals have been filed by the assessee, G.Rangaswamy (HUF), being aggrieved by the orders passed by the Tribunal in WTA Nos.21, 33, 34 and 35/Mds/2002 for the assessment year 1993-94 to 1997-98, respectively.

2. At the time of admitting the appeals in T.C.A. Nos. 201 to 204 of

2011, this Court framed the following substantial questions of law:

“1.Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the agricultural lands measuring about 57.5 cents held by the appellant at Krishnarayapuram Village, Coimbatore should be classified as urban land under Section 2(ea)(v) of the Wealth-tax Act and subject ot tax?

2.Whether on the facts and in the circumstances of the case, the Tribunal erred in not appreciating that the agricultural land on which no construction is permitted cannot be considered as urban land in view of explanation (b) to Section 2(ea)(v) of the Wealth-tax?”

3. The short point involved in this case is as below:-

Through a partition among the family members, the assessee acquired 57.5 cents of land in Krishnarayapuram Village, Coimbatore. This land was previously exempted from the urban land ceiling, as proceedings issued by the Revenue Authority classified it as agriculture land. Based on this classification, the assessee sold the property in 1995 as vacant land without any conversion. However, in 1996, the Department assessed the income under the Wealth-tax Act, 1957, contending that the property sold falls within the meaning of “urban land” under Section 2(ea)(v) of the Wealth-tax Act.

4. The assessee has contested this assessment on the ground that he was holding the land as an agricultural land, carrying on agricultural activities and sold it as an agricultural land. It had never qualified as “urban land” as defined under Section 2ae(v), especially given the legal provisions barring its conversion or construction of land without permission. Despite being a vacant agricultural land, it has been construed by a stretch of imagination as urban land under the definition provided in Section 2(ea)(v) of the Act.

5. For a better appreciation of the issue, we have extracted the relevant provisions of Section 2(ea)(v) below:

“

2.Definitions.- In this Act, unless the context otherwise requires,-

…...

(ea) “assets” in relation to the assessment year commencing on the 1^st day of April, 1993, or any subsequent assessment year, means_

……. ……. …….

(v) Urban land.”

The relevant portion of the Act excludes land which, though falling within the general definition of “urban land” requires the permission of the authorities for any construction to be put on the said land.

6. The learned counsel appearing for the appellant submitted that the assessee had no intention of putting up any construction on the land, nor was any construction carried out on the land or seek any permission for putting up any construction. While the land all along been classified as agricultural land and was exempted from the urban land ceiling, the Assessing Authority as well as the Appellate Authority of the Tribunal failed to apply law properly. Without taking note of the facts and the evidence produced, they erroneously concluded that the land though claimed to be an agricultural land, was not used for agricultural activities as the assessee had failed to prove such operations were being carried on.

7. A plain reading of the provision extracted above, as well as the provisions of the Town and Country Planning Act, clearly indicates that land classified as agricultural in the revenue records cannot be used for any other purpose unless the classification