DCIT, Circle - 10, Kolkata, Kolkata V. M/s. Dinesh Chandra Rawat, South 24 Parganas

ITA 1393/KOL/2010

• Counselvise Citation: 139323514 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 02-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHA
• Assessee Lawyers: ANIBARYA DAS A R
• Keywords: Depreciation

Judgement Text

, C , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA ( ) . . , , . . . . !' # !' # !' # !' # , , ) [BEFORE SRI S.V. MEHROTRA, A.M. & SHRI N. VIJAYA K UMARAN, J.M.] $ $ $ $ / I.T.A NO. 1393/KOL/2010 ASSESSMENT YEAR : 2005-2006 DEPUTY COMMISSIONER OF INCOME TAX, -VS.- M/S. DINESH CHANDRA RAWAT, 24-PARGANAS(S) CIRCLE-10, KOLKATA (PAN : ADIPR 8519 C) ( %& /APPELLANT ) ( '(%& / RESPONDENT ) FOR THE APPELLANT : SHRI R.K. SAHA, D.R . FOR THE RESPONDENT : SHRI ANIBARYA DAS, A.R. # ) * + # ) * + # ) * + # ) * + /DATE OF HEARING : 20.10.2011 ,- * + ,- * + ,- * + ,- * + /DATE OF PRONOUNCEMENT : 18.11.2011 . / ORDER PER SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER/ . . , :- THE ASSESSEE, AN INDIVIDUAL, IN THE RELEVANT ASSESS MENT YEAR FILED HIS RETURN OF INCOME SHOWING TOTAL INCOME OF RS.92,600/- EXCLUDING AGRIC ULTURAL INCOME OF RS.9,71,733/-. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DIS CLOSED TOTAL AGRICULTURAL INCOME FOR RS.14,02,654/- FROM ITS NURSERY GARDEN, I.E. CHANDN I GREEN HOUSE. ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSEE HAD SHOWN TOTAL SALE OF R S.35,31,096/- OF VARIOUS ITEMS OF THE NURSERY AND TOTAL EXPENDITURE OF RS.26,53,615/-, WHICH INCL UDED RS.13,54,800/- ON PURCHASE OF PLANT. AFTER CONSIDERING VARIOUS EXPENSES DEBITED TO THE P ROFIT & LOSS A/C. THE ASSESSING OFFICER CONCLUDED THAT THERE WAS NO EXPENDITURE WHICH COULD PROVE THE AGRICULTURAL ACTIVITY BEING CARRIED ON BY THE ASSESSEE. HE DEPUTED AN INSPECTOR TO MAKE SPOT ENQUIRY, WHO REPORTED THAT THE ASSESSEE PURCHASED PLANTS (SAPLINGS) AND SEEDS FROM LOCAL NURSERY, AND OUT OF WEST BENGAL. AFTER NURTURING OF SAPLINGS, THEY WERE SOLD TO LOCA L PEOPLE AS WELL AS OUT OF WEST BENGAL. FROM THE DETAILS OF PURCHASES OF PLANTS AND SEEDS, PANCH AYAT REGISTRATION CERTIFICATE AND INSPECTORS REPORT, ASSESSING OFFICER CONCLUDED THAT THE ASSESS EE WAS CARRYING A NURSERY AND PURCHASING PLANT AND AFTER NURTURING THE SAME WERE SELLING THE M ON PROFIT AND CLAIMING EXEMPTION UNDER SECTION 10(1) TREATING THE SAME AS AGRICULTURAL INC OME. ASSESSING OFFICER REFERRED TO THE ITA NO. 1393/KOL./2010 2 DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS.- RAJA BENOY KUMAR SAHAS ROY [1957] 32 ITR 466, WHEREIN GUIDELINES HAVE BEEN LAI D DOWN FOR DETERMINATION OF THE SCOPE OF THE TERMS AGRICULTURE AND AGRICULTURAL PURPOSES . HE NOTED THAT THE ASSESSEE SHOULD HAVE PERFORMED THE FOLLOWING OPERATIONS:- BASIC OPERATIONS - PRIOR TO GERMINATION, SOME BASIC OPERATION IS ESS ENTIAL TO CONSTITUTE AGRICULTURE. THE BASIC OPERATION WOULD I NVOLVE EXPENDITURE OF HUMAN SKILL AND LABOUR UPON THE LAND ITSELF AND NOT MEREL Y ON THE GROWTHS FROM THE LAND. SOME ILLUSTRATIVE INSTANCES OF SUCH OPERATIONS ARE TILLING OF LAND, SOWING OF SEEDS, PLANTING AND SIMILAR OPERATIONS ON THE LAND. SUBSEQUENT OPERATIONS - BESIDES THE BASIC OPERATIONS, THERE ARE CERTAIN SUBSEQUENT OPERATIONS, WHICH ARE PERFORMED AFTER TH E PRODUCE SPROUTS FROM THE LAND, ILLUSTRATIVE INSTANCES OF SUBSEQUENT OPERATIO NS ARE WEEDING, DIGGING THE SOIL AROUND THE GROWTH, REMOVAL OF UNDESIRABLE UNDERGROW THS AND ALL OPERATIONS WHICH FOSTER THE GROWTH AND PRESERVE THE SAME NOT O NLY FROM INSECTS AND PESTS BUT ALSO FROM DEPRECIATION FROM OUTSIDE, TENDING, P RUNING, CUTTING HARVESTING AND RENDERING THE PRODUCE FIT FOR THE MARKET. MERE PERF ORMANCE OF THESE SUBSEQUENT OPERATIONS ON THE PRODUCTS OF THE LAND WHERE SUCH P RODUCTS HAVE NOT BEEN RAISED ON THE LAND BY THE PERFORMANCE OF THE BASIC OPERATI ONS DESCRIBED ABOVE WOULD NOT BE ENOUGH TO CHARACTERIZE THEM AS AGRICULTURAL OPERATIONS. WHERE, HOWEVER, THE SUBSEQUENT OPERATIONS ARE PERFORMED IN CONJUNCT ION WITH AND IN A CONTINUATION OF THE BASIC OPERATIONS, THE SUBSEQUEN T OPERATIONS WOULD ALSO CONSTITUTE PART OF THE INTEGRATED ACTIVITY OF AGRCU 1TURE. FROM THE ABOVE JUDGMENT OF THE HONBLE SUPREME COURT, IT IS CRYSTA L CLEAR THAT THE BASIC OPERATION IS THE ESSENTIAL REQUIREMENTS FOR CLAIMIN G AN INCOME AS EXEMPTED U/S.10(L) UNDER GARB OF AGRICULTURE INCOME. AS IN T HE INCOME AS EXEMPTED ULS.10(1) UNDER GARB OF AGRICULTURE INCOME. AS IN T HE INSTANT CASE, THE BASIC CONDITIONS ARE NOT SATISFIED RATHER THE ASSESSEE PU RCHASES PLANT AND NURTURES IT I.E. SUBSEQUENT PERFORMANCE HENCE THE AGRICULTURE I NCOME AS SHOWN BY THE ASSESSEE TO THE EXTENT OF 60% I.E. RS.8,41,592/- OU T OF TOTAL AGRICULTURE INCOME OF RS.14,02,654/- AS CLAIMED BY THE ASSESSEE IS BEING CONSIDERED AS INCOME FROM OTHER SOURCES INSTEAD OF AGRICULTURE INCOME. THIS O BSERVATION IS ALSO BASED ON THE FACTS THAT ABOUT 35% OF THE SALE AMOUNT IS SPEN T BY THE ASSESSEE TOWARDS THE PURCHASE OF PLANT I.E. RS.13,54,800/- OUT OF SALE O F RS.35,31,096/- IN CHANDNI GREEN HOUSE. 