This article is written by Advocate Nishit Paul, pursuing M&A, Institutional Finance and Investments Laws(PE and VC transactions) from LawSikho. Here he discusses what is Diversion and why it is necessary.

Introduction

The Law in reference to this Article is taken from Madhya Pradesh Land Revenue Code, 1959. The law of Land Revenue is an exchequer for the holding of State land and the payment for the holding of land to the State Government. The Land Revenue Code lays down the procedure on how the Land is to be assessed and the Revenue to be levied on the Holder of the Land. The Land is charged according to its use by the Holder as per the latest assessment of the land and in case the Holder has to change the Use of the Land or purpose then a Diversion of land is needed to be done. Generally, the land use is changed from agriculture to non-agriculture purpose. This Article will discuss how the diversion is done and its procedure before the Revenue Courts and why it is necessary to be done.

What Is The Object Of Diversion?

First we need to understand the object of Land Revenue; it is a comprehensive Code which encompasses all aspects pertaining to the land. The scheme of the code related to ownership of all lands is vested in the State and the Government has to power to make rules in pursuant of ownership and ‘land revenue’ which has been discussed, the whole code in brief here.

A Diversion happens when the holder of the land redefines the use of the land from agriculture to a non-agriculture purpose. Therefore, the law defines two sets of ‘land use’ accordingly Agriculture and Non-Agriculture use of the land.

• Conditions for Diversion

For the purpose of Diversion, an assessment for the land is done as per the use of the land, the holder has to determine the use on the following grounds or purpose:-

1. In case the purpose of agriculture, a farmhouse being situated on the holding of one acre or more;
2. A site for dwelling house purposes.
3. For an educational purpose.
4. For Industrial purpose.
5. For the commercial purpose.
6. For the purpose of mining under a mining lease within the meaning of the Mines and Minerals (Regulation and Development) Act, 1957.
7. For the purpose other than those specified from the above points.

Where the said land before diversion was free from land revenue or there was no land revenue charged upon it after diverting it into any one of the above purposes it shall be liable to the payment of land revenue and assessed in accordance with the purpose to which it has been diverted.

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The land revenue shall be charged as the land assessed for the use for any one of the above purpose and to be diverted into for that purpose. The land revenue will be as upon the last assessment which has been fixed and has not expired that will be levied according to the purpose to which it has been diverted.

• The Assessing Officer

Sub-Divisional Officer shall be the Assessing Officer who is to be referred for the alteration or assessment to be carried out.

• Some Concessions In Special Cases

1. Charitable Purpose: A premium will not levy for the diversion of land for a Charitable purpose.
2. Micro Small and Medium Enterprise (MSME): In case of MSME, only half of the assessed land revenue shall be payable for a holding up to two hectares used exclusively for the purpose of an MSME.
3. Diversion to Agriculture Land: No premium shall be levied in case the land is diverted back for Agricultural purpose and shall be avail all the benefits under the law may prescribe.
4. Dwelling House: No premium shall be levied in the diversion for residential purpose of dwelling house in a non-urban area of which area is less than 100 sq.meter.

How Assessment and Premium Is Calculated?

The fixation of the fees and the premium on diversion of land is done as per the rules framed by the Government as provided under ‘Rules Regarding Alteration of Assessment and Imposition of Premium’, the notification was last published on 10th July 2014 by Revenue Department of Government of Madhya Pradesh. The following are the conditions for the assessment and calculation of premium:

1. Alteration of Assessment

1. When land already diverted to a non-agricultural purpose and re-assessed on that basis is re-diverted to an agricultural purpose, the assessment as re-fixed shall be equal to the agricultural assessment on the land as fixed as per the last settlement.
2. When land already diverted to a non-agricultural purpose and assessed on that basis is re-diverted to an agricultural purpose and there is no agricultural assessment to fall back upon, the assessment on re-diversion shall be fixed at the rate adopted for similar soil in the same village or in a neighbouring village at the last settlement.
3. Where land assessed for use for anyone purpose is diverted to any other purpose, assessment thereon shall be revised and the land revenue shall be fixed in accordance with rates specified as per Column (4) of the below Table. Provided that where land is diverted into more than one non-agricultural (mixed use), the assessment thereon shall be fixed in proportion to the purposes specified as per in the below Table.

