Tamal Kumar Mitra, Hooghly V. ITO,Ward-2(2), Hoogly, Hooghly

ITA 747/KOL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8109 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2012
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 10-05-2012
• Court: TRIBUNAL
• Department Lawyers: D K RAKSHIT
• Keywords: Earning of tax free income
• Section: 10

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [ () )) ) , ,, , , . .. . ! ! ! !. .. . , , , , '# ] ]] ] [BEFORE SHRI MAHAVIR SINGH, JM & SRI C. D. RAO, AM] % / I.T.A NOS.747 & 748/KOL/2012 &' ()/ ASSESSMENT YEARS : 2005-06 & 2006-07 TAMAL KUMAR MITRA . -VS.- I.T.O., WARD-2 (2) HOOGHLY [PAN : AEPPM 3719 M] HOOGHLY. [ +, /APPELLANT ] [ -.+,/ RESPONDENT ] +, / FOR THE APPELLANT : SHRI SOMNATH GHOSH -.+, / FOR THE RESPONDENT : SHRI D.K.RAKSHIT /&0 1 !# /DATE OF HEARING : 08.10.2012. 2( 1 !# /DATE OF PRONOUNCEMENT : 08.10.2012. '3 /ORDER . .. . ! ! ! !. .. . , , , , '# PER C. D. RAO, A. M. THE ASSESSEE HAS FILED THE ABOVE APPEALS AGAINST T HE ORDER OF LD. CIT-(A)- XXXVI, KOLKATA DATED 16.03.2012 PERTAINING TO ASSES SMENT YEARS 2005-06 AND 2006- 07 RESPECTIVELY. 2. IN BOTH THESE APPEALS THE FIRST TWO GROUNDS ARE RELATING TO THE ISSUE OF TAXABILITY OF INCOME DERIVED FROM NURSERY OPERATIONS. 3. AT THE TIME OF HEARING THE LD. COUNSEL APPEARIN G ON BEHALF OF ASSESSEE HAS FILED THE ORDER OF THIS TRIBUNAL DATED 21.06.20121 IN THE CASE OF SUMIT KUMAR MITRA IN ITA NO.2166/LOL/2010 WHEREIN THE FACTS OF THE CASE ARE IDENTICAL TO THAT OF THE PRESENT CASE. THEREFORE, HE REQUESTED TO SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES AND DIRECT THE 2 AO TO TREAT THE INCOME FROM NURSERY OPERATIONS AS A GRICULTURAL INCOME AND EXEMPTED U/S 10(1) OF THE IT ACT. 4. ON THE OTHER HAND, THE LD. DR APPEARING ON BEHAL F OF REVENUE THOUGH RELIED ON ORDERS OF THE REVENUE AUTHORITIES COULD NOT CONTRAD ICT THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR ASSESSEE BY BRINGING ANY CONTRARY DECIS ION TO THAT OF THE ONE RELIED ON BY THE LD. COUNSEL. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, IT IS OBSERVED THAT THIS TRIBUNAL IN THE CASE OF SUMIT KR.MITRA VIDE ITA NO.2166/KOL/2010 DATED 21.06.2012 HAS FOLLOWED THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.476/KOL/2010 IN THE CASE OF CIT VS ITC LIMITED FOR A.YR.2005-06 DATED 10.06.2011. THE RELEVANT OBSERVA TIONS OF THE TRIBUNALS ORDER IN ITA NO.476/KOL/2010 ARE AS UNDER :- 3. AT THE OUTSET, IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESEE AND AGAINST THE REVENUE BY THE DECISION OF THIS TRI BUNAL IN ITA NO.476/K12010, DCIT VS. M/S. ITC LIMITED FOR AY 2005-06 DATED 10.06.2011, W HEREIN IT HAS BEEN HELD AS UNDER: IT IS EVIDENT THAT THE INCOME OF THE ASSESSEE FROM MARKETING OF CLONAL PLANTS IS AN AGRICULTURAL INCOME. NOW THE QUESTION ARISES AS TO WHETHER THE AMENDMENT MADE BY FINANCE ACT, 2008 BY INSERTING EXPLANATION 3 TO SEC TION 2(1A) IS RETROSPECTIVE OR IS PROSPECTIVE. EXPLANATION 3 AS INSERTED BY FINANCE A CT, 2008 TO SECTION 2(1A) READS AS UNDER :- FOR THE PURPOSES OF THIS CLAUSE, ANY INCOME DERIVE D FROM SAPLINGS OR SEEDLINGS GROWN IN A NURS ERY SHALL BE DEEMED TO BE AGRICULTURAL INCOME . THE EXPLANATORY NOTES TO THE SAID PROVISION OF THE FINANCE ACT, 2008 IS