ACIT, Bhubaneswar V. Orissa State Cashew Development Corporation Ltd, Bhubaneswar

ITA 87/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4420 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 13-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-03-2010
• Court: TRIBUNAL
• Department Lawyers: RAISE; AYS
• Assessee Lawyers: ASSESS MENT YEAR
• Keywords: Revenue expenditure

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL,CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 87 AND 88 /CTK/2010 C.O.NOS.05 AND 06/CTK/2010 (FILED BY THE ASSESSEE) (ASSESS MENT YEAR 2004 - 05 AND 2005 - 06) ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), BHUBANESWAR. VERSUS ORISSA STATE CASHEW DEV.CORPN.LTD., 2 ND FLOOR, F - 4 BLOCK, INDRADHANU MARKET, IRC VILLAGE, BHUBANESWAR PAN: AAACO 5722 G (APPELLANT) (RESPONDENT) FOR THE APPELLANT: S MT. PRAMITA TRIPATHY, DR FOR THE RESPONDENT SHRI J.M.PATTANAIK, AR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THESE APPEALS BY THE REVENUE FOR THE AYS 2004 - 05 AND 2005 - 06 RAISE THE SOLITARY ISSUE WITH RESPECT TO CLAIM OF THE ASSESSEE RENDE RING INCOME FROM NURSERY AS AGRICULTURAL INCOME ASSESSED OTHERWISE BY THE ASSESSING OFFICER AND DIRECTED TO BE CONSIDERED AS AGRICULTURAL INCOME ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS). 2. THE BRIEF FA CTS ARE THAT THE ASSESSEE HAS BEEN CARRYING OUT AGRICULTURAL OPERATIONS IN CULTIVATING AND NURTURING CASHEW NUTS PLANTS ON LAND PARTLY TRANSFERRED FROM THE SOIL CONSERVATION DEPARTMENT OF GOVERNMENT OF ORISSA THE ASSESSEE BEING 100% GOVERNMENT UNDERTAKING ITSELF . APART FROM RENDERING INCOME FROM SALE OF CASHEW NUTS THE ASSESSEE HAD INCOME FROM SEEDS AND SAPLINGS IN THE NURSERY IN VIEW OF THE VAST AREA AVAILABLE TO IT WHEN THE LIFE FOR CASHEW PLANTATION S RANGES BETWEEN 5 TO 10 YEARS. THE QUALITY OF CASHEW NU TS GROWN IN THE PARTICULAR AREA , ON THE BASIS OF RESEARCH AND DEVELOPMENT CARRIED OUT BY THE ASSESSEE , COMMA NDS HIGHER PRICE FOR WHICH THE SEEDS AND SAPLINGS G ROWN ARE ALSO PART OF ITS AGRICULTURAL OPERATION CARRIED OUT WHICH ENTIRE LY ARE CLAIMED AS EXPENS ES INCURRED FOR EARNING AGRICULTURAL INCOME. THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT U/S.143(3) HELD THAT IN PLACE WHERE YO UNG PLANTS ARE REARED AND KEPT I S QUOTED I S NURSERY IS BUSINESS AND DOES NOT GENERALLY INVOLVE THE ORDINARY PROCESS OF CULTI VATION IN FIELDS AT ALL , AS WAS CONSIDERED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF MAHARAJ PRASAD JAIN V. CIT (61 ITR 297) AND H.H.MAHARAJA VBIBUTI NARAINSINGH V. STATE OF UP (65 ITR 2 ITA NO. 87 AND 88 /CTK/2010 C.O.NOS.05 AND 06/CTK/2010 364).THE ASSESSING OFFICER HAD ALSO CONSIDERED THE OTHER AGRIC ULTURAL INCOME RENDERED BY THE ASSESSEE , PARTLY NOT TO BE CONSIDERED AS AGRICULTURAL INCOME ON THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN ALL THE EXPENSES CARRIED OUT WERE TO BE ALLOWED EITHER FOR THE PURPOSE OF RENDERING INCOME FROM AGRICULTURAL PROCESS OR FOR NURSERY. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE CASE LAWS CITED BY THE AO AND ALSO DISTINGUISHED THE FACTS OF THE ASSESSEES CASE BY RELYING ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT V. SOUNDARYA NURSERY (241 I TR 530), HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT V. GREEN GOLD TREE FARMERS PVT.LTD. (299 ITR 262) BY ACCEPTING THE PROPOSITION THAT THE LAW PROVIDES SPECIFICALLY AS TO WHAT COULD BE CONSIDERED AS AGRICULTURAL INCOME AS PROVIDED IN EXPLANATION - 3 TO SECTION 2(1A ) . THE LAW PROVIDES THAT ANY INCOME DERIVED FROM SAPLING OR SEEDLINGS GROWN IN A NURSERY SHALL BE DEEMED TO BE THE AGRICULTURAL INCOME AND NOT OTHERWISE HAD NOT BEEN ESTABLISHED BY THE ASSESSING OFFICER. 3. THE LE ARNED DR HAS NOT BROUGHT OUT ANY CONTROVERTING MATERIAL TO THIS EFFECT AS NOTED BY THE ASSESSING OFFICER. 4. THE LEARNED COUNSEL FOR THE ASSESSEE RESPONDENT SUBMITTED APART FROM THE SETTLED LAW PROVIDING FOR HOLDING THE INCOME FROM NURSERY AS AGRICULTURAL INCOME , FACTS OUGHT TO HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER WHEN HE HIMSELF AGREES TO THE PROPOSITION THAT A PART OF THE INCOME WHICH HE ASSESSED IS AGRICULTURAL INCOME AND IS CARRIED OUT BY INCURRING AGRICULTURAL OPERATIONS WHICH EXPENSES HAVE B EEN ALLOWED 100% THEREFORE CANNOT BE ISOLATED FOR THE PURPOSE OF RUNNING OF NURSERY AS A SEPARATE BUSINESS UNIT. HE FULL Y SUPPORTED THE ORDER OF THE LEARNED CIT(A) IN VIEW OF THE FA C T FINDING WHICH HAS NOT BEEN DISTINGUISHED BY THE ASSESSING OFFICER AND TH E LEARNED DR AS OF NOW. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LEARNED CIT(A). THE ASSESSING OFFICER APPE ARS TO HAVE DEV IATED TO CONSIDER THE CONTENTION OF THE WORD NURSERY WHEN HE SOUGHT TO RELY ON THE ALLAHABAD HIGH COURTS DECISION WHICH FACTS ARE ENTIRELY DIFFERENT. IN THE CASE OF THE ASSESSEE BEFORE US, THE ASSESSING OFFICER HIMSELF AGREES TO THE PROPO SITION THAT THE VAST LAND WHICH THE ASSESSEE CULTIVATES INCORPORATES PLANTATION OF CASHEW NUTS AND THEIR TERM RANGES BETWEEN 5 TO 10 YEARS THEREFORE REGULARLY REQUIRES 3 ITA NO. 87 AND 88 /CTK/2010 C.O.NOS.05 AND 06/CTK/2010 REPLENISHMENT FOR WHICH MAINTENANCE OF A NURSERY IS THE FOREMOST NECESSITY , WHICH INCIDE NTALLY RENDERS INCOME ON ACCOUNT OF NO PARTICULAR TIME PERIOD FOR A TREE TO DIE AND TO BE REPLACED ONLY BY THE SAID SAPLINGS. IN OTHER WORDS, THE LEARNED CIT(A) APPRECIATED THE DISTINCTION BY RELYING O N OTHER DECISIONS, WHICH RELATE TO ACTUAL AGRICULTURAL OPERATION CARRIED OUT AND ARE INCIDENTAL FOR MAINTAINING NURSERY WHICH NURSERY WAS CONSIDERED BY THE HONBLE ALLAHABAD HIGH COURT WAS NOT FOR THE PURPOSE OF CARRYING OUT ANY AGRICULTURAL OPERATION. HAVING ALLOWED THE EXPENSES INCURRED FOR THE NURSERY, THE ASSESSING OFFICER CONTRADICTED HIS OWN VIEW OF HOLDING THE SAME AS BUSINESS WHICH THE ASSESSEE NEVER CLAIMED SEPARATELY IN VIEW OF ITS INBUILT MECHANISMS OF NOTING REPLACEMENT, REPLENISHMENT AND ACCOUNTING OF REVENUE EXPENDITURE AS AND WHEN THEY ARE INCURR ED TO BE CAPITALIZED. THEREFORE, IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE CONTENTION OF THE LEARNED CIT(A) IN ALLOWING THE INCOME FROM NURSERY AS AGRICULTURAL INCOME AS RETURNED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE SUPPORTING THE IMPUGNED ORDERS OF THE LEARNED CIT(A) ARE ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON DT. 20 TH MAY, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GU PTA) ACCOUNTANT MEMBER DATE: 20 TH MAY, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY . COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), BHUBANESWAR. 2. THE RESPONDENT: ORISSA STATE CASHEW DEV.CORPN.LTD., 2 ND FLOOR, F - 4 BLOCK, INDRADHANU MARKET, IRC VILLAGE, BHUBANESWAR 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.