2. Imposition of Premium

1. No premium shall be imposed in case the land assessed and diverted from a non-agriculture to an agriculture purpose.
2. Where land assessed for use for anyone purpose is diverted to any other purpose and land revenue is fixed thereon the premium shall be imposed according to the corresponding rate as provided in the below table.
3. In the event of the land diverted to non-agriculture purposes being re-diverted to agriculture or to any other purpose, the holder of the land or the successor-in-title will not be entitled to get a refund or set off of the amount of premium already paid for diversion.
4. All changes in assessment on account of diversion shall be brought on the record-of-rights and other record prescribed under the law and necessary corrections shall also be made in respect of the survey numbers or plot numbers.

 

S.No	Use of Land	Rate of Premium	The rate for re-assessing the land revenue.
(1)	(2)	(3)	(4)
1	For residential purpose for dwelling house	1% of Market Value of agriculture land	0.2% of the market value of agriculture land
2	For educational purpose- If the area diverted is up to 1 hectare. For excess land, if the area diverted is more than 1 hectare.	1% of Market Value of agricultural land 0.5% of Market Value of agriculture land	0.2% of the Market Value of agricultural land 0.1% of the Market Value of agricultural land
3	For Industrial purpose	1% of Market Value of agricultural land	0.2% of the Market Value of agricultural land
4	For commercial purpose	2% of Market Value of agricultural land	0.4% of the Market Value of agricultural land
5	For mining purpose specified in clause (f) of sub-section(1) of Section 59*needs citation to the concerned section*	1% of Market Value of agricultural land	0.2% of the Market Value of agricultural land
6	For Charitable purpose	No Premium shall be levied	0.2% of the Market Value of agricultural land.

 

What Happens After Diversion?

The following are the consequences for diversion of land :

1. Land Revenue as per the fair assessment of the demarcated land : The land revenue shall be paid according to the assessment the land and for the purpose it is used which will be determined by the last Assessment in that area as notified by the Government, irrespective for the assessment which was fixed has not expired, otherwise, it will be altered and assessed accordingly to the rules framed by the Government with the purpose to which it  has been diverted.

In case where the assessment has not been fixed the assessment of land revenue shall be made by the Collector in accordance with rules provided under the Code.

2. A Separate Survey Number is Demarcated: After diversion of land where the purpose of the land has been changed from agriculture to a non-agricultural purpose that portion of the land is specially assigned by the Settlement Officer after assessment into a separate survey number or sub-division of a survey number.

3. Re-Numbering or Sub-dividing Survey Numbers: The Settlement Officer may either renumber or sub-divide survey numbers into as many sub-divisions as may be required in view of the acquisition of rights in land.

Why It Is Necessary?

As per The Land Revenue Code, a Land is considered as an account and the account holder is known as the ‘Bhoomiswami’ or the Holder. The Holder has to pay land revenue to the Government at every 30 years period as per the purpose the Land is in use by the Holder. The following are the necessary reasons for diversion of land -:

1. Land Use: The Holder has to maintain its rights in the Records of the Government about the land use because the land revenue is payable as per purpose or use of the land. If the Land is used for any other purpose than agriculture or other purposes where land revenue is not payable as per the Government, the Holder of land will be held liable to pay penalty for this instance. It is an obligation of any person who holds the right, interest or liabilities of the land to enter in the records or register it by requisition in writing to any Revenue Officer, Revenue Inspector or Patwari who is engaged in compiling or revising the records or register upon receiving of such requisition within one month from the date of receiving all such information.
2. Penalty: The person neglecting to make a report or produce information related to the change in holding rights and shall be liable as per the discretion of the Tahsildar to a penalty not exceeding one thousand rupees, which shall be recoverable as an arrear of land revenue.  

SIMILAR LAWS IN OTHER STATES

S.No	State Act	Provision
1.	The Madhya Pradesh Land Revenue Code, 1959	S.59: Variation of land revenue according to the purpose for which land is used
2.	The Maharashtra Land Revenue Act, 1965	S.44: Procedure, for the conversion of use of land from one purpose to another.
3.	The Karnataka Land Revenue Act, 1964	S.95: Uses of agricultural land and the procedure for use of agricultural land for other purposes
4.	The Delhi Land Revenue Act, 1954	S.24: Reversion of agriculture

 

Conclusion

The State Government has the power to levy land revenue on all land under different heads as per, the assessment of revenue on the land. It can reassess and re-fix the land revenue liable on such a parcel of land where the use of which is converted or diverted. In such a case a onetime premium on such conversion is lived as per the Revenue Code. The Diversion of land is the record of the Holder for which purpose the land is used. The State present several classes of land based on which it determines the land revenue by a proper assessment. It also determines the holder having its rights and liabilities with the land or in case of a transfer, the new holder is on to change the use of land. This whole process of assessment of land and land revenue adds revenue to the Exchequer for the State Treasury.   

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