ACIT, Kottayam V. M/s. The Nilgiri Tea Estate Ltd, Kottayam

ITA 37/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77448 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 07-05-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 03-02-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: SONY MATHEW
• Keywords: Capital asset; Capital receipt
• Section: 2(14); 115JB; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 37/COCH/2014 ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. VS. M/S. THE NILGIRI TEA ESTATE LTD., ANCHERIL BANK BUILDING, P.O. BOX NO. 1, BAKER JUNCTION, KOTTAYAM-686 001. PAN:AAACN 7290G] (REVENUE -APPELLANT) (ASSESSEE-RESPONDEN T) ASSESSEE BY SHRI SONY MATHEW, CA REVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 07/05/2014 DATE OF PRONOUNCEMENT 06/06/2014 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 06- 11-2013 PASSED BY THE LD. CIT(A)-IV, KOCHI AND IT R ELATES TO THE ASSESSMENT YEAR 2008-09. 2. THE SOLITARY ISSUE URGED IN THIS APPEAL IS WHETH ER THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE PROFIT ON SALE OF AGR ICULTURAL LAND NEED NOT BE INCLUDED FOR COMPUTING PROFIT U/S. 115JB OF THE ACT . I.T.A. NO.37 /COCH/2014 2 3. THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE S TATED IN BRIEF. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION DECLARING LOSS OF RS. 69.42 LAKHS UNDER NORMAL PROVISIONS OF THE A CT AND THE NEGATIVE BOOK PROFIT OF RS. 27.21 LAKHS U/S. 115JB OF THE ACT. T HE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD SOLD AGRICULTURAL LAND LOCATED AT PEERUMADE, WHICH FORMED PART OF STAG BROOK ESTATE, AND HAS REALISED A PROFIT OF RS. 1,01,00,424. THOUGH THE ABOVE SAID PROFIT WAS SHOWN IN THE PROFIT AND LOSS ACCOUNT, YET THE ASSESSEE EXCLUDED THE SAME WHILE COMPUTING THE BOOK PROFIT U NDER SECTION 115JB OF THE ACT, BY PLACING RELIANCE ON THE DECISION RENDERED B Y THE CO-ORDINATE BENCH OF COCHIN TRIBUNAL IN THE CASE OF HARRISONS MALAYALAM VS. ACIT (2009) (315 ITR (AT) 1). HOWEVER, THE ASSESSING OFFICER TOOK THE V IEW THAT THE ASSESSEE CANNOT SO EXCLUDE THE ABOVE SAID PROFIT, SINCE IT HAS BEEN DULY DECLARED IN THE PROFIT AND LOSS ACCOUNT AND FURTHER, THE PROVISIONS OF SECTION 115JB DID NOT PROVIDE FOR EXCLUDING IT FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT. THE ASSESSING OFFICER ALSO TOOK THE VIEW THAT THE GAIN ARISING ON SALE OF AGRICULTURAL LAND CANNOT BE CONSIDERED AS AGRICULTURAL INCOME U/S. 2(1A) OF THE ACT AND HENCE, CANNOT BE TREATED AS AN EXEMPTED INCOME U/S. 10(1) OF THE ACT . ACCORDINGLY, THE AO INCLUDED THE PROFIT ON SALE OF AGRICULTURAL LAND IN THE BOOK PROFIT COMPUTED BY THE ASSESSEE. I.T.A. NO.37 /COCH/2014 3 3. