2010 (3) TMI 840 - AT - Income Tax

Capital gains or agricultural income - the old mango trees were cut out for providing land for replantation of mango trees - In the present case, the land was acquired by the deceased father of the assessee along with trees and plants standing thereon and such land along with trees and plants were sold by the assessee. - The entire cost price of this land which included the cost of trees and plants also has been claimed as deduction as cost of acquisition and the same was allowed after indexation and hence it cannot be said that some part of sale proceeds is agricultural income and not capital gains. - Decided in favor of revenue.

Summary

Issues:
1. Assessment of sale proceeds under "Capital gains" instead of agricultural income.
2. Liability to pay interest under section 234B of the Income-tax Act.

Detailed Analysis:
Issue 1: The appellant contested the assessment of the sale proceeds of agricultural crops, horticulture, and trees under "Capital gains" instead of agricultural income. The appellant claimed that the amount was exempt agricultural income, as it was part of the sale deed. The Assessing Officer rejected this claim, stating that the sale was composite with the land and could not be treated separately as agricultural income. The Commissioner of Income-tax (Appeals) upheld this decision, citing relevant judgments supporting the taxability of such proceeds. The appellant argued that a separate amount was paid for trees and plants, making it agricultural income. Various judgments were presented by both parties to support their arguments.

Issue 2: The appellant also denied liability to pay interest under section 234B of the Income-tax Act. The appellant's representative highlighted details from the sale deed, emphasizing that the trees and plants were existing at the time of land purchase by the deceased father of the assessee. The appellant argued that the cost of trees was not ascertainable, and thus, the sale proceeds should not be taxed. However, the Tribunal found that the sale of land along with trees and plants could not be considered agricultural income, as the entire cost price, including trees and plants, had been claimed as a deduction in the cost of acquisition.

In conclusion, the Tribunal dismissed the appeal, stating that no interference was warranted in the Commissioner of Income-tax (Appeals) order. The judgment highlighted the distinction between composite sales of land with trees and standalone sales of trees, emphasizing that in this case, the entire land was sold along with the trees, making it subject to capital gains tax.