R.L. SANGANI, J.M. * Also Second ITO vs. Kantilal C. Kothari (ITA No. 4169/Bom/82; Asst. yr. 1963-64) and Second ITO vs. Champalal Kothari (I.T.A.No. 4170/Bom/82; Asst. yr. 1963-64). These three appeals relating to asst. yr. 1963-64 have been heard together and are being disposed of by this common order. 2 . On 14th May, 1962, Shri Champalal Harakchand Kothari who is assessee in ITA No 4170/Bom/82 entered into agreement with M/s Jaifabs Rayon Industries Pvt. Ltd., Bombay to purchase certain land at rate of Rs. 20 per square yard. Tha area mentioned in said agreement was 12341 sq. yds but on actual measurement that area was found to be 11400 sq. yds. said vendor had agreed to execute proper conveyance in favour of Champalal H. Kothari or his nominees. On same day, that is on 14th May, 1962, said Shir Champalal H. Kothari had entered into agreement with his wife Smt. Ichra Devi, his three minor sons, namely, Kantilal, Premchand and Ramniklal, and three minor daughters namely, Vijayalaxmi, Sushilakumari and Rajlaxmi, in which it was mentioned that said purchase by Champalal H. Kothari had been made for and on behalf of all those persons and that each one of them would have share in said property in proportion to his respective contribution towards purchase price. On 7th Oct., 1962, there was agreement between Shri Champalal H. Kothari and one Shri Prakash I. Bhatia under which Shri Champalal H. Kothari agreed to sell portion of aforesaid land measuring 1710 sq. yds at rate of Rs. 90 per sq. yd. This agreement contained clause whereby said Prakash I. Bhatia agreed to obtain conveyance directly for said company, either in his favour or in favour of his nominee. Shri Prakash I. Bhatia made agreement with one Shri Chaganlal D. Gugale to sell 1710 sq. yds. of land to him. On 30th March, 1963 said company executed two sale deeds one in favour of Shri Chaganlal D. Gugale in respect of 1710 sq. yds and other in favour of Shri Champalal H. Kothari, his wife and minor children referred to above, in respect of balance area of land admeasuring 9690 sq. yds. out of said 11400 sq. yds. On same day, that is 30th March, 1963, remaining plot admeasuring 9690 sq. yds. was divided into four plots and each plot was allotted to two of said eight purchasers mentioned in manner indicated below, area of each plot being in proportion to contribution made by them towards purchase price of land. Shri Champalal H.Kothari & 2,908 sq. 1. Rajalaxmi C. Kothari yds. Ichra Devi D. Gandhi and Sushila C. 2. 1,937" Kothari Kantilal C. Kothari and Vijayalaxmi C. 3. 1,937" Kothari Premchand C.Kothari and Ramniklal 4. 2,908" C. Kothari 9,690 sq. . . yds. On very date said four sets of co-owners entered into separate agreements M/s Bharat Building Co. Bombay, for leasing out their respective plot to said company. 3 . According to ITO, said Champalal H. Kothari was estate agent contractor, builder and estate broker, Shri C.D. Gugale to whom plot admeasuring 1710 sq. yds. was transferred was also estate agent and broker. sale proceeds obtained by sale on 1710 sq. yds. had been utilised for paying price of land purchased from company. All these facts, according to ITO, clearly indicated that in purchasing land from said company, Shri Champalal H. Kothari and seven members of his family constituted AOP who had motive to earn profit and as such, adventure was in nature of trade. ITO deducted Rs. 34,200 being purchase price of land admeasuring 1710 sq. yds. at rate of Rs. 20 per sq. yds. from said price realised for said area namely Rs. 1,53,900 and treated balance of Rs. 1,19,700 as business income. 4 . He rejected contention of assessee to effect that transaction was not in nature of trade but was investment made by family. surplus arising out of said transaction of Rs. 1,19,700 was not business income. He also rejected contention that said land was agricultural land and as such, did not come under category of capital asset, with result that provisions regarding capital gains were not attracted. 5 . It may be mentioned here that above finding was regarded by ITO in assessment proceedings of AOP of Champalal H. Kothari and seven others. said AOP had been asked to file return by notice under s.148 of Act, which had been issued with prior approval of CIT dt. 20th June, 1970. said AOP filed nil return and made submissions referred to above, which were rejected by ITO. However, assessment that ITO made on AOP in respect of said business income was on protective basis. He observed that assessments of members of said AOP would be reopened and share of income would be assessed in individual assessment of each member. Accordingly, he added Rs. 17,955 in individual assessment of Shri Kantilal s. Kothari. ITA No. 1280/Bom/82 arises out of proceeding of assessment of AOP, while ITA No. 4170/Bom/82 arises out of assessment proceedings of Shri Champalal Kothari as individual and ITA No. 4169/Bom /82 arises out of assessment proceedings of assessment of Shri Kantilal C. Kothari. 