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DEL ETED THE ABOVE SAID ADDITION BY PLACING RELIANCE ON THE DECISION RENDER ED BY THE COCHIN BENCH OF ITAT IN THE CASE OF HARRISONS MALAYALAM (SUPRA). 4. BEFORE US, THE LD. DR PLACED STRONG RELIANCE ON THE ASSESSMENT ORDER AND SUBMITTED THAT THE PROFIT REALIZED ON SALE OF AGRIC ULTURAL LAND CANNOT BE CONSIDERED AS AGRICULTURAL INCOME AND HENCE, CANNOT BE EXCLUDED FROM THE COMPUTATION OF PROFIT U/S. 115JB OF THE ACT. 5. ON THE CONTRARY, THE LD. AR SUBMITTED THAT THE C O-ORDINATE BENCH OF THE ITAT IN THE ASSESSEES OWN CASE IN I.T.A. NO. 377/C OCH/2010 RELATING TO THE ASSESSMENT YEAR 2007-08 VIDE ITS ORDER DATED 29-02- 2012 HELD THAT THE PROFIT ARISING ON SALE OF AGRICULTURAL LAND IS NOT INCLUDA BLE IN THE COMPUTATION OF BOOK PROFIT U/S. 115JB OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE IMPUGNED AGRIC ULTURAL LAND IS NOT A CAPITAL ASSET IN TERMS OF SEC. 2(14)(III) OF THE ACT, I.E. , THE SAME IS NOT LOCATED WITHIN THE MUNICIPAL LIMITS OR WITHIN THE NOTIFIED LIMITS. AS SUBMITTED BY THE LD. AR, WE NOTICE THAT, AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF THE ITAT IN THE ASSESSEES OWN CASE RELATING TO THE ASSESSMENT YEAR 2007-08 (REFERRED SUPRA). FOR THE SAKE OF CONVENIENCE, WE I.T.A. NO.37 /COCH/2014 4 EXTRACT BELOW THE OPERATING PORTION OF THE ABOVE SA ID ORDER PASSED BY THE TRIBUNAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE M ATERIAL ON RECORD. THE REVENUES STAND IS THAT PROFIT OR LOSS ON THE DISPO SAL OF AN ASSET IS TO BE DULY INCORPORATED IN THE PROFIT & LOSS ACCOUNT OF A COMP ANY PREPARED IN ACCORDANCE WITH PARTS II & III OF SCHEDULE VI TO TH E COMPANIES ACT, 1956, THE NET PROFIT PER WHICH IS TO BE ADOPTED BY IT FOR COM PUTING THE `BOOK PROFIT UNDER THE MAT PROVISIONS, INCLUDING S. 115JB. AS SU CH, THERE IS NO BASIS FOR EXCLUDING THE PROFIT DERIVED ON THE SALE OF ITS AGR ICULTURAL LAND BY THE ASSESSEE. FURTHER, THERE IS NO QUESTION OF THE SAME BEING EXI GIBLE FOR DEDUCTION ON ACCOUNT OF SEC. 10 OF THE ACT, WHICH MAKES NO REFER ENCE TO THE SAID INCOME. THE ASSESSEE, ON THE OTHER HAND, RELIES ON THE DECI SION BY THE TRIBUNAL IN THE CASE OF HARRISONS MALAYALAM LTD. VS. ACIT (SUPRA), PER WHICH THE SAID PROFIT HAS BEEN HELD AS NOT LIABLE TO BOOK PROFIT TAX U/S. 115JB. THE REVENUE, HOWEVER, PREFERS WITH ITS VIEW AS THE MATTER HAS BE EN, AS STATED, CARRIED BY IT IN APPEAL BEFORE THE HONBLE HIGH COURT. THE TRIBUNAL HAS, IN RENDERING ITS SAID DECISION, RELIED ON THE DECISIONS BY THE APEX COURT IN THE CASE OF SINGHAI RAKESH KUMAR V. UNION OF INDIA (2001) 247 ITR 150 (SC) AND CIT V. ALL INDIA TEA AND TRADING CO. LTD . (1996) 219 ITR 544 (SC), HOLDING THAT THE INCOME ARISING ON THE TRANSFER OF AGRICULTURAL LAND IS NOT EXIGIBLE TO CAPITAL GAINS TAX, BEING IN THE NATURE OF AGRICULTURAL INCOME. FIRSTLY , AS SUCH, THERE IS COMPLETE PARITY OF FACTS, SO THAT WE FIND NO REASON TO TAKE A DIFFERENT VIEW OF THE MATTER. SECONDLY, THE REVENUES OBJECTION IS TECHNICAL IN N ATURE INASMUCH IT CONCEDES THAT THE INCOME IS OTHERWISE NOT CHARGEABLE TO TAX UNDER THE REGULAR PROVISIONS OF THE ACT. THE PROVISIONS OF CHAPTER XII-B OF THE ACT DO NOT, IN OUR VIEW, OPERATE TO EXTEND THE SCOPE OF `TOTAL INCOME PER S ECTION 5 ON WHICH THE CHARGE TO TAX U/S. 4 IS ATTRACTED, BUT IS ONLY TOWARD PROV IDING AN ALTERNATIVE BASIS FOR COMPUTING THE SAME. REFERENCE BY THE LD. CIT(A) TO THE CIRCULAR NO. 550 BY THE BOARD IN THIS REGARD IS IN OUR VIEW APPOSITE; T HE RECEIPT BEING ADMITTEDLY A CAPITAL RECEIPT. WE THEREFORE FOLLOWING THE DECISIO N BY THE TRIBUNAL IN THE CASE OF HARRISONS MALAYALAM LTD. VS. ACIT (SUPRA), DELETE THE INCLUSION OF PROFIT OF RS. 23.69 LAKHS ON ACCOUNT OF SALE OF AGRICULTURAL LAND, ADMITTEDLY NOT A CAPITAL ASSET U/S. 2(14), IN THE COMPUTATION OF BOOK PROFIT U/S. 115JB OF THE ACT. WE DECIDE ACCORDINGLY. 7. THERE SHOULD NOT BE ANY DISPUTE THAT THE PROF IT ARISING ON SALE OF AGRICULTURAL LAND, WHICH DOES NOT FALL IN THE CATEGORY OF CAPIT AL ASSET AS DEFINED UNDER SEC. 2(14) OF THE ACT DOES NOT COME UNDER THE PURVIEW O F THE INCOME TAX ACT AT ALL. I.T.A. NO.37 /COCH/2014 5 FOR EXAMPLE, THE PROFIT ARISING ON SALE OF PERSONAL EFFECTS IS NOT EXIGIBLE TO INCOME TAX ACT. IN THE SIMILAR MANNER, THE PROFIT ARISING ON SALE OF AGRICULTURAL LAND, WHICH IS NOT A CAPITAL ASSET, IS ALSO NOT EXI GIBLE TO INCOME TAX. HENCE, IN OUR VIEW, AN ITEM OF INCOME WHICH DOES COME UNDER T HE PURVIEW OF INCOME TAX CANNOT BE SUBJECTED TO TAX UNDER ANY OF THE PROVISI ONS OF THE ACT. HENCE, THE TRIBUNAL, IN THE ASSESSEES OWN CASE REFERRED ABOVE , HAS EXPRESSED THE FOLLOWING VIEW:- THE PROVISIONS OF CHAPTER XII-B OF THE ACT DO NOT, IN OUR VIEW, OPERATE TO EXTEND THE SCOPE OF `TOTAL INCOME PER SECTION 5 ON WHICH THE CHARGE TO TAX U/S. 4 IS ATTRACTED, BUT IS ONLY TOWARD PROVIDING A N ALTERNATIVE BASIS FOR COMPUTING THE SAME. ACCORDINGLY, WE ARE OF THE VIEW THAT THE PROFIT FRO M SALE OF AGRICULTURAL LAND, WHICH IS NOT A CAPITAL ASSET, CANNOT BE INCLUDED FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. ACCORDINGLY, WE UPHOLD THE DECISION TAKEN BY LD CIT(A). 8 . IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . PRONOUNCED ACCORDINGLY ON 06-06- 2014. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 6TH JUNE, 2014 GJ I.T.A. NO.37 /COCH/2014 6 COPY TO: 1. M/S. THE NILGIRI TEA ESTATE LTD., ANCHERIL BANK B UILDING, P.O. BOX NO. 1, BAKER JUNCTION, KOTTAYAM-686 001.. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCL E-1, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-IV, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN