ITO, Wd.-2(1), Kolhapur V. M/s. Gajanan Agro Farms, Kolhapur

ITA 1285/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9887 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 13-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH MS ANN KAPTHUAMA
• Keywords: Capital asset
• Section: 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI G.S.PANNU, ACCOUNTANT MEMBER. ITA.NO.1285 & 1286/PN/2011 (ASSTT. YEAR : 2002-03 & 2003-04) ITO, WARD-2(1), KOLHAPUR. .. APPELLANT VS. M/S.GAJANAN AGRO FARMS, 2126 E WARD, TARABAI PARK, KOLHAPUR. .. RESPONDENT PAN: AADFG6064H AND CO.NO.94 & 95/PN/2011 (ASSTT. YEAR : 2002-03 & 2003-04) M/S.GAJANAN AGRO FARMS, 2126 E WARD, TARABAI PARK, KOLHAPUR. .. APPELLANT PAN: AADFG6064H VS. ITO, WARD-2(1), KOLHAPUR. .. RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO/ SHRI MAYURESH DOSHI DEPARTMENT BY : SHRI S.K.SINGH/ MS.ANN KAPTHUAMA DATE OF HEARING : 29.10.2012 DATE OF PRONOUNCEMENT : 31.10.2012 ORDER PER SHAILENDRA KUMAR YADAV, JM : ALL THESE APPEALS AND CROSS OBJECTIONS PERTAIN TO SAME ISSUE OF SAME ASSESSEE. SO THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 2. IN ITA.NO.1285/PN/2011, THE REVENUE HAS FILED TH IS APPEAL AGAINST THE ORDER OF THE CIT(A) ON THE FOLLOWING GR OUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR FAIL ED TO APPRECIATE THAT TO CLAIM EXEMPTION AS PER SECTION 2 (1A) OF THE ACT, THE BASIC CONDITION IS THAT THE ASSESSEE SHOUL D HAVE LAND. IN THE INSTANT CASE, THE ASSESSEE IS NOT A OWNER OF LAND, AS NEITHER THE SAID AGRICULTURAL LAND IS APPEARING IN THE BALANCE SHEET, NOR IT HAS PRODUCED 7/12 EXTRACTS EVIDENCING THE LAND TO BE IN ITS OWN NAME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR ERRE D IN NOT APPRECIATING THAT TO CLAIM EXEMPTION AS PER SECTION 2(1A) OF THE ACT, THE BASIC CONDITION IS THAT THE ASSESSEE S HOULD BE CULTIVATOR, OR RECEIVER OF RENT IN KIND, OF ANY PRO CESS TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAK EN TO MARKET. THE ASSESSEE SATISFIES NEITHER OF THE ABOV E CONDITIONS, SINCE BEING AN ARTIFICIAL PERSON, CREATED BY LAW, I T CANNOT BE AN AGRICULTURIST, CONDUCT ANY OF THE ABOVE ACTIVITIE S OF ITS OWN. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE COMMISSIO NER OF INCOME TAX(APPEALS), KOLHAPUR BE VACATED AND THAT O F THE ASSESSING OFFICER BE RESTORED. 3. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF TH E ASSESSEE WITH REGARD TO AGRICULTURAL INCOME MAINLY IN ABSENCE OF NON-FILING OF EXTRACTS IN FORM 7/12 AND 18 WITH REGARD TO THE AGR ICULTURAL LAND IN QUESTION. IN APPEAL, THE CIT(A) HAS ALLOWED ASSESSE ES CLAIM, WHICH HAS BEEN OPPOSED BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT THE CIT(A) FAILED TO APPRECIATE THAT TO CLAIM EXEMPTION AS PER SECTION 2(1A) OF THE ACT, THE BASIC CONDITION IS THAT THE A SSESSEE SHOULD HAVE LAND. IN THE INSTANT CASE, THE ASSESSEE IS NOT A OWNER OF LAND, AS NEITHER THE SAID AGRICULTURAL LAND IS APPEARING IN THE BALANCE SHEET, NOR IT HAS