6. In appeal filed by Shri Champalal Kothari and others AOP CIT (A) held that land in question was at relevant time agricultural land and as such, it was not capital asset as defined in s.2(14) of IT Act. He further found that transaction was not adventure in nature of trade. Consequently, according to him surplus arising out of sale of 1710 sq. yds of land out of 11400 sq. yds. did not constitute either capital gain or business profit. said amount was not liable to be brought to tax. He, accordingly, cancelled assessment order. On basic of said order additions in individual assessments of Shri Champalal Kothari and Kantilal C. Kothari were deleted. Department has now filed these three appeals before us. 7 . We shall first consider question whether said land was agricultural land at relevant time. We are concerned with asst. yr. 1963- 64 and as such, law as its stood in that year will be applicable. Agricultural land, as already stated, is excluded from definition of capital asset and as such, any gain from sale of such land would not amount to capital gain. In order to determine whether particular land was agricultural land or not, one has first to find out if it is being put to any use at relevant time. If it is used for agricultural purposes, there is presumption that it is agricultural land. If it is used for non-agricultural purpose, presumption is that it is non-agricultural land. presumption arising out of user of land can, of course, be rebutted by other circumstances. determination of question would, therefore, depend on facts in each case. 8 . In present case, it is admitted position that at time of transaction land was open vacant piece of land. At that time, it was not being used for any non-agricultural purpose. latter of District Deputy Collector dt 8th Jan., 1968, addressed to Shri Chandulal K. Patel in respect of land bearing Survey No 161/1A and 161/2 recites that said land was being used for non-agricultural purposes form 1966. land with which we are concerned is also part of Survey No 161. There is no indication on record that land was used for non-agricultural purposes in accounting year relevant to asst. yr. 1963-64, with which we are concerned. In agreement dt. 14th May, 1962 between vendor company and Shri Champalal Kothari, land has been described as piece or parcel vacant agricultural land bearing survey Nos. 161/1A, 161/2A, 161/1B and Survey Nos. 28 and 29. vendor could not have described said land agricultural land if really said land had not been used for agricultural purpose prior to that time or had been used for non- agricultural purposes. No material has been brought on record to indicate that said recital in agreement was false. said land is described as agricultural land in indenture dt. 30th March, 1963 executed by company in respect of said land. CIT (Appeals) has observed that photostat copies of certificates issued by Talatihi and Bill Collector Ghatkoper indicated that paddy was being cultivated in land right from 1956 to 1963-64. authenticity of said record is not challenged. said entries clearly indicated that land was agricultural land till end of 1963. Subsequently, land revenue for entire period has been paid on basis that it was agricultural land. It is true that land revenue was paid subsequently. However, it pertains to reverent period. revenue authorities accepted land revenue on said basis that it was agricultural land at relevant time. All these facts clearly indicated that land in question was agricultural land at relevant time. All these facts have not been given due weight by ITO. CIT (A) has taken into account of these facts and come to conclusion that land in question was agricultural land at relevant time. After considering criticism levelled by ld. departmental representative against finding of CIT (A),we find that conclusion to which ld. CIT (A), we find that conclusion to which ld. CIT (A)has arrived at on this point is correct. We confirm said finding and hold that land in question was agricultural land at relevant time. Consequently, provision regarding capital gain would not be attracted. 