2012 (10) TMI 1214 - AT - Income Tax

Summary

Issues Involved:
1. Ownership of Land for Agricultural Income Exemption u/s 2(1A) of the Income-tax Act.
2. Status of Firm as Agriculturist.
3. Documentary Evidence Supporting Agricultural Income.

Summary:

1. Ownership of Land for Agricultural Income Exemption u/s 2(1A) of the Income-tax Act:
The Revenue contended that the assessee should own the land to claim exemption u/s 2(1A) of the Income-tax Act, which was not reflected in the balance sheet nor supported by 7/12 extracts. The CIT(A) allowed the claim, which was opposed by the Revenue. The Tribunal upheld the CIT(A)'s decision, stating that ownership of land is not a prerequisite for agricultural income. It suffices if the revenue is derived from agricultural activities on land situated in India.

2. Status of Firm as Agriculturist:
The Revenue argued that an artificial person like a firm cannot be an agriculturist. The Tribunal referred to various legal provisions, including the Bombay Tenancy and Agricultural Land Act, 1948, and the Maharashtra Agricultural Income-tax Act, 1962, which allow a firm to engage in agricultural activities and derive agricultural income. The Tribunal also cited the Supreme Court's decision in Narayan Bhimji Vadangale, which held that a firm can cultivate land through its partners. Therefore, the Tribunal concluded that a firm could be an agriculturist and derive agricultural income.

3. Documentary Evidence Supporting Agricultural Income:
The Assessing Officer disallowed the claim due to the absence of documentary evidence. The Tribunal noted that the assessee had a joint cultivation agreement with Maharashtra State Farming Corporation (MSFC) and carried out all agricultural operations. The Tribunal found that the income derived from these activities was agricultural income, even though the land was not owned by the firm. The Tribunal upheld the CIT(A)'s decision, stating that the Assessing Officer's conclusion was based on improper interpretation of law and surmises.

Conclusion:
The Tribunal dismissed the Revenue's appeals and upheld the CIT(A)'s order, confirming that the amounts of Rs. 32,69,820/- and Rs. 35,13,376/- for A.Ys. 2002-03 and 2003-04 respectively are agricultural income of the assessee firm. The cross objections filed in support of the CIT(A)'s order were also dismissed.