2012 (7) TMI 419 - AT - Income Tax

Expenditure in respect of poultry farming - Assessing Officer has added back the cost of purchase of Emu birds as well as expenses incurred towards feeing of the birds Held that - Assessing Officer has failed to appreciate the fact that without purchase of Emu birds, sale would not have been possible, so the cost of acquisition of Emu birds and the maintenance/feeding cost which the assessee has alleged not to have claimed during the assessment year 2007-08 deserves to be allowed as business expenditure In favor of assessee Agricultural income - Addition on account of income from sale of coconuts Assessing Officer while treating the income from sale of coconut trees as income from other sources has observed that it is not acceptable that Rs. 2,400/- worth of trees would have yielded an amount of Rs. 66,820 Assessee has about 275 coconut trees out of which he has planted 200 coconut trees in the year 2004-05. The coconut trees start yielding fruit in three years time and it was during the relevant assessment year that for the first time, the trees planted by the assessee gave fruits and the assessee was able to earn Rs. 66,820/- from the sale of coconuts Held that - Assessee has not produced any concrete evidence to show that it has earned income from sale of coconuts - assessee is a small time farmer. He may not have maintained record of sale of coconuts - 50% income from sale of coconut is directed to be considered as Agricultural Income. Regarding income from sale of turmeric - contention of the Assessing Officer that there is no correlation between the date of alleged sale of turmeric and the harvesting season of the produce is not tenable - stand of the assessee throughout has been that the assessee use to sell the produce only during the time when he used to get maximum price for the crop Held that - Assessing Officer made the addition only on the basis of presumption that since the harvesting season and sale of crop do not coincide, the income cannot be considered as agricultural income - addition made by the Assessing Officer deleted

Summary

Issues:
1. Disallowance of income from various sources as agricultural income.
2. Disallowance of expenditure in poultry farming.
3. Disallowance of income from sale of coconuts.
4. Disallowance of income from sale of turmeric under agricultural income.

Issue 1 - Disallowance of income from various sources as agricultural income:
The appellant impugned the order disallowing income from dairy farming, sale of milk & goat, sale of turmeric, and sale of coconut trees as agricultural income. The Assessing Officer categorized income from Emu Birds and sale of milk & goat as business income, and income from turmeric and coconut trees as "Income from Other Sources." The appellant contended that expenses towards purchase of birds and maintenance costs were not considered. The Tribunal found that the cost of purchase and maintenance of Emu birds should have been allowed as business expenditure, overturning the Assessing Officer's decision.

Issue 2 - Disallowance of expenditure in poultry farming:
The appellant challenged the disallowance of expenditure related to poultry farming. The Tribunal observed that the Assessing Officer failed to consider the cost of purchase and maintenance of Emu birds, which were necessary for generating income. Consequently, the Tribunal allowed the appellant's appeal on this ground.

Issue 3 - Disallowance of income from sale of coconuts:
The Assessing Officer disallowed the income from sale of coconuts as agricultural income, questioning the yield from coconut trees. The Tribunal noted that the appellant had planted coconut trees that started yielding during the relevant assessment year. Despite lack of concrete evidence, the Tribunal considered basic operations involved in growing coconut trees and allowed 50% of the claimed income as agricultural income, emphasizing the need for justice in the decision.

Issue 4 - Disallowance of income from sale of turmeric under agricultural income:
The Assessing Officer disallowed income from sale of turmeric, citing discrepancies in the timing of sale and harvest. The Tribunal disagreed, emphasizing that farmers often wait for optimal prices before selling produce. Considering the cultivation cycle and the appellant's practices, the Tribunal found the Assessing Officer's addition unjustified and allowed the appeal on this ground.

In conclusion, the Tribunal set aside the CIT(A)'s order and partially allowed the appellant's appeal, recognizing the validity of certain income sources as agricultural income and overturning disallowances based on insufficient reasoning.