9. next question to be considered whether transaction in question was adventure in nature of trade. In order to determine this question all surrounding circumstances are to be taken into account. total area of land purchased was 11400 sq. yds. Out of that area, only small portion measuring 1710 sq. yds. was sold within few months of purchase. balance area was not sold till date of hearing to arguments before us. said area was leased out to Bharat Building Co Bombay. lease was for 99 years. Champalal Kothari and members of family were entitled to receive only rent from said lease. assessee has produced before us figures of monthly rent for each of two plots, monthly rent is Rs. 1454.55, and Rs. 2185.25. Advance rent to be appropriated towards ground rent receivable ranged from Rs. 19,500. This clearly indicates that as far as remaining area of 9690 sq. yds. concerned same had certainly been purchased with view to make investment and not with view to carry on business of land. area of 1710 sq. yds. which has been sold part of entire land ofd 11,400 sq. yds. It was not any separate plot. In circumstances, sale of small portion of entire land purchased could not be presumed to be transaction in nature of trade particularly when major portion has been leased out on long lease and is certainly investment. We may also mention here that minors are associated with transaction of purchasers. It is well known that transactions of sale and purchase of immovable property present difficulties when minors are co-owners. This is because purchaser has to be satisfied that transaction is for benefit of minors. There is also risk that minor on attaining majority, may repudiate transaction. if intention had been to trade in land, Champalal Kothari would not have associated his minor children in transaction of purchase. Considering all circumstances, mere fact that small portion of land was sold within few months of purchase would not mean that transaction was in nature of trade. original intention appears to be that of investment and when it was found that very high price was being available within few months, portion of land were sold. If intention at time of purchase had been to deal in land, entire land or atleast large portion thereof would have been sold when very high price was available within few months of purchase. However, we find that only small portion of land was sold, while major portion was given on long lease. In circumstances, fact that Shri Champalal Kothari at relevant time was estate broker does not indicate that intention was otherwise. After considering entire circumstances, we are of opinion that ld. CIT (A) has arrived at correct conclusion in holding that there was no adventure in nature of trade and that transaction of purchase was entered into with view to make investment. 10. In this contention, decision of Kerala High Court inM. Raman Pillai vs. CIT(1964) 51 ITR 829 (Ker) on which Id. CIT (A) has relied is very significant. In that case building contractor had entered into agreement for purchase of land in important locality at Trivandrum and then had sold about 1/4th of that area to four persons. purchase had been made by raising fund from overdraft facility from bank. High Court took into consideration fact that large portion of land had been retained by assessee for himself and that transaction was not in nature of trade. facts in case are similar to facts in our case and that radio of that decision would apply. On behalf of Department, reliance was placed on decision inCIT vs Narasimha Reddi(1985) 44 CTR (Kar) 322 :(19 84 ) 160 ITR 347 (Kar). In that case facts were entirely different. assessee and his son in that case had purchased agricultural land in urban area and had then obtained permission for conversion of said land to non-agricultural purpose and thereafter land was divided in house sites were sold. It was on these facts that it was held that transaction was in nature of trade. In our case, as already stated, large portion of land has been given on long term lease and has not been sold. That decision is not applicable. Another decision on which reliance was placed isSawandas Devram vs. CIT(1983) 37 CTR (MP) 178: (19 84 ) 150 ITR 576 (MP). In that case assessee had purchased agricultural lands from Vendor made plots of those land and then sold them at profit. From these facts, it was held that real intention at time of purchase was not to retain land for himself, but to sell them at profit and as such, transaction was adventure in nature of trade. In our case, as already stated only small portion had been sold while very big portion had been retained and has been given on long term lease. Consequently, ratio of that decision would not be applicable. For reasons already given, we confirm order of CIT (A). We, accordingly, dismiss appeal relating to AOP of Shri Champalal Kothari and others. In view of above finding, share from surplus was not liable to be included in individual assessment of Champalal Kothari and Kantilal Kothari. Consequently, order of CIT (A) directing deletion of inclusion of said amounts must be confirmed. 11. In result all three appeals are dismissed. *** EIGHTH INCOME TAX OFFICER v. CHAMPALAL KOTHARI & ORS.