CONTAINED IN CBDT CIRCULAR NO. 1 OF 2009 DATED 27.03.2009, WHICH IS ASUNDER:- 4.1. AGRICULTURAL INCOME IS DEFINED IN SUB-SECTION (1A) OF SECTION 2 OF THE ACT TO MEAN, INTER ALIA, INCOME DERIVED FROM LAND WHICH IS SITUA TED IN INDIA AND IS USED FOR AGRICULTURAL PURPOSES. SUCH AGRICULTURAL INCOME IS EXEMPT FROM TAX UNDER SUB-SECTION (1) OF SECTION 10 OF THE INCOME TAX ACT, 1961. IT HAS B EEN HELD BY JUDICIAL AUTHORITIES THAT WHETHER INCOME FROM NURSERY OPERATIONS CONSTITUTES AGRICULTURAL INCOME OR NOT, WILL DEPEND ON THE FACTS OF EACH CASE. IF THE NURSERY IS MAINTAINED BY CARRYING OUT BASIC OPERATIONS ON LAND AND SUBSEQUENT OPERATIONS ARE CA RRIED OUT IN CONTINUATION OF THE BASIC OPERATIONS, THEN INCOME FROM SUCH NURSERY WOULD BE AGRICULTURAL INCOME NOT LIABLE TO TAX 3 UNDER SECTION 10. HOWEVER, IF THE NURSERY IS MAINTA INED INDEPENDENTLY WITHOUT RESORTING TO BASIC OPERATIONS ON LAND, THEN INCOME FROM SUCH NURSERY WOULD NOT BE AGRICULTURAL INCOME AND WOULD BE LIABLE TO BE INCLUDED IN THE TO TAL INCOME. 4.2. WITH A VIEW TO GIVING FINALITY TO THE ISSUE, A N EXPLANATION IN SECTION 2 OF THE INCOME TAX ACT, HAS BEEN INSERTED PROVIDING THAT INCOME DE RIVED FROM SAPLINGS OR SEEDLINGS GROWN IN A NURSERY SHALL BE DEEMED TO BE AGRICULTUR AL INCOME. ACCORDINGLY, IRRESPECTIVE OF WHETHER THE BASIC OPERATIONS HAVE BEEN CARRIED O UT ON LAND, SUCH INCOME WILL BE TREATED AS AGRICULTURAL INCOME, THUS QUALIFYING FOR EXEMPTION UNDER SUB-SECTION (1) OF SECTION 10 OF THE ACT. 33. ON PERUSAL OF ABOVE CBDT CIRCULAR, IT IS EVIDEN T THAT THE AMENDMENT HAS BEEN MADE BY INSERTING EXPLANATION 3 BY FINANCE ACT, 2008 IS TO SETTLE THE CONTROVERSY WHICH HAS ARISEN BECAUSE OF THE JUDICIAL PRONOUNCEMENTS. THER EFORE, WE AGREE WITH LD. AR THAT THE SAID AMENDMENT IS CURATIVE IN NATURE AND IT HAS TO BE CONSIDERED RETROSPECTIVE. THE HONBLE BOMBAY HIGH COURT HAS HELD IN THE CASE OF G ODREJ & BOYCE MANUFACTURING CO. LTD. VS.- DCIT 328 ITR 81, INTER ALIA, THAT WHEN T HE AMENDMENT IS CURATIVE OR IT IS INTENDED TO REMEDY UNINTENDED CONSEQUENCES OR TO RE NDER A STATUTORY PROVISION WORKABLE, THE AMENDMENT MAY BE CONSTRUED TO RELATE BACK TO TH E PROVISION IN RESPECT OF WHICH IT SUPPLIES A REMEDIAL EFFECT. 34. CONSIDERING THE ABOVE DECISIONS AND THE AMENDME NT NOW MADE BY THE FINANCE ACT, 2008, WE ARE OF THE CONSIDERED VIEW THAT THE INCOME DERIVED BY THE ASSESSEE FROM MARKETING OF CLONAL PLANTS IS IN THE NATURE OF AGRI CULTURAL INCOME. THUS IT IS EXEMPTED UNDER SECTION 10(1) OF THE INCOME TAX ACT,. HENCE, WE AGREE WITH THE ORDER OF LD. CIT(APPEALS) AND REJECT GROUND NO.4 OF THE APPEAL T AKEN BY THE DEPARTMENT. RESPECTFULLY FOLLOWING THE TRIBUNALS DECISION IN T HE CASE OF ITC LIMITED, SUPRA, WE ALLOW THE CLAIM OF ASSESSEE. APPEAL OF ASSESSEE IS ALLOWE D. 5.1. SINCE THIS TRIBUNAL HAS CONSISTENTLY OBSERVED THAT THE INCOME DERIVED FROM NURSERY OPERATIONS IS AN AGRICULTURAL INCOME AND TH US ASSESSEE IS EXEMPTED U/S 10(1) OF THE IT ACT, 1961 EVEN PRIOR TO THE AMENDMENT OF EXP LANATION AS INSERTED BY FINANCE ACT, 2008 TO SECTION 2(1A). WE SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND DIRECT THE AO TO TREAT THE INCOME OF ASSE SSEE DERIVED FROM NURSERY OPERATIONS AS EXEMPTED U/S 10(1) OF THE IT ACT FOR THE IMPUGNE D ASSESSMENT YEARS 2005-06 AND 2006-07. 