PRODUCED 7/12 EXTRACTS EVIDENCING THE LAND TO BE IN ITS OWN NAME. THE CIT(A) ERRED IN NOT APPRECIAT ING THAT TO CLAIM EXEMPTION AS PER SECTION 2(1A) OF THE ACT, THE BASI C CONDITION IS THAT THE ASSESSEE SHOULD BE CULTIVATOR, OR RECEIVER OF R ENT IN KIND, OF ANY PROCESS TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO MARKET. THE ASSESSEE SATISFIES NEITHER OF THE ABOVE TWO CONDITIONS, SINCE BEING AN ARTIFICIAL PERSON, CREAT ED BY LAW, IT CANNOT 3 BE AN AGRICULTURIST, CONDUCT ANY OF THE ABOVE ACT IVITIES OF ITS OWN. SO THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, LD. AUTHOR ISED REPRESENTATIVE HEAVY RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). 5. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MA TERIAL ON RECORD, WE ARE NOT INCLINED TO INTERFERE WITH THE F INDING OF THE CIT(A). AS PER PROVISIONS CONTAINED IN BOMBAY TENA NCY AND AGRICULTURAL LAND ACT, 1948, INDIAN PARTNERSHIP ACT AND CIRCULAR ISSUED BY THE BOARD IN RESPECT OF AGGREGATION OF IN COME, WE ARE OF THE VIEW THAT FIRM CAN ENGAGE IN AGRICULTURAL ACTIV ITY AND DERIVE INCOME FROM SUCH ACTIVITIES WHICH YIELD AGRICULTURA L INCOME COVERED BY SECTION 10(1) OF THE ACT. IN THIS REGARD, THE A SSESSING OFFICER HAS NOT CONSIDERED THE PROVISIONS OF MAHARASHTRA AGRICU LTURAL INCOME- TAX ACT, 1962. TAX ON AGRICULTURAL INCOME IS A STAT E SUBJECT (ENTRY 46 IN LIST II IN THE SEVENTH SCHEDULE TO THE CONSTI TUTION). HENCE, THE STATE IS EMPOWERED TO ENACT LEGISLATION ON LEVY ING AGRICULTURAL INCOME-TAX. THE MAHARASHTRA INCOME-TAX ACT HAS COME INTO FORCE FROM 01.04.1962. SECTION 2(2) OF THE MAHARASHTRA AG RICULTURAL INCOME-TAX ACT, 1962 READS AS UNDER: (2) 'ASSESSEE' MEANS A PERSON BY WHOM AGRICULTURAL INCOME- TAX OR ANY OTHER SUM OF MONEY IS PAYABLE UNDER THIS ACT AND INCLUDES - (A) EVERY PERSON IN RESPECT OF WHOM ANY PROCEEDING UNDE R THIS ACT HAS BEEN TAKEN FOR THE ASSESSMENT OF HIS AGRICULTURAL INCOME OR THE AGRICULTURAL INCOME OF A NY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE; (B) EVERY PERSON WHO IS DEEMED TO BE AN ASSESSEE UNDER ANY PROVISION OF THIS ACT; THUS SECTION 2(2) DEFINES AN ASSESSEE TO MEAN A PER SON BY WHOM AGRICULTURAL INCOME-TAX OR ANY OTHER SUM OF MONEY I S PAYABLE UNDER THE MAHARASHTRA AGRICULTURAL INCOME-TAX ACT, 1962. 6. SUB-SECTION (9) OF SECTION 2 DEFINES THE MEANING OF A PERSON APPEARING IN SUB-SECTION (2). SUB-SECTION (9) READS AS UNDER: 4 2) 'PERSON' INCLUDES- (A) AN INDIVIDUAL (B) A HINDU UNDIVIDED FAMILY, (C) A COMPANY, (D) A FIRM, (E) AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDU ALS, WHETHER INCORPORATED OR NOT, AND (F) EVERY ARTIFICIAL JURIDICAL PERSON, NOT FALLING WITHIN ANY OF THE PRECEDING SUB-CLAUSES; ITEM (D) OF THIS SUB-SECTION SPECIFICALLY INCLUDES A FIRM. THEREBY IMPLYING THAT A FIRM CAN HAVE AGRICULTURAL INCOME O N WHICH AGRICULTURAL INCOME-TAX IS PAYABLE. 