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The Income tax Act does not define the term ‘agriculture’. The A O in Shankar Dalal v CIT [2017] 10 ITR-OL 733 (Bom) gave a finding that though the land was located beyond the specified limits from the municipal limits, i.e., beyond 8 kms, yet it is to be treated as capital asset since no agricultural operations were carried out regularly and it was sold to a company engaged in the business of development of infrastructure activity.


The Bombay High Court chose not to go by the age old judicial pronouncements based line of arguments of the AO/Tribunal and instead held that what is of relevance is evidence of the “agriculture” activities on such land recognized under the local land law. As in this case the land was situated in Goa the Court referred to the following definition of ‘agriculture’ as contained in the Goa, Daman and Diu Land Revenue Code, 1968 (Code) and the Rules made thereunder:


“2. (1) ‘agriculture’, with its grammatical variations and cognate expressions, means raising of useful or valuable products which derive nutriment from the soil with the aid of human labour and skill and includes horticulture, dairy farming, poultry farming, stock breeding and grazing.”


Going by it therefore according to the Court the definition of “agriculture” itself permitted, any unused land can be used and utilized even for grazing, horticulture, dairy farming, stock breeding. In this case the various trees planted such as mango trees, cashew trees, jackfruit trees, coconut trees, kokum trees, acacia trees and wild trees and the fruit products derived from it are being consumed for their private purposes which in the Courts opinion, in no way, can be or should have been the foundation against them to hold that it was never used and/or unusable or remained unused for any agricultural activities. It also held that merely because the assessees could not produce and/or could not use and utilize the land fully by employing labourers and/or unable to give the crop statements should not have been the criteria, specifically when the assessee’s and the owners of the land had been using the products for their personal consumption.


The Court further held that the burden lies upon the Department to disprove and/or place material on record to show that activities or no activities or do use or no use of such land do not fall within the ambit of “agriculture” so defined under the Code. The decision taken by the Revenue Department by overlooking this provision and Code is impermissible, unacceptable and so the demand and the penalty. It further held that by any act or inaction of unauthorised use of agricultural land to non-agricultural purpose, in no way, legally converts such agricultural land to non-agricultural land


The High Court therefore pushed aside all the following arguments of the revenue as irrelevant in considering the agricultural or non agricultural character of the land in question:


  1. use and/or non-use and/or being unused for specific agricultural purpose for want of labour;
  2. agricultural operations or no-agricultural operations;
  3. Regular income or no specific regular income;
  4. use of agricultural produce for own consumption or for sale;
  5. own labour and/or skill or hired labour

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