Jasveer Singh, Ludhiana V. ITO, Khanna

ITA 1134/CHANDI/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1583 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 22-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Question of law
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 1134/CHD/2014 ASSESSMENT YEAR: 2010-11 SHRI JASVEER SINGH , VS THE ITO, C/O JASVEER SAW MILLS, WARD II, KOHARA ROAD, KHANNA. MACHHIWARA, LUDHIANA. PAN: BHPPS4945D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 17.08.2015 DATE OF PRONOUNCEMENT : 25.08.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS)-II LUDHIANA DATED 28.11.2014 FO R ASSESSMENT YEAR 2010-11 CHALLENGING THE ADDITION OF RS. 29,00,100/- MADE BY ASSESSING OFFICER IN THE RETURN ED INCOME BY TREATING THE SALE OF POPULAR TREES AS ADV ENTURE IN NATURE OF TRADE AND NOT AGRICULTURE INCOME. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER HAD RECEIVED INFORMATION THAT ASSESSEE HAD DEPOSITED RS. 40,02,500/- IN CASH IN HIS BANK ACCOU NT IN HDFC BANK LTD. THE ASSESSEE SUBMITTED THAT HE HAD 2 RECEIVED R. 39,32,000/- FROM SALE OF POPULAR TREES AND RS. 2,05,000/- FROM SALE OF OLD AGRICULTURAL MACHINERY AND THE PROCEEDS FROM THESE SALES WERE DEPOSITED IN THE BANK ACCOUNT. THE ASSESSEE SUBMITTED THAT HE HAD PURCHA SED 1214 POPULAR TREES @ RS. 850/- PER TREE FOR RS. 10,31,900/- AS PER AGREEMENT DATED 01.06.2006 FOR F OUR YEARS WITH SHRI OM MURARI SEVA SAMITI, SAMRALA. TH ESE POPULAR TREES WERE SOLD IN THE FINANCIAL YEAR 2009- 10 FOR RS. 39,32,000/-. THE ASSESSING OFFICER POINTED OUT THAT NO INCOME OUT OF THIS ACTIVITY HAD BEEN SHOWN IN TH E RETURN AND NO BOOKS OF ACCOUNT HAVE BEEN MAINTAINED . THE ASSESSING OFFICER POINTED OUT THAT THIS RECEIPT CANNOT BE TREATED AS AGRICULTURE INCOME BECAUSE TREES WERE PLANTED BY THE OWNER OF THE ESTATE AND THEY GROW SPONTANEOUSLY. IT WAS ACCORDINGLY ADVENTURE IN THE NATURE OF TRADE. THE ASSESSING OFFICER ALSO ASKED TO FURNISH DETAILS OF THE EXPENSES INCURRED BY ASSESSE E FOR GROWING THESE TREES. THE ASSESSEE SUBMITTED THAT EXPENSES INCURRED FOR THE PURPOSE OF AGRICULTURE I. E ELECTRICITY CHARGES ARE EXEMPT. IT WAS ALSO SUBMIT TED THAT SINCE ENTIRE INCOME WAS EXEMPT, THEREFORE IT W AS NOT INCLUDED IN THE RETURN OF INCOME. THE ASSESSING OF FICER WAS, HOWEVER, NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND NOTED THAT THE BASIC OPERATIONS FOR DO ING AGRICULTURE OPERATION HAVE NOT BEEN DONE BY ASSESSE E WHICH REQUIRES HUMAN SKILL AND LABOUR UPON THE LAND . THE ASSESSING OFFICER POINTED OUT THAT ASSESSEE HAD NOT DONE ANY ACTIVITY ON THE LAND AND HAS PURCHASED SMA LL 3 GROWN UP POPULAR TREES AND SOLD THE SAME IN THE YEA R UNDER CONSIDERATION. THE ASSESSING OFFICER RELIED UPON DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT V RAJA BENOY KUMAR SUHAS ROY 321 ITR 466 AND MADE T HE ADDITION OF RS. 29,00,100/- ( RS. 40,02,500/- - RS. 10,31,900/-). 3. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND IT WAS SUBMITTED THAT THE BANK ACC OUNT IN HDFC BANK LTD. IN WHICH CASH WAS DEPOSITED WAS OPENED UNDER THE AGRICULTURE SCHEME CATEGORY WHICH PROVES THAT ASSESSEE IS AN AGRICULTURIST. THE ASSE SSEE HAD TAKEN CARE OF THE POPULAR TREES FOR FOUR YEARS AFTE R THE SAME WERE PURCHASED AND ONLY THEREAFTER, DURING THI S PERIOD POPULAR TREES WERE SOLD. THE ASSESSEE REFER RED TO THE TERMS OF THE AGREEMENT AND POINTED OUT THAT THE LAND WAS TAKEN ON THEKA AND ASSESSEE WAS LIABLE TO CUT ALL THE POPULAR TREES WITHIN FOUR YEARS. IT WAS POINTED OU T THAT LAND HAD BEEN TAKEN ON LEASE WITH THE SMALL POPULAR TREES GROWING IN THE LAND AND ASSESSEE HAD WORKED THERE O VER THE PERIOD OF FOUR YEARS TO BRING THE SAID TREES TO SALEABLE POSITION. THE ASSESSEE HAD PERFORMED ALL THE BASIC OPERATIONS WHICH ARE REQUIRED FOR THE UPBRINGING OF THE PLANTS/TREES. THE ASSESSEE HAD MAINTAINED THE LAND BY GIVING THE DESIRED FERTILIZERS. THE ASSESSEE HAD P ERFORMED THE LABOUR WORK UPON THE LAND AND HAS MANAGED TO GI VE WATER TO THE GROWING POPULAR TREES BY WAY OF GENERA TOR OR ELECTRICITY. THE ASSESSEE, THEREFORE, SUBMITTED TH AT IN 4 ORDER TO CONSIDER THE INCOME AS AGRICULTURAL INCOME , FOLLOWING THINGS ARE ESSENTIAL I.E., (I) THERE MAY BE A LAND; (II) THE LAND MUST BE USED FOR AGRICULTURE PURPOSES ; (III) LAND CULTIVATION; (IV) THAT OWNERSHIP OF LAND IS NO T ESSENTIAL. IT WAS SUBMITTED THAT ANY ACTIVITY WHIC H IS IN THE NATURE OF AGRICULTURE ACTIVITY, WILL REMAIN THE SAME IRRESPECTIVE OF THE FACT THAT WHO IS PERFORMING OPE RATION ON THE LAND. IN THE CASE OF THE ASSESSEE, THE SEED S FOR POPULAR TREES HAD BEEN GROWN BY THE FIRST PERSON AN D AFTER THAT, ALL THE ABOVE ACTIVITIES HAD BEEN PERFORMED B Y THE ASSESSEE. THE FIRST PARTY HAD SOWN SEEDS AND GOT A N AMOUNT OF RS. 10.31 LACS FOR LEASE OF THE LAND AND FOR SALE OF THE SMALL TREES. THE ASSESSEE HAD DONE FURTHER ACTIVITIES AND AFTER SELLING THE TREES, EARNED THE AGRICULTURE INCOME. THE INCOME EARNED BY THE ASSESS EE THUS, CANNOT BE TREATED IN THE NATURE OF BUSINESS. THE ASSESSEE ALSO RELIED UPON DECISION IN THE CASE OF R AJA BENOY KUMAR SUHAS ROY (SUPRA) AND SUBMITTED THAT TH E INCOME IN THE CASE OF THE ASSESSEE WAS AGRICULTURE INCOME. THE ASSESSEE ALSO RELIED UPON DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V SRM COTTON & OIL MILLS REPORTED IN 174 TAXMAN 503. 