7. SUB-SECTION 7 TO SECTION 2 OF MAHARASHTRA AGRICU LTURAL INCOME-TAX ACT, 1962 DEFINES THE TERMS 'FIRM', 'PAR TNER' AND 'PARTNERSHIP' TO HAVE THE SAME MEANING AS ASSIGNED TO THEM IN THE INDIAN PARTNERSHIP ACT, 1932. SUB-SECTION 7 READS AS UNDER: (7) 'FIRM', 'PARTNER' AND 'PARTNERSHIP' HAVE THE SA ME MEANINGS RESPECTIVELY ASSIGNED TO THEM IN THE INDIAN PARTNER SHIP ACT, 1932, BUT THE EXPRESSION 'PARTNER' SHALL ALSO INCLU DE ANY PERSON WHO, BEING A MINOR, HAS BEEN ADMITTED TO THE BENEFITS OF PARTNERSHIP; 8. PERSONS WHO HAVE ENTERED INTO PARTNERSHIP WITH O NE ANOTHER ARE INDIVIDUALLY CALLED PARTNERS AND COLLECTIVELY C ALLED A FIRM AND THE NAME UNDER WHICH THE BUSINESS IS CARRIED ON IS CALLED THE FIRM NAME. THE PROVISIONS OF THE MAHARASHTRA AGRICULTURA L INCOME-TAX ACT, 1962 CLEARLY REVEALS THAT A PARTNERSHIP FIRM C AN BE AN AGRICULTURIST AND CAN HAVE AGRICULTURAL INCOME. THE REFORE, THE CONCLUSION DRAWN BY THE ASSESSING OFFICER THAT A JU RISTIC PERSON LIKE A FIRM CANNOT BE AN AGRICULTURIST IN MAHARASHTRA IS NOT CORRECT. 9. IN THE CASE OF NARAYAN BHIMJI VADANGALE AND ANOT HER VS. HUKUMCHAND CHUNILAL THOLE AND ANOTHER IN AIR 1992 S C 503, REVERSING THE DECISION OF THE BOMBAY HIGH COURT AND GIVING REFERENCE TO SECTION 2(2) AND SECTION 63 OF THE BTA LA, 1948, THE HON'BLE SUPREME COURT HELD THAT IT COULD NOT BE SAI D THAT A 5 PARTNERSHIP FIRM BEING AN INANIMATE PERSON COULD NO T CULTIVATE LAND PERSONALLY AND COULD NOT THEREFORE BE AN AGRICULTUR IST IN THE FOLLOWING WORDS: NOW WE ARE REQUIRED TO EXAMINE WHETHER THE VIEW TA KEN BY THE HIGH COURT IN TREATING THE FIRM AS INANIMATE, I NCAPABLE OF PERSONAL CULTIVATION OF AGRICULTURAL LAND IS CORREC T OR OTHERWISE. NO ELABORATION IS NECESSARY TO UNDERSTAN D THE LEGAL COMPOSITION OF A FIRM AND ITS PERSONALITY WHICH IS A NAME GIVEN COMPENDIOUSLY TO A GROUP OF PEOPLE WHO COMPRI SE ITS PARTNERS, AND THOSE PEOPLE HAVE NATURALLY TO BE LIV E PERSONS. WHEN WE TALK OF A FIRM CULTIVATING LAND WE MEAN TO CONVEY THAT IT IS THE PARTNERS OF THE FIRM WHO CULTIVATE THE LA ND AND IN THAT SENSE THE FIRM CULTIVATES IT PERSONALLY. THE FIRM M AY BE INANIMATE BUT THE PARTNERS COMPRISING THEREOF ARE P EOPLE IN FLESH AND BLOOD. ON THIS ANALYSIS THE BASIS OF THE JUDGMENT OF THE HIGH COURT GETS KNOCKED OFF. WHETHER THE FIRM I S AGRICULTURIST OR NON-AGRICULTURIST WOULD DEPEND UPO N THE ACTIVITIES OF ITS PARTNERS. 10. SECTION 60(1) OF THE CIVIL PROCEDURE CODE HAS A LSO BEEN REFERRED. A PERUSAL OF SECTION 60(1) OF THE CIVIL PROCEDURE C ODE, 1908, SHOWS THAT THE MEANING OF THE WORD 'AGRICULTURIST' IS GIV EN IN EXPLANATION V TO, MEAN A PERSON WHO CULTIVATES THE LAND PERSONA LLY AND WHO DEPENDS FOR HIS LIVELIHOOD MAINLY ON INCOME FROM AG RICULTURAL LAND WHETHER AS OWNER, TENANT, PARTNER OR AGRICULTURAL L ABOUR. EXPLANATION VI TO SECTION 60(1) OF THE OF THE CIVIL PROCEDURE CODE 1908 MENTIONS THAT AN AGRICULTURIST WILL BE DEEMED TO CULTIVATE THE LAND PERSONALLY IF HE CULTIVATES THE LAND BY HIS O WN LABOUR OR BY THE LABOUR OF ANY MEMBER OF HIS FAMILY OR BY SERVAN TS OR BY LABOURERS BY WAGES PAYABLE IN CASH OR IN KIND (NOT BEING A SHARE OF PRODUCE) OR BOTH. THUS, IT IS IMMATERIAL THAT THE F IRM CANNOT CULTIVATE THE LAND PERSONALLY TO BECOME AN AGRICULT URIST. ALL THAT IS REQUIRED IS THAT THE REVENUE FROM THE LAND SHOULD B E GENERATED BY AGRICULTURAL PRODUCE. THE DEEMED CULTIVATION OF LAN D, CONTAINED IN EXPLANATION VI MAKES IT AMPLY CLEAR THAT A PERSON N EED NOT CULTIVATE THE LAND PERSONALLY TO BE AN AGRICULTURIS T UNDER THE BTALA, 1948. FURTHER, UNDER SECTION 2(1A) OF THE IN COME-TAX ACT ONLY AGRICULTURAL INCOME IS DEFINED AND IS REQUIRED TO BE A SOURCE OF INCOME. IT IS NOT NECESSARY THAT IN ORDER TO COME W ITHIN THE AMBIT OF 6 THE INCOME-TAX ACT, THE PERSON HAS TO BE AN AGRICUL TURIST. IT IS SUFFICIENT IF REVENUE IS DERIVED FROM AGRICULTURAL ACTIVITIES CONDUCTED ON A LAND SITUATED IN INDIA WHICH IS USED FOR AGRIC ULTURAL PURPOSES. THEREFORE, THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE FIRM CAN BE AN AGRICULTURIST WHICH DERIVES REVENUE FROM AGRICULTUR AL ACTIVITY. 11. IN THIS REGARD THE CIT(A) RIGHTLY REFERRED TO T HE EXPLANATORY NOTES TO THE FINANCE ACT 1973, WHICH BROUGHT IN THE CONCEPT OF AGGREGATION TO AGRICULTURAL INCOME FOR THE PURPOSES OF LEVY OF INCOME-TAX. IN PARAGRAPH 11.1 IT IS MENTIONED THAT - 'THE SCHEME OF PARTIALLY INTEGRATED TAXATION OF NON -AGRICULTURAL INCOME WITH INCOME DERIVED FROM AGRICULTURE APPLIES ONLY IN THE CASE OF INDIVIDUALS, HINDU UNDIVIDED FAMILIES, UNREGISTERED FIRMS, ASSOCIATION OF PERSONS, BODIES OF INDIVIDUAL S AND ARTIFICIAL JURIDICAL PERSONS. REGISTERED FIRMS, CO- OPERATIVE SOCIETIES, LOCAL AUTHORITIES AND COMPANIES ARE THUS OUTSIDE THE PURVIEW OF THE SCHEME.' 12. A READING OF THE EXPLANATORY MEMORANDUM SHOWS T HAT REGISTERED FIRMS, CO-OPERATIVE SOCIETIES, LOCAL AUT HORITIES AND COMPANIES HAVE BEEN KEPT OUTSIDE THE PURVIEW OF AGG REGATION SCHEME TO DETERMINE THE RATES APPLICABLE TO TAX THE NON-AGRICULTURAL INCOME. IT IS EVIDENT FROM THE ABOVE THAT AN INFERE NCE THAT APART FROM INDIVIDUAL, HUF, UNREGISTERED FIRMS, AOP, BOI AND ARTIFICIAL JURIDICAL PERSON, THE OTHER FOUR CATEGORIES OF PERS ONS MENTIONED ABOVE CAN ALSO DERIVE AGRICULTURAL INCOME, CAN BE D RAWN. 13. REGARDING AGRICULTURAL LAND IS NOT THE PROPERT Y OF THE FIRM, IT JUST REQUIRES TO BE MENTIONED THAT THE LAND ON WHIC H THE AGRICULTURAL ACTIVITY WAS CARRIED ON BY THE ASSESSE E BELONGED TO MSFC LTD., PUNE. THE ASSESSEE IS A TENANT OF MSFC L TD. THE DEFINITION OF 'TENANT' AND 'TENANCY' APPEARING IN B TLA, 1948 IS GIVEN AS UNDER: 2(17) 'TENANCY' MEANS THE RELATIONSHIP OF LAND LORD AND TENANT; 7 2(18) 'TENANT' MEANS A PERSON WHO HOLDS LAND ON LEA SE AND INC1UDES- A) A PERSON WHO IS DEEMED TO BE A TENANT UNDER SECT ION 4; B) A PERSON WHO IS A PROTECTED TENANT; AND C) A PERSON WHO IS A PERMANENT TENANT; AND THE WORD LANDLORD SHALL BE CONSTRUED ACCORDI NGLY. 14. THERE IS NO BAR IN LAW ON THE FARMER BECOMING A TENANT TO A LANDOWNER. FOR THE PURPOSES OF AGRICULTURAL INCOME , IT WOULD SUFFICE IF THE FARMER CONDUCTS AGRICULTURAL OPERATI ONS ON THE LAND OWNED BY SOMEONE ELSE AND DERIVES INCOME THEREFROM. IN FACT, THE AGREEMENT BETWEEN MSFC LTD. AND THE ASSESSEE FIRM I S ENTERED INTO BY SHRI SANJAY D PATIL AND SHRI SATEJ D PATIL, BOTH OF WHOM WERE SHOWN TO BE' AGRICULTURISTS. THEY ARE THE ONLY PART NERS OF THE FIRM. IN FACT, AS PER THE TERMS OF THE JOINT CULTIVATION AGREEMENT, THERE CANNOT BE ANY DOUBT THAT THE ASSESSEE FARM WAS OBLI GATED TO CARRY OUT ALL AGRICULTURAL OPERATIONS IN THE FARM LAND AN D TO CARRY OUT ALL INCIDENTAL ACTIVITIES IN RELATION TO FARMING OPERAT IONS. THIS HAS BEEN CLEARLY BROUGHT OUT IN PARAGRAPH 2 OF THE JOINT CUL TIVATION AGREEMENT WHICH IS REPRODUCED AS UNDER: IN THE JOINT CULTIVATION THE CONTRIBUTIONS AND OBLI GATIONS OF THE TWO PARTIES SHALL BE AS FOLLOWS: (I) THE CONTRIBUTION OF MSFC SHALL BE IN TERMS OF ITS CULTIVABLE LAND ADMEASURING ABOUT 647 ACRES OF ITS KOLHAPUR FARM AND OTHER CAPITAL ASSETS, SUCH AS BUILDINGS, MACHINERY, ETC. AND PERMANENT EMPLOYEES OF THE KOLHAPUR FARM, AND EXPERT SUPERVISION OF THE MANAGEMENT OF THE MSFC. (II) THE CONTRIBUTION AND OBLIGATION OF THE FIRM SHALL INCLUDE ALL OPERATIONAL ACTIVITIES IN THE FARM LAND S INCLUDING ALL INPUT EXPENSES, INCREMENTAL STAFF/LABOUR (IF FOUND NECESSARY), ESTABLISHMENT AN D OFFICE EXPENDITURE OF KOLHAPUR FARM OFFICE, REPAIR AND MAINTENANCE OF MSFC MACHINERY AND ANY OTHER EXPENDITURE INCIDENTAL TO THE FARMING OPERATIONS. 8 SOME PERSONS ARE ALSO DEEMED TO BE TENANTS AS DEFIN ED IN SECTION 4 OF THE BTLA, 1948, WHICH READS AS UNDER: 4. A PERSON LAWFULLY CULTIVATING ANY LAND BELONGI NG TO ANOTHER PERSON SHALL BE DEEMED TO BE A TENANT IF SU CH LAND IS NOT CULTIVATED PERSONALLY BY THE OWNER AND IF SUCH PERSON IS NOT- A) A MEMBER OF THE OWNER'S FAMILY, OR B) A SERVANT ON WAGES PAYABLE IN CASH OR KIND BUT NOT IN CROP SHARE OR A HIRED LABOURER CULTIVATING THE LAND UNDER THE PERSONAL SUPERVISION OF THE OWNER OR ANY MEMBER OF THE OWNERS, FAMILY, OR C) A MORTGAGEE IN POSSESSION. 15. EVEN OTHERWISE, A FIRM CANNOT OWN A LAND UNDER THE BTALA, 1948. HENCE IT WOULD BE IMPOSSIBLE TO OBTAIN REGIST RATION OF THE LAND ON WHICH AGRICULTURAL ACTIVITIES WAS CARRIED O UT BY THE FIRM. IT IS NOT MANDATORY THAT THE PROPERTY HAS TO BE PRODUC ED OR INTRODUCED IN THE BOOKS OF THE FIRM BEFORE ANY INCO ME CAN BE DERIVED FROM IT. A FIRM IS NOT A LEGAL ENTITY IN TH E SENSE OF A COMPANY. PERSONS ARE INDIVIDUAL CALLED PARTNERS AND COLLECTIVELY CALLED A FIRM, WHICH IS THE NAME UNDER WHICH THE PA RTNERS COLLECTIVELY CARRY OUT THE BUSINESS. IT IS A COMPEN DIOUS NAME OF PARTNERS, WHO COME TOGETHER TO SHARE PROFITS OF A B USINESS CARRIED ON BY ALL OR BY ANY OF THEM ACTING FOR ALL. SINCE I T IS NOT A JURISTIC PERSON, IT IS NOT POSSIBLE TO OWN PROPERTY IN THE N AME OF THE FIRM. THE REASON THAT AGRICULTURAL LAND WAS NOT INTRODUCE D IN THE BOOKS DOES NOT HOLD MUCH SUBSTANCE. 