SYED MOHAMED SATHIK ALI,DINDIGUL V. ITO, WARD-1(3), DINDIGUL

ITA 2362/CHNY/2025

AI Insights

The case revolves around the classification of income derived from the sale of Silver Oak trees, which were cut and sold by the assessee, Syed Mohamed Sathik Ali. The Income Tax Officer initially assessed this income as 'Income from Capital Gains' and added it to the assessee's income, rejecting the claim that it was agricultural income. The CIT(A) upheld this decision. However, the Tribunal, referencing a decision by the Hon'ble High Court of Madras, found that the income should be classified as agricultural income, as the Silver Oak trees were not of spontaneous growth but were planted and nurtured by the assessee. The Tribunal's decision was influenced by precedents that defined agricultural produce to include products from trees that require human effort and are not wild or spontaneous.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 790454 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 28-08-2025
• Other Referred Cases: United Nilgiri Tea Estates Company Ltd. v. The Tamil Nadu Sales Tax Appellate Tribunal & Ors
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M. SUBASHRI; VIRTUAL
• Assessee Lawyers: T.N. SEETHARAMAN
• Keywords: Set aside; Capital Gains
• Section: 143(3)

Judgement Text

"आयकर अपीलीय अिधकरण, ’ए’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी जगदीश, लेखा सद˟ क े समƗ । Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri Jagadish, Accountant Member आयकर अपील सं./I.T.A. No.2362/Chny/2025 िनधाŊरण वषŊ/Assessment Year: 2017-18 Syed Mohamed Sathik Ali, C/o Shri T.N. Seetharaman, Advocate, # 384 (Old No. 196), Lloyds Road, Chennai 600 086. [PAN: AJDPS6560R] Vs. The Income Tax Officer, Ward 1(3), Dindigul. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri T.N. Seetharaman, Advocate ŮȑथŎ की ओर से/Respondent by : Ms. M. Subashri, Addl. CIT (Virtual) सुनवाई की तारीख/ Date of hearing : 20.11.2025 घोषणा की तारीख /Date of Pronouncement : 01.12.2025 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order dated 30.06.2025 passed by the Addl/JCIT(A)-1, Nashik for the assessment year 2017-18. 2. The assessee raised 5 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in confirming the addition made as income from capital gains Printed from counselvise.com I.T.A. No.2362/Chny/25 2 denying the claim of agricultural income in the facts and circumstances of the case. 3. We note that the Assessing Officer completed the assessment order under section 143(3) of the Income Tax Act, 1961 [“Act” in short] dated 30.12.2019 by assessing total income of the assessee at ₹.17,86,320/- against the returned income at ₹.5,77,800/-, after making disallowance of ₹.12,08,520/- claimed as agricultural income out of sale from cutting of the oak trees and added to the income returned by the assessee under the head Income from Capital Gains. The ld. CIT(A) confirmed the view of the Assessing Officer. 4. The ld. AR Shri T.N. Seetharaman, Advocate submits that the cut and sale of Silver Oak trees grown by the assessee are agricultural income and not liable to tax. He vehemently argued that the Silver Oak trees are not of spontaneous growth, unlike forest trees, but were planted and nurtured by the assessee, cut and sold as log and the income so derived constitutes agricultural income. The ld. AR placing reliance on the decision of the Hon’ble High Court of Madras in the case of United Nilgiri Tea Estates Company Ltd. v. The Tamil Nadu Printed from counselvise.com I.T.A. No.2362/Chny/25 3 Sales Tax Appellate Tribunal & Ors in W.P. Nos. 46464 to 46470 of 2006 dated 29.07.2022 prayed to follow the same. 5. The ld. DR Ms. M. Subashri, Addl. CIT relied on the order passed by the ld. CIT(A). 6. Heard both the parties and perused the material available on record. We note that the assessee claimed agricultural income realized through sale of Silver Oak grown as shade trees in tea estate, but, however, the Assessing Officer denied and treated the same as long term capital gain, which was confirmed by the ld. CIT(A). We note that whether the sales of cut/sized Silver Oak trees grown as shade trees in the Tea Estate would constitute “agricultural produce was subject matter in appeal before the Hon’ble High Court of Madras in the case of United Nilgiri Tea Estates Company Ltd. v. The Tamil Nadu Sales Tax Appellate Tribunal & Ors (supra), wherein, the Hon’ble High Court was pleased to hold the cut/sized shade trees would constitute “agricultural produce and relevant portion of the said order is reproduced herein below for better understanding: 14.1. To understand, what would constitute \"agriculture\", it may be relevant to refer to the following judgments of the Hon'ble Supreme Court and the Madras High Court: Printed from counselvise.com I.T.A. No.2362/Chny/25 4 (i) CIT vs. Raja Benoy Kumar Sahas Roy ( 31 ITR 426 ) wherein it was held that \"some basic operation prior to germination involving application of human effort on the land itself was necessary to constitute agriculture\". (ii) CIT vs. Sundara Mudaliyar ( 18 ITR 259 ) wherein it was pointed out that \"irrespective of the nature of the produce or the product of the land whatever is grown on land aided by human labour and effort, whatever does not grow wild or spontaneously on soil without human labour or effort, would constitute \"agricultural produce\". 14.2. The shade trees that have been cut/sized and sold are Silver Oak. These trees have their origin in Australia, an exotic plant variety and they are used as shade trees in tea estates in southern parts of India. These shade trees viz., Silver Oak need to be attended to periodically and they have to be planted and grown at particular intervals/distance to serve its purpose as shade trees for growth of tea plants. It is not the case of the Revenue that the growth of Silver Oak is wild or spontaneous, rather it is the case of the petitioner, which remains uncontroverted, these require human effort/labour and attention and thus, would constitute “agricultural produce”. 7. From the reading of the above decision of the Hon’ble High Court of Madras, it is clear that the income derived by sale of Silver Oak Trees which are “agricultural produce” is undoubtedly an “agricultural income”. The ld. DR could not controvert the above decision of the Hon’ble High Court of Madras. Respectfully following the above decision in the case of United Nilgiri Tea Estates Company Ltd. v. The Tamil Nadu Sales Tax Appellate Tribunal & Ors (supra), we set aside the order of the ld. CIT(A) and delete the addition made by the Assessing Officer with a direction to treat the sale proceeds earned out Printed from counselvise.com I.T.A. No.2362/Chny/25 5 of sale of Silver Oak trees as agricultural income. Thus, the grounds raised by the assessee are allowed. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced on 01st December, 2025 at Chennai. Sd/- Sd/- (JAGADISH) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 01.12.2025 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. Printed from counselvise.com "