4. THE LD. CIT(APPEALS) CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE AGREEMENT AND NOTED THAT ASSESS EE WAS MERELY INVOLVED IN THE PURCHASE OF AGRICULTURE PROD UCE AT THE GROWING STAGE AND SALE THEREOF. THE ASSESSEE I S NOT OWNER OF THE LAND AND HAD NOT CARRIED OUT ANY BASIC 5 OPERATION OF AGRICULTURE. NO EVIDENCE OF DOSES OF FERTILIZERS HAVE BEEN FILED. THE LD. CIT(APPEALS), THEREFORE, REJECTED THE CLAIM OF ASSESSEE AND DISMISSED APPEAL OF THE ASSESSEE. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMI TTED THAT ALL BASIC OPERATIONS HAVE BEEN CARRIED OUT BY ASSESSEE AFTER TAKING THE LAND ON LEASE THROUGH THE AGREEMENT. ACCORDING TO THE AGREEMENT, ASSESSEE HA S ACQUIRED SMALL TREES AND OVER THE PERIOD OF FOUR YE ARS, CONDUCTED THE BASIC NECESSARY OPERATIONS WHICH ARE NEEDED FOR THE AGRICULTURE ACTIVITY AND POPULAR TRE ES WERE SOLD AFTER FOUR YEARS. THUS, THE ASSESSEE PERFORME D ALL THE BASIC OPERATIONS OF AGRICULTURE AND PROVIDED WA TER AND FERTILIZER TO THE POPULAR TREES DURING THIS PERIOD. IT IS AN ESTABLISHED FACT THAT POPULAR TREES ARE PLANTED IN MOIST SOIL AND PROPERLY IRRIGATED, ESPECIALLY IN THE FIRS T YEAR OF THE PLANTING IN ORDER TO DEVELOP GOOD ROOT SYSTEM. SO IF THE CARE COULD NOT HAVE BEEN TAKEN, THEN POPULAR TR EES COULD NOT HAVE BEEN GROWN OVER THE PERIOD OF FOUR Y EARS. THE ASSESSEE HAD ALSO TAKEN ALL OTHER PRECAUTIONS T O PRESERVE THE TREES FOR GROWING UP AND AS SUCH PERFO RMED ALL BASIC OPERATIONS. HE HAS RELIED UPON FOLLOWING DECISIONS : I) DECISION IN THE CASE OF CIT V RAJA BENOY KUMAR SUHAS ROY 32 ITR 466 IN WHICH HON'BLE SUPREME COURT HELD AS UNDER : 6 INCOME DERIVED FROM A FOREST WHICH IS BEING MAINTAINED BY THE ASSESSEE FOR A LONG TIME BY CARRYING OUT OF OPERATIONS OF REPLANTING, WEEDING, IRRIGATING, NURSING AND PRUNING IS AGRICULTURAL INCOME EXEMPT FROM TAX SO FAR AS THESE TREES ARE CONCERNED. II) ADVANTA INDIA LTD. V ACIT 158 TTJ 763 IN WHICH BANGLORE BENCH OF THE TRIBUNAL HELD AS UNDER : INCOME DERIVED BY THE ASSESSEE FROM THE ACTIVITY OF PRODUCTION OF HYBRID SEEDS FROM BASIC SEEDS IS AN AGRICULTURAL INCOME AND ACCORDINGLY EXEMPT UNDER SECTION 10 OF THE ACT. III) CIT V SRM COTTON & OIL MILL 174 TAXMAN 503 IN WHICH HON'BLE PUNJAB & HARYANA HIGH COURT HELD AS UNDER : IN VIEW OF FINDINGS OF FACT ARRIVED AT BY TRIBUNAL ON APPRECIATION OF EVIDENCE ON RECORD THAT INCOME FROM SALE OF TREES WAS AGRICULTURE INCOME AND NOT INCOME FROM OTHER SOURCES, NO SUBSTANTIAL QUESTION OF LAW ARISES. 