16. THE INCOME-TAX ACT, 1961 DEFINES THE TERM 'AGR ICULTURAL INCOME' IN SECTION 2(1A) AS UNDER: 1. ..... (1) ...... (1A) AGRICULTURAL INCOME MEANS (A) ANY RENT OR REVENUE DERIVED FROM LAND WHICH IS SITUATED IN INDIA AND IS USED FOR AGRICULTURAL PURP OSES; (B) ANY INCOME DERIVED FROM SUCH LAND BY (I) AGRICULTURAL; OR (II) THE PERFORMANCE BY A CULTIVATOR OR RECEIVER OF RENT-IN-KIND OF ANY PROCESS ORDINARILY EMPLOYED 9 BY A CULTIVATOR OR RECEIVER OF RENT-IN-KIND TO REND ER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO MARKET; OR (III) THE SALE BY A CULTIVATOR OR RECEIVER OF RENT-IN-KIN D OF THE PRODUCE RAISED OR RECEIVED BY HIM, IN RESPECT OF WHICH NO PROCESS HAS BEEN PERFORMED OTHER THAN A PROCESS OF THE NATURE DESCRIBED IN PARAGRAPH (II) OF THIS SUB-CLAUSE; (C) ANY INCOME DERIVED FROM ANY BUILDING OWNED AND OCCUPIED BY THE RECEIVER OF THE RENT OR REVENUE OF ANY SUCH LAND, OR OCCUPIED BY THE CULTIVATOR OR THE REC EIVER OF RENT-IN-KIND, OF ANY LAND WITH RESPECT TO WHICH, OR THE PRODUCE OF WHICH, ANY PROCESS MENTIONED IN PARAGRAP HS (II) AND (III) OF SUB-CLAUSE (B) IS CARRIED ON; 17. CLAUSE (A) SPECIFICALLY STATES THAT AGRICULTUR AL INCOME MEANS ANY RENT OR REVENUE DERIVED FROM LAND WHICH IS SITU ATED IN INDIA AND IS USED FOR AGRICULTURAL PURPOSES. SIMILARLY, C LAUSE (B) SPEAKS ABOUT INCOME DERIVED FROM A LAND SITUATED IN INDIA AND WHICH IS USED FOR AGRICULTURAL PURPOSES OF AGRICULTURE OR AN Y OTHER WORK SPECIFIED IN ITEMS (II) AND (III) OF THIS CLAUSE. C LAUSE (C) IS NOT APPLICABLE IN THIS CASE. A PLAIN READING OF THIS SECTION MAKES IT CLEAR THAT ALL THAT IS NECESSARY THAT REVENUE SHOUL D BE DERIVED FROM A LAND SITUATED IN INDIA AND WHICH IS USED FOR AGRI CULTURAL PURPOSES. THIS SECTION DOES NOT SPECIFY THAT REVENU E HAS TO BE DERIVED BY THE OWNER OF THE AGRICULTURAL LAND ONLY. REVENUE THEREFORE IMPLIES SOME YIELD OR SOME INCOME FROM: A GRICULTURAL OPERATIONS. SUB-CLAUSE (II) AND (III) ALSO USE THE TERMS 'CULTIVATOR' AND 'RECEIVER OF RENT-IN-KIND'. THESE TERMS ALSO APPEAR IN CLAUSE (C) OF SECTION 2(LA). THUS, IT CAN BE INFERRED THAT AGRICULTURAL INCOME CAN ALSO BE DERIVED BY A PERSON WHO IS A CULTIVATOR OR WHO IS THE OWNER OF LAND. IT IS ONLY THE RECEIVER OF RENT-IN-K IND WHO CAN DIRECTLY BE HELD TO BE THE OWNER OF LAND AS REFERRED TO IN T HIS SECTION. A CULTIVATOR MAY BE THE OWNER BUT IT IS NOT NECESSARY THAT HE HAS TO BE THE OWNER. IN CLAUSE (A), THERE CAN BE A RECIPIE NT OF RENT FROM LAND WHICH IMPLIES OWNERSHIP AND ALSO A RECIPIENT O F REVENUE DERIVED FROM LAND, WHICH IMPLIES THAT THE PERSON CA N BE THE OWNER OR MAY NOT BE THE OWNER OF LAND. SIMILARLY, SUB-CLA USE (I) OF CLAUSE (B) SPEAKS OF INCOME DERIVED FROM AN AGRICULTURAL L AND BY AGRICULTURE. THIS MAKES IT CLEAR THAT REVENUE DERIV ED FROM LAND OR 10 FROM AGRICULTURE IMPLIES A PERIODIC RETURN OF INCOM E FROM AGRICULTURAL OPERATIONS ONLY. AS PER EXPLANATION VI TO SECTION 60(1) OF THE CIVIL PROCEDURE CODE, 1908 INCLUDES ALL SUCH PERSONS WHO CAN CULTIVATE LAND BY HIS OWN LABOUR OR BY LABOUR O F MEMBERS OF HIS FAMILY OR BY SERVANTS OR BY LABOURERS BY WAGES PAYA BLE IN CASH OR IN KIND AS AN AGRICULTURIST. 