6. IN THE RESULT GROUND NOS. 1 AND 2 IN BOTH THE AP PEALS ARE ALLOWED. 7. THE ONLY OTHER ISSUE RAISED BY ASSESSEE IN ITA N O.748/KOL/2012 IS RELATING TO THE SUBSIDY OF RS.59,129/- RECEIVED BY ASSESSEE FRO M NATIONAL HORTICULTURE BOARD 4 WHETHER THE SAME IS A REVENUE RECEIPT OR CAPITAL RE CEIPT. THE REVENUES CONTENTION IS THAT THE RECEIPT IS OF REVENUE IN NATURE AND ADDED TO THE INCOME OF ASSESSEE. 8. AT THE TIME OF HEARING, THE LD. COUNSEL APPEARIN G ON BEHALF OF ASSESSEE BY PLACING ON RECORD THE SANCTION OF THE SUBSIDY BY THE MANAGI NG DIRECTOR OF NATIONAL HORTICULTURE BOARD DATED 19.07.2006 CONTENDED THAT THE SUBSIDY I S TO BE TREATED AS CAPITAL IN NATURE IN VIEW OF THE NATIONAL HORTICULTURE BOARD SCHEME DEV ELOPMENT OF COMMERCIAL HORTICULTURE THROUGH PRODUCTION AND POST HARVEST MA NAGEMENT. THEREFORE HE REQUESTED TO SET ASIDE THE ORDERS OF THE REVENUE AU THORITIES AND DIRECT THE AO TO TREAT THE RECEIPT OF RS.59,129/- AS CAPITAL IN NATURE. 9. ON OTHER HAND, THE LD. DR APPEARING ON BEHALF OF THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 10. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, IT IS OBSERVED FROM THE LETTER OF NATION AL HORTICULTURE BOARD DATED 19.07.2006 ADDRESSED TO THE BRANCH MANAGER, STATE BANK OF INDI A, BALAGARH BRANCH, DIST.HOOGHLY THAT THE SUBSIDY RELEASED BY NHB TO THE STATE BANK OF I NDIA, BALAGARH BRANCH, P.O.SRIPUR BAZAR, DIST.HOOGHLY (W.B.) IS ON BEHALF OF INDIVIDUAL UNIT AND THE ABOVE SANCTIONED SUBSIDY AMOUNT SHALL BE KEPT IN SEPARATE SUBSIDY RESERVE FUND A/C. THE ADJUSTMENT OF SUBSIDY WILL BE ON THE PATTERN OF BACK-ENDED CAPITAL INVESTMENT SUBSIDY. A CCORDINGLY, THE FULL PROJECT COST INCLUDING NHB SUBSIDY AMOUNT BUT EXCLUDING THE MARGIN MONEY C ONTRIBUTION FROM THE BENEFICIARY WOULD DISBURSED AS A LOAN BY THE BANK. THE REPAYMENT SCHE DULE OF THE ABOVE MENTIONED LOAN WOULD BE DRAWN IN SUCH A WAY THAT THE SUBSIDY AMOUNT IS ADJU STED AFTER LOAN PORTION OF THE STATE BANK OF INDIA, BALAGARH BRANCH, P.O. SRIPUR BRANCH, DIS.HOO GHLY (W.B.) EXCLUDING SUBSIDY LIQUIDATED. 10.1. ON CAREFUL PERUSAL OF THE ABOVE AND THE SCHEM E OF NATIONAL HORTICULTURE BOARD IN RESPECT OF CAPITAL INVESTMENT SUBSIDY SCHEME FOR CONSTRUCTION/EXPANSION/MODERNIZATION OF COLD STORAG S/STORAGES OF HORTICULTURE PRODUCE, WE ARE OF THE VIEW THAT THE RECEIPT OF RS .59,129/- FROM NATIONAL HORTICULTURE BOARD IS OF CAPITAL IN NATURE. THEREFORE, WE SET AS IDE THE ORDERS OF THE REVENUE 5 AUTHORITIES ON THIS ISSUE ALSO AND DIRECT THE AO TO TREAT THE RECEIPT OF RS.59,129/- AS CAPITAL IN NATURE. 11. IN THE RESULT GROUND NO.3 IN ITA NO.748/KOL/201 2 IS ALLOWED. 12. IN THE RESULT BOTH THE APPEALS OF ASSESSEE ARE ALLOWED. '3 #/' 4 /& 5 6 !# ORDER PRONOUNCED IN THE OPEN COURT ON 08.10.2012. SD/- SD/- [ , ] [ . !., , , , '# ] [ MAHAVIR SINGH ] [ C. D. RAO ] JUDICIAL MEMBER ACCOUNTANT MEMBER (!#) DATED : 08.10.2012. [RG &78 9 /.PS] 6 '3 1 -: ;':(/ COPY OF THE ORDER FORWARDED TO: 1. TAMAL KUMAR MITRA, C/O SHRI SOMNATH GHOSH, ADVOCATE , SEVEN BROTHERS LODGE, CHINSURAH, DIST.HOOGHLY, PIN:712 1 05. 2 I.T.O., WARD-2 (2), HOOGHLY. 3. THE CIT, 4. THE CIT(A)- XXXVI, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA [.: -/ TRUE COPY] '3&// BY ORDER, 8 /ASSTT REGISTRAR