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2012 (9) TMI 748 - HC - Income TaxAgricultural income - plantation company engaged in rubber cultivation - assessee is also buying latex from small planters convert into centrifuged latex and sell the same - assessee returned 100% of income from their plantation obtained on sale after conversion of field latex into centrifuged latex for assessment under the Kerala Agricultural Income Tax Act and no part was offered for assessment under the Central Income Tax Act Held that - Circular No.5 of 2003 dated 22/05/2003 prohibiting reopening of assessment under Section 147 as well as under Section 263 of the Income Tax Act for any assessment year prior to the assessment year 2002-03 - Assessees who have paid agricultural income tax on 100% of the income from centrifuged latex will not be reassessed under the Central Act for any year prior to the assessment year 2002-03 - assessee s case is covered by the circular and the assessee cannot be called upon to pay tax again under the Central Income Tax Act on that part of the income assessed under Rule 7 over which also tax was paid under AIT Act Charging provision of assessment of part of the income from the sale of items of rubber covered by Rule 7A should be deemed to have come into force only when Rule 7A was introduced i.e. with effect from 01/04/2002 - from the assessment year 2002-03 onwards income from centrifuged latex could be assessed under Rule 7A of the Rules.
Issues:
Assessment under Kerala Agricultural Income Tax Act and Central Income Tax Act, interpretation of Rule 7 and Rule 7A, applicability of circular No.5 of 2003, double assessment of income from centrifuged latex, discrimination in assessments. Analysis: The judgment by the Kerala High Court dealt with the appellant-assessee, a plantation company engaged in rubber cultivation, facing assessment under both the Kerala Agricultural Income Tax Act and the Central Income Tax Act for the assessment year 1996-97. The appellant had returned 100% of income from their plantation for assessment under the Agricultural Income Tax Act, but the Central Income Tax Department assessed part of the income from the sale of centrifuged latex under Rule 7 of the Income Tax Rules. The appellant challenged this assessment, leading to a series of appeals and tribunal decisions. The introduction of Rule 7A in 2002 specifically declared 35% of income from the sale of processed rubber as business income, but the circular No.5 of 2003 prohibited revising assessments prior to 2002-03 if assessees had paid agricultural income tax on 100% of the income from centrifuged latex. The court analyzed the circular's application, emphasizing the prevention of double assessment and discrimination between assessees based on the timing of assessments by the Central Income Tax Department. The court held that the circular should apply to all cases of assessments and reassessments under the Central Income Tax Act up to 2002-03 if 100% of income from centrifuged latex was returned and assessed under the Agricultural Income Tax Act. It concluded that Rule 7 should not be applied after the introduction of Rule 7A and that Rule 7A should be deemed to have come into force from 01/04/2002. The court allowed the Income Tax Appeal and the Writ Petition, vacating the tribunal's orders and restoring the CIT (Appeals) order regarding the assessment of income from centrifuged latex. It clarified that from the assessment year 2002-03 onwards, income from centrifuged latex could be assessed under Rule 7A of the Rules.
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