18. HENCE THE TERMS 'CULTIVATOR' OR 'RECEIVER OF R ENT-IN-KIND' COULD BE INFERRED TO BE A PERSON WHO CULTIVATES THE LAND EITHER ON HIS OWN OR THROUGH ASSISTED LABOUR AND THIS PERSON INCLUDES A FIRM AS WELL. IN NORMAL SENSE, THE TERM 'CULTIVATOR' MEANS ONE WH O DOES CULTIVATION OF THE LAND AND CULTIVATION INCLUDES TI LLING OF THE LAND, SOWING OF THE SEEDS, PLANTING ETC., WHICH ARE THE A CTIVITIES CARRIED ON BY THE ASSESSEE. IT IS NOT NECESSARY THAT SUCH ACTI VITY SHOULD BE DONE BY OWNER OF LAND HIMSELF OR BY THE ENTITY ENGA GED IN AGRICULTURE. 19. IT IS NOT A MANDATE OF LAW THAT IN ORDER TO HA VE AGRICULTURAL INCOME THE PERSON MUST OWN THE AGRICULTURAL LAND. I N THAT CASE, MOST OF THE RURAL POPULATION WHO DO NOT OWN LAND BU T CULTIVATE LAND OF OTHERS ON BATAI SYSTEM AS IT IS POPULARLY KNOWN AND WHO ARE DEPENDENT ON AGRICULTURE FOR THEIR LIVELIHOOD WOULD NOT BE HAVING AGRICULTURAL INCOME AT ALL. OWNERSHIP OF LAND IS, T HEREFORE, NOT A PREREQUISITE FOR HAVING AGRICULTURAL INCOME. IT WOU LD SUFFICE IF REVENUE IS DERIVED FROM AGRICULTURAL ACTIVITIES CAR RIED OUT ON AN AGRICULTURAL LAND SITUATED IN INDIA FOR AN INCOME T O QUALIFY AS AGRICULTURAL INCOME RECOGNIZED UNDER THE INCOME-TAX ACT. 20. THE ASSESSING OFFICER HAD ALSO STATED THAT THE ASSESSEE FIRM HAD NOT FURNISHED ANY DOCUMENTARY EVIDENCE IN SUPPO RT OF THE CLAIM THAT INCOME DERIVED WAS AGRICULTURAL INCOME. IN THIS REGARD THE STAND OF THE ASSESSEE HAS BEEN THAT LAND IN QUE STION WAS RECEIVED BY IT FROM MAHARASHTRA STATE FARMING CORPO RATION FOR JOINT CULTIVATION TO GROW AND PRODUCE SUGARCANE. ASSESSE E ALSO PLACED ON RECORD BEFORE AUTHORITIES BELOW THE COPY OF THE AGREEMENT 11 EXECUTED FOR JOINT CULTIVATION WITH MAHARASHTRA STA TE FARMING CORPORATION. THUS THERE WAS NO DENYING THE FACT TH AT SUGARCANE WAS CULTIVATED ON THE LAND OWNED BY MSFC LTD., AND ALSO THE BASIC AGRICULTURAL ACTIVITY IN THE FORM OF PREPARATION OF LAND FOR CULTIVATION, ENSURING WATER SUPPLY, PLANTATION OF S EEDS, TENDING OF SAPLINGS OF SUGARCANE, SPRAYING OF INSECTICIDES AND PESTICIDES, MANURING ETC., WAS CARRIED OUT IN RESPECT OF SUGARC ANE BY THE PARTNERS OF THE FIRM. IT WAS CLEAR STAND OF THE AS SESSEE BEFORE THE ASSESSING OFFICER THAT SINCE LAND WAS OWNED BY MSFC LTD., IT WAS NOT REFLECTED IN THE BALANCE SHEET. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THIS ARGUMENT. AT THE SAME TIME ASSESSING OFFICER HAS NOT DOUBTED THE CULTIVATION OF SUGARCAN E ON THE AGRICULTURAL LAND IN QUESTION. IN THIS SITUATION, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT INCOME OF ASSESSEE IS NOT INCOME FROM AGRICULTURE. IN ANY CASE MERELY BECAUS E THE AGRICULTURAL ACTIVITIES WERE CONDUCTED IN THE NAME OF THE FIRM WILL NOT TAKE AWAY THE CHARACTER OF INCOME IN THE HANDS OF THE RECIPIENT. IT IS ONLY THE AGRICULTURAL INCOME WHICH HAS BEEN D ISTRIBUTED AMONG PARTNERS WHICH WAS DERIVED FROM AGRICULTURAL ACTIVI TIES