40% OF INCOME IS BEING CONSIDERED AS A GRICULTURE INCOME AS BECAUSE THE ASSESSEE HAS PURCHASED SEEDS AND AS PER INSPECTORS REPORT, THE ASSESSEE ALSO PERFORMS BASIC OPERATIONS IN THIS RES PECT. AFTER CONSIDERING ASSESSEES PROFIT & LOSS A/C., HE CONCLUDED THAT EXPENSES DEBITED TO PROFIT & LOSS A/C. DO NOT PROVE THAT ASSESSEE CARRIED OUT AF OREMENTIONED ACTIVITIES. 2. BEFORE THE LD. CIT(APPEALS), IT WAS, INTER ALIA, SUBMITTED AS UNDER :- THE ASSESSEE PURCHASES SEEDS AND SAPLINGS FROM OTH ERS BUT BEFORE PURCHASING THE SAME HE, BY USING MANUAL LABOUR, TIL LS THE AGRICULTURAL LAND BY MEANS OF DIGGING THE SOIL, APPLYING FERTIL IZERS FOR MAKING THE LAND CONGENIAL TO GROWTH OF SEEDS AND SAPLINGS. THEREAFT ER THE APPELLANT AGAIN ITA NO. 1393/KOL./2010 3 EMPLOYING MANUAL LABOUR SOWS THE SEEDS AND PLANTS S APLINGS IN THE SOIL. THE AR ALSO POINTED OUT THAT IN THE PROFIT & LOSS A CCOUNT OF THE ASSESSEE SUBSTANTIAL EXPENDITURE HAS BEEN BOOKED ON ACCOUNT OF PURCHASE OF SEEDS AND PLANTS, FERTILIZERS, COWDUNGS, TRACTORS PURCHAS ES AND PAYMENTS TOWARDS SALARIES AND WAGES. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS.- SOUNDARYA NURSERY [2000] 241 ITR 530 (MAD.) AN D CIT VS.- GREEN GOLD TREE FARMERS (P) LTD. (2008) 167 TAXMAN 151 (UTTARAKHAND). 3. THE LD. CIT(APPEALS) ALLOWED THE ASSESSEES APPE AL FOR THE FOLLOWING REASONS :- (1) IN CIT VS.- SOUNDARYA NURSERY (SUPRA), HONBLE MAD RAS HIGH COURT HELD THAT IF PLANTS SOLD BY THE ASSESSEE IN POTS WE RE THE RESULT OF PRIMARY AS WELL AS SUBSEQUENT OPERATIONS COMPREHEND ED WITHIN THE TERM AGRICULTURE AND THAT THEY WERE CLEARLY THE PRODUCTS OF AGRICULTURE. THUS, IT WAS HELD THAT EVEN THE INCOME FROM THE OPERATIONS OF NURSERY WOULD QUALIFY TO BE TREATED AS AGRICULT URAL INCOME. (2) IN CIT VS.- GREEN GOLD TREE FARMERS P. LTD., HONB LE UTTARAKHAND HIGH COURT HELD THAT INCOME FROM THE SALE PROCEEDS OF THE LAND BEING RUN AS NURSERY CONSTITUTE INCOME FROM AGRICULTURE. (3) LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSE SSEE HAD TILLED THE LAND BY MEANS OF DIGGING SOIL, APPLYING FERTILIZERS AND MAKING AGRICULTURAL LAND CONGENIAL TO GROWTH OF SEEDS AND SAPLINGS, THEREFORE, THE ASSESSEE HAD CARRIED OUT BASIC OPERATIONS. 4. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT VS.- SOUNDARYA NURSERY [2000] 241 ITR 530 (MAD.) (SUPRA) AND CIT VS.