6. THE LD. COUNSEL FOR THE ASSESSEE BY REFERRING TO THE DECISION OF BANGALORE BENCH IN THE CASE OF ADVANTA INDIA LTD. (SUPRA) SUBMITTED THAT IN THIS CASE IT HAS BEE N HELD THAT LAND WAS TAKEN ON LEASE FROM THE FARMERS AND ASSESSEE ENGAGES SERVICES OF THE FARMERS FOR PRODUC TION OF HYBRID SEEDS AND HAD TAKEN ENTIRE PRODUCE FROM THE FARMERS. IT REIMBURSES THE ENTIRE EXPENDITURE OF CULTIVATION GIVEN TO FARMERS. THE FARMERS ARE NOT GIVEN 7 PRICE FOR THE PRODUCE EXCEPT REIMBURSEMENT OF THE E NTIRE CHARGES AND REPAYMENT OF THE LABOUR CHARGES. HE HA S SUBMITTED THAT IT WAS, THEREFORE, HELD THAT FARMERS CAN BE SAID TO BE THE AGENT OF THE ASSESSEE COMPANY AND TH E PRODUCTION OF HYBRID SEEDS BY FARMERS CANNOT BE SAI D TO BE NOT ON BEHALF OF THE ASSESSEE COMPANY. 7. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE PURCHASED POPULAR TREES WHICH WE4RE SOLD LATER ON. THEREFORE, TRANSACTION WAS CLEARLY ADVENTURE IN NAT URE OF TRADE AND APPEAL OF ASSESSEE MAY BE DISMISSED. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND CONSIDE RED THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT ASSESSEE HAS TAKEN THE AGRICULTURE LAND ON LEASE VIDE AGREEM ENT DATED 01.06.2006 FOR FOUR YEARS WITH SMALL GROWN UP TEES NUMBERING 1214, COPY OF THE AGREEMENT IS FILED IN P APER BOOK. THE OWNER OF THE AGRICULTURAL LAND SOLD THE SAID SMALL POPULAR TREES TO THE ASSESSEE SUBJECT TO CONSIDERATION OF RS. 10,31,900/-. THE ASSESSING OF FICER ALSO GIVEN THE BENEFIT OF THE SAME IN FAVOUR OF THE ASSESSEE WHILE COMPUTING THE INCOME. IT IS ALSO NOT IN DISPUTE THAT WHEN ASSESSING OFFICER ASKED FOR THE P ROOF OF THE SALE OF POPULAR TREES AMOUNTING TO RS. 39,32,00 0/-, DETAILS FILED AND THE ASSESSING OFFICER ACCEPTED TH E SAME. HOWEVER, IT WAS HELD THAT THE RECEIPTS OF SALE OF P OPULAR TREES COULD NOT BE CONSIDERED AS AGRICULTURE INCOME . ACCORDING TO THE AGREEMENT, THE LAND WITH POPULAR T REES 8 HAD BEEN GIVEN TO ASSESSEE ON CONTRACT FOR FOUR YEA RS WITH POWER MOTOR FOR IRRIGATION FOR GROWING THESE POPULA R TREES. THE ASSESSEE WAS ALSO AUTHORIZED TO CUT THE TREES W ITHIN THE PERIOD OF LEASE. THEREFORE, IT WAS CLEAR FROM THE TERMS OF THE AGREEMENT THAT USE OF THE POWER MOTOR SHALL BE DONE BY THE LEASE HOLDER. THE MOTOR CONNECTION HAS BEEN GIVEN IN RUNNING CONDITION AND ASSESSEE SHALL BE BO UND TO HAND OVER THE MOTOR IN RUNNING CONDITION AFTER COMP LETION OF THE LEASE AGREEMENT PERIOD. IT IS ALSO NOTED IN THE AGREEMENT THAT IF DUE TO STORM, POPULAR TREES ARE D AMAGED OR SCATTERED, SAME SHALL BE RESPONSIBILITY OF THE A SSESSEE. THE TERMS OF THE AGREEMENT THUS, SPECIFY THAT ASSES SEE HAS TAKEN AGRICULTURAL LAND ON LEASE WITH SMALL POP ULAR TREES FOR PERIOD OF FOUR YEARS. THE ASSESSEE WAS AUTHORIZED TO USE POWER MOTOR FOR IRRIGATION PURPOS ES FOR GROWING OF THESE POPULAR TREES. THE PERIOD OF FOUR YEARS IS NOT VERY SMALL AND AS SUCH IT COULD BE SAFELY PRESU MED THAT DURING THE PERIOD OF FOUR YEARS, ASSESSEE