ON THE LAND IN QUESTION. EVEN IF FIRM WOULD NOT HAVE BEEN IN E XISTENCE, THIS CHARACTER OF INCOME WOULD NOT HAVE CHANGED IN THE H ANDS OF THE PARTNERS WHO OWNED THE LAND. 21. THE AGREEMENT EXECUTED BETWEEN MSFC LTD., AND T HE ASSESSEE FOR JOINT CULTIVATION OF LAND BELONGING TO MSFC LTD . THOUGH THE AGREEMENT IS IN THE FORM OF A JOINT CULTIVATION OF LAND, THE ARTICLES OF THE AGREEMENT ARE SUCH THAT ALL ACTIVITIES OF AGRIC ULTURAL OPERATIONS AND ENJOYMENT OF THE FRUITS OF CULTIVATION ARE GIVE N TO THE ASSESSEE. IN RETURN, THE ASSESSEE HAS TO UNDERTAKE THE FOLLOW ING: I) KEEPING A DEPOSIT OF RS.10,00,000/- WITH MSFC LTD. II) PAYMENT OF RS.20,00,000/- P.A. AS GUARANTEED SHARE OF PRODUCE REGARDLESS OF THE ACTUAL INCOME DERIVED FRO M AGRICULTURAL ACTIVITIES. 12 III) UPKEEP AND MAINTENANCE OF THE ESTABLISHMENT OWNED B Y MSFC LTD. IN KOLHAPUR FARMS INCLUDING PAYMENT OF SALARIES ETC. TO THE EMPLOYEES OF MSFC LTD. IN KOLH APUR FARM. IV) PAYMENT OF LAND REVENUE AND RELATED CHARGES AND CES S IN RESPECT OF KOLHAPUR FARM. V) UPKEEP AND MAINTENANCE OF SOIL IN KOLHAPUR FARM. VI) RETURNING OF 5250 METRIC TONS OF SUGARCANE AT THE TERMINATION OF AGREEMENT. THIS CONDITION IS ABSENT IN THE AGREEMENT DATED 09.05.1997 RELEVANT FOR ASSESSMENT YEAR 2002-03. THIS SHOWS THAT RELATIONSHIP BETWEEN MSFC LTD., AN D THE ASSESSEE FIRM CAN BE PROPERLY DESCRIBED AS THAT OF THE LANDLORD AND A TENANT. THE ASSESSEE FIRM HAS TO MAKE THE PAYMEN T OF A FIXED SUM OF RS.20,00,000/- EVERY YEAR DURING THE SUBSIST ENCE OF THE AGREEMENT REGARDLESS OF PRODUCTION FROM THE AGRICUL TURAL FARM. UNDER THESE CIRCUMSTANCES AND ON THE BASIS OF THE F ACT WHICH WERE PRODUCED AT THE TIME OF ASSESSMENT, THE ASSESSING O FFICER WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF ASSESSEE THAT I NCOME IN QUESTION IS DERIVED BY FIRM FROM AGRICULTURAL OPERATIONS CARRIE D ON THE LAND BELONGING TO MSFC LTD., PUNE, AS AGRICULTURAL INCOM E. THE CONCLUSION OF THE ASSESSING OFFICER IS BASED ON IMP ROPER INTERPRETATION OF LAW AND ON SURMISES AND CONJECTUR ES. IN VIEW OF THE ABOVE, THE CIT(A) WAS JUSTIFIED THAT AMOUNT OF RS.32,69,820/- AND RS.35,13,376/- FOR A.YS. 2002-03 AND 2003-04 RE SPECTIVELY ARE AGRICULTURAL INCOME OF ASSESSEE FIRM. THIS REASONE D FACTUAL FINDING NEED NO INTERFERENCE FROM OUR SIDE. AS A RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. 22. THE CROSS OBJECTIONS FILED WERE IN SUPPORT OF T HE ORDER OF THE CIT(A) GOES ACADEMIC. IN VIEW OF THE FOREGOING CONC LUSION WHEREIN THE ORDER OF THE CIT(A) HAS BEEN UPHELD. 13 23. AS A RESULT, BOTH THE APPEALS OF REVENUE AS WEL L AS THE CROSS OBJECTIONS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF OCTOBER, 2012. SD/- SD/- ( G.S.PANNU ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 31 ST OCTOBER, 2012 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ITO, WARD-2(1), KOLHAPUR. 3. THE CIT(A), KOLHAPUR. 4. THE CIT, KOLHAPUR. 5. THE DR A BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.