2006 (6) TMI 471 - HC - Income Tax

Issues Involved:

1. Whether the Agricultural Income-tax Officer is empowered to revise the assessment by recomputing the income.
2. Whether the Agricultural Income-tax Officer was justified in revising the assessment in light of the amendment to section 80 HHC of the Income-tax Act by the Finance Act, 1999, with retrospective effect from 1992.

Detailed Analysis:

1. Empowerment of Agricultural Income-tax Officer to Revise Assessment:

The core issue revolved around whether the Agricultural Income-tax Officer could revise the assessment by recomputing the income. The Tribunal had accepted the assessees' contention that, as per Rule 7 of the Tamil Nadu Agricultural Income-tax Rules, 1955, the computation made by the Central Income-tax Officer under the Income-tax Act should be accepted by the Agricultural Income-tax Officer. Consequently, the Tribunal set aside the revision of assessment made by the Agricultural Income-tax Officer, which had been sustained by the Assistant Commissioner of Agricultural Income-tax. The High Court affirmed this view, stating that the computation of income by the Central Income-tax Officer is final and binding on the Agricultural Income-tax Officer under Rule 7. The Court referred to the precedents set by the Supreme Court in "Assam Co. Ltd. v. State of Assam" and the Kerala High Court in "Tata Tea Ltd. v. IAC of Agr. I.T." which held that the State Officers could not recompute agricultural income already computed by Central Officers.

2. Justification of Revising Assessment in Light of Amendment to Section 80 HHC:

The second issue concerned whether the Agricultural Income-tax Officer was justified in revising the assessment based on the amendment to section 80 HHC of the Income-tax Act by the Finance Act, 1999, which inserted sub-section 4-B with retrospective effect from 1992. The learned Special Government Pleader contended that the revision was valid as the amendment clarified that any income not chargeable under the Income-tax Act should be excluded for the purposes of computing total income under section 80 HHC. The Tribunal, however, had set aside this revision, and the High Court upheld the Tribunal's decision. The Court noted that the Central Income-tax Officer had already allowed deductions under section 80 HHC as per the law prevailing at the time of computation. The Court emphasized that the benefit of Chapter VI-A deductions under the Income-tax Act, including section 80 HHC, could not be extended to agricultural income, which is not chargeable to tax under the Income-tax Act. The Court cited the Supreme Court's decision in "Union of India v. Warren Tea Ltd." which clarified that the deductions specified in Chapter VI-A are admissible only on income chargeable to tax and cannot be extended to agricultural income.

Conclusion:

The High Court concluded that the Agricultural Income-tax Officer is not empowered to revise the assessment by recomputing the income, even in light of the amendment to section 80 HHC of the Income-tax Act by the Finance Act, 1999. The Court dismissed both the revisions, answering the questions of law against the State and in favor of the assessees.

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