- GREEN GOLD TREE FARMERS (P) LTD. (2008) 167 TAXMAN 151 (UTTYARAKHAND) (SUPRA). ITA NO. 1393/KOL./2010 4 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORDS OF THE CASE. ADMITTEDLY, THE ASSESSEE HAD PURCHASED SAPLINGS AND SEEDS FROM LOCAL NURSERY AND NURTURED THE SAME IN ITS NURSERY. THIS ASPECT IS NOT DISPUTED AN D THE INSPECTOR DEPUTED BY ASSESSING OFFICER HAS ALSO CONFIRMED THE SAME. THE MAIN DISPUTE IN TH E PRESENT CASE IS AS TO WHETHER THE ASSESSEE HAD CARRIED OUT BASIC OPERATIONS OR NOT. THE ASSESS ING OFFICER HAS OBSERVED THAT THE ASSESSEE HAD INCURRED TOTAL EXPENDITURE OF RS.26,53,615/- OU T OF WHICH ONLY RS.13,54,800/- WAS TOWARDS PURCHASE OF PLANT. HE HAS NOT GIVEN ANY FURTHER DET AILS IN REGARD TO BALANCE EXPENDITURE. THE ASSESSEE IN ITS SUBMISSIONS, BEFORE THE LD. CIT(APP EALS), INTER ALIA, POINTED OUT THAT BEFORE PURCHASING SEEDS AND SAPLINGS, BY USING MANUAL LABO UR TILLED THE AGRICULTURAL LAND BY MEANS OF DIGGING SOIL, APPLYING FERTILIZERS AND MAKING AGRIC ULTURAL LAND CONGENIAL TO GROWTH OF SEEDS AND SAPLINGS. THIS CONSTITUTES BASIC OPERATION. ASSESSI NG OFFICER HAS NOWHERE POINTED OUT THAT NO EXPENDITURE HAD BEEN INCURRED ON SUCH ACTIVITIES. H E MERELY STATED THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE NURSERY EXPENSES THROUGH WHICH IT COULD BE ESTABLISHED THAT AGRICULTURAL ACTIVITIES WERE CARRIED OUT. FROM THE PROFIT & LOSS A/C. FOR THE YEAR ENDED 31 ST MARCH, 2005 CONTAINED AT PAGE 9 OF THE PAPER BOOK, IT IS SEEN T HAT THE ASSESSEE HAS INCURRED THE EXPENSES UNDER FOLLOWING HEADS :- CHANDNI GREEN HOUSE NANDABHANGA, SAMUKPOTA, P.0: KANGANBERIA 24 PARGANAS (SOUTH), PIN: 743 503 PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH . 2005 INCOME AMOUNT AMOUNT (RS.) (RS.) SALES 35,31,096.00 CLOSING STOCK 5,23,706.00 MISC. INCOME 1,468.00 TOTAL (A) 40,56,270.00 EXPENDITURE OPENING STOCK 4,10,590.00 PURCHASES BAMBOO PURCHASE 6,735.00 CHEMICAL PURCHASE 12,660.00 COWDUNG PURCHASE 16,350.00 FERTILISERS PURCHASE 24,170.00 PLANT PURCHASE 13,54,800.00 POT PURCHASE 21,310.00 SAND PURCHASE 19,645.00 SEEDS PURCHASE 26,570.00 TOOLS PURCHASE 3,200 .00 14,85,440.00 AUDIT FEES 2,700.00 BANK CHARGES 330.00 ITA NO. 1393/KOL./2010 5 SALARIES & WAGES 4,06,435.00 PRINTING & STATIONERY 1,446.00 CARRIAGE 6,730.00 LABOUR WELFARE 2,690.00 GENERAL EXPENSES 73,811.01 REPAIR & MAINTENANCE 64,795. 00 SECURITY SERVICE CHARGES 34,910.00 TELEPHONE EXPENSES 21,466.00 ELECTRICITY CHARGES 1,02,348.00 RENT, RATES & TAXES 12,510.00 TRACTOR HIRE CHARGES 5,940.00 CONVEYANCE EXPENSES 21,474.00 7,57,585.01 TOTAL (B) 26,53,615.01 NET PROFIT (A B) 14,02,654.99 (TRANSFERRED TO PROPRIETORS CAPITAL A/C.) THUS, THE ASSESSEES ACTIVITIES WERE TO FIRST MAKE ITS LAND CONDUCIVE FOR PUTTING THE SEEDS AND SAPLINGS IN IT BY TILLING THE LAND AND APPLYING FER TILIZERS. THESE OPERATIONS WERE CARRIED OUT BEFORE THE SAPLINGS WERE PUT INTO THE LAND AND, THE REFORE, THE ASSESSEE HAD CARRIED OUT BASIC OPERATIONS FOR NURTURING THE SAPLINGS. 6. FROM THE AFOREMENTIONED DETAILS, IT IS EVIDENT T HAT THE ASSESSING OFFICER MERELY MADE GENERAL OBSERVATIONS WITHOUT VERIFYING THE NECESSAR Y DETAILS WHICH WERE AVAILABLE BEFORE HIM. UNDER SUCH CIRCUMSTANCES, THE CLAIM OF THE ASSESESE HAD RIGHTLY BEEN ACCEPTED BY LD. CIT(APPEALS). WE FURTHER FIND THAT THE ISSUE IS SQU ARELY COVERED BY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS.- SOUNDARY A NURSERY [2000] 241 ITR 530 (MAD.) (SUPRA), WHEREIN THE COURT, INTER ALIA, OBSERVED AS UNDER :- THE ASSESSEE WAS CARRYING ON BUSINESS OF A NURSERY AND VARIOUS TYPES OF FRUIT PLANTS, FLOWER PLANTS, VEGETABLE PLANTS AN D SEEDLINGS WERE GROWN. THE ASSESSEES ACTIVITIES WERE TO PREPARE SE EDLINGS ON SCIENTIFIC BASIS, GROW PLANTS ON PREPARED BEDS AND AFTER SEVER AL OPERATIONS CARRIED OUT ON THE LAND, VIZ. CUTTING, GOOTYING AND INARCHING, THEY WERE TRANSPLANTED IN SUITABLE CONTAINERS INCLUDING POTS AND KEPT IN THE GREEN HOUSES OR IN SHADE AND THEN SOLD. THE ASSESSE E CLAIMED THAT THE INCOME DERIVED FROM THE SALE OF PLANTS GROWN IN POT S AND SALE OF SEEDS CONSTITUTED AGRICULTURAL INCOME. HONBLE MADRAS HIGH COURT, INTER ALIA, OBSERVED AS UNDER :- IT WAS HELD THAT THE INCOME FROM THE SALE OF PLANT S GROWN IN POTS AND THE SALE OF SEEDS DERIVED ON ACCOUNT OF CULTIVATION BY THE ASSESSEE WAS AGRICULTURAL INCOME. ITA NO. 1393/KOL./2010 6 7. BY RESPECTFULLY FOLLOWING THE DECISION OF THE HO NBLE MADRAS HIGH COURT, WE UPHOLD THE ORDER OF LD. CIT(APPEALS) AND REJECT THE GROUND S OF APPEAL TAKEN BY THE DEPARTMENT. BEFORE PARTING, WE MAY ALSO REFER TO EXPLANATION 3 INSERTED BY THE FINANCE ACT, 2008, W.E.F. 01.04.2009 TO SECTION 2(1A) DEALING WITH AGR ICULTURAL INCOME. EXPLANATION 3 READS AS UNDER :- FOR THE PURPOSES OF THIS CLAUSE, ANY INCOME DERIVE D FROM SAPLINGS OR SEEDLINGS GROWN IN A NURSERY SHALL BE DEEMED TO BE AGRICULTURAL INCOME. 8. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/11/2011. SD/- SD/- [N. VIJAYA KUMARAN / . . . . !' # !' # !' # !' # ] [S.V. MEHROTRA/ ( . . )] JUDICIAL MEMBER/ ACCOUNTANT MEMBER/ DATED : 18/ 11/ 2011 COPY OF THE ORDER FORWARDED TO: 1. M/S. DINESH CHANDRA RAWAT, VILL. NANDA BHANGA (SAMU KH POTA), DIST. 24- PARGANAS (SOUTH); 2 DCIT, CIRCLE-10, KOLKATA 3. CIT(APPEALS)- ,KOLKATA 4. CIT, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, I.T.A.T., KOLKATA LAHA, SR. P.S.