HAS PERFORMED ALL THE BASIC OPERATIONS FOR THE PURPOSE OF GROWING THESE POPULAR TREES BY PROVIDING WATER AND FERTILIZER. THE OTHER BASIC OPERATIONS WERE ALSO T O BE PERFORMED BY ASSESSEE FOR SAFETY OF THE POPULAR TRE ES OTHERWISE, THE SAME COULD GET DESTROYED/DAMAGED WIT HIN THE PERIOD OF LEASE. IT IS NOT NECESSARY FOR EARNI NG AGRICULTURE INCOME THAT OWNERSHIP OF THE LAND SHOUL D BE WITH THE ASSESSEE. IN THE CASE OF THE ASSESSEE, AS SESSEE HAS BEEN ABLE TO PROVE THAT IT HAS THE AVAILABILITY OF THE AGRICULTURAL LAND ON LEASE AND THAT LAND WAS USED F OR 9 AGRICULTURE PURPOSES. THE ASSESSEE HAS ALSO CULTIV ATED THE LAND HAVING POPULAR TREES PRIMARILY GROWN UP BY THE OWNER OF THE LAND. REST OF THE AGRICULTURE OPERATI ONS WERE CONDUCTED BY THE ASSESSEE IN ORDER TO BRING POPULAR TREES IN A SALEABLE POSITION. THE NATURE OF AGRICULTURE ACTIVITY WOULD REMAIN THE AGRICULTURE ACTIVITY IRRESPECTIVE OF THE FACTS WHO HAS PERFORMED THE OPERATIONS ON THE LAND. IN THE CASE OF THE ASSESSEE, SMALL POPULAR TREES HAVE NOT BEEN PLANTED BY THE ASSESSEE BUT FURTHER OPERATIONS WERE CARRIED OUT BY THE ASSESSEE. THEREFORE, THE PROCESS OF GROWING POPULAR TREES WILL REMAIN AN AGRICULTURE AC TIVITY. THE CASE LAWS RELIED UPON BY LD. COUNSEL FOR THE AS SESSEE SUPPORT THE CASE OF THE ASSESSEE. WE MAY ALSO NOTE HERE THAT ASSESSEE HAS TAKEN UP AGRICULTURAL LAND ON LEA SE WITH SMALL POPULAR TREES AS PER AGREEMENT DATED 01.06.20 06 AND SOLD THE POPULAR TREES IN FINANCIAL YEAR 2009-1 0. THEREFORE, IT IS DIFFICULT TO BELIEVE THAT ASSESSEE WOULD NOT HAVE CONDUCTED ANY AGRICULTURE OPERATIONS DURING TH E FOUR YEARS, OTHERWISE THE POPULAR TREES WOULD HAVE BEEN DAMAGED OR DESTROYED AND COULD NOT BE SOLD. THE ASSESSING OFFICER HAS NOT BROUGHT ANY SUFFICIENT MA TERIAL ON RECORD AS TO HOW THE GROWING OF THE POPULAR TREE S IN THE LEASED AGRICULTURAL LAND WAS ADVENTURE IN NATUR E OF TRADE. MERELY BECAUSE THE ASSESSEE HAS TAKEN AGRIC ULTURAL LAND ON LEASE WOULD NOT MAKE IT TO BE A BUSINESS AC TIVITY OF THE ASSESSEE. THE ASSESSEE HAS ALSO EXPLAINED T HAT THE SALE PROCEEDS OF POPULAR TREES HAVE BEEN DEPOSITED IN HDFC BANK ACCOUNT WHICH WAS OPENED BY ASSESSEE AND 10 BELONG TO THE AGRICULTURE CATEGORY AS IS CERTIFIED BY THE BANKER (PB-11). 9. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT ASSESSEE HAS EARNED AGRICULTURE INCOME OUT OF SALE OF THE POPULA R TREES, THEREFORE, THE SAME COULD NOT BE ADDED IN THE HANDS OF ASSESSEE HOLDING IT TO BE ADVENTURE IN NATURE OF TR ADE. WE, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH AUGUST,2015. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH AUGUST,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH