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2014 (7) TMI 1316 - AT - Income TaxRevision u/s 263 - CIT directing revision to the assessment order to include agricultural capital gain in the computation of book profits u/s 115JB - submission of the assessee is that the profits on transfer of agricultural land falls within the definition of agricultural income and therefore the same is to be reduced from the profits as per profit loss account while computing book profits u/s 115JB - HELD THAT - The undisputed fact in the case of the assessee is that, the land transferred is agricultural land. This is so because the assessing officer has not assessed the income arising out of those lands under the regular provisions of Income-tax Act. In fact, the Ld. CIT Vijayawada has accepted the correctness of computation of total income under the regular provisions of the Act. Consequently, the profit on sale of agricultural land would become agricultural income u/s 2(1A) of the Act and hence not part of total income as per provisions of section 10 under provisions of Income tax Act, 1961. This profit has to be excluded from the computation of total income. In our view, it should be reduced from the net profits as per profit loss account while computing the book profits for the purposes of 115JB of the Act. See HARRISONS MALAYALAM LIMITED. VERSUS ACIT 2009 (5) TMI 124 - ITAT COCHIN - Decided against revenue
Issues involved:
Appeal against CIT order u/s 263 of the Income-tax Act regarding the computation of book profits under section 115JB based on the treatment of profit from the sale of agricultural land as agricultural income. Analysis: 1. The appeal was filed against the order of the CIT Vijayawada under section 263 of the Income-tax Act, challenging the treatment of profits from the sale of agricultural land in the computation of book profits under section 115JB. The CIT found the assessment order erroneous and prejudicial to the revenue's interests due to the failure to include the profit from the sale of agricultural land in the book profits calculation. 2. The assessee contended that the profit from the sale of agricultural land should be considered as agricultural income and excluded from the book profits calculation under section 115JB. The argument was based on the definition of agricultural income under section 2(1A) and the exclusions mentioned in section 2(14)(iii) regarding capital assets, specifically agricultural land. 3. The CIT Vijayawada directed a revision to the assessment order to include the profit from the sale of agricultural land in the computation of book profits under section 115JB. The assessee challenged this direction on the grounds that the profit should be treated as agricultural income and excluded from the book profits calculation. 4. The ITAT, after considering the submissions from both parties, referred to a similar case decided by the Cochin bench in Harrisons Malayalam Ltd. vs. ACIT. The Cochin bench held that profits from the sale of agricultural land should be treated as agricultural income and not included in the book profits calculation under section 115JB. 5. Relying on the Cochin bench decision and various judicial pronouncements, the ITAT held that the profit from the sale of agricultural land should be considered as agricultural income and excluded from the book profits calculation under section 115JB. Therefore, the ITAT quashed the CIT's order under section 263 of the Act. 6. The ITAT's decision favored the assessee's contention that the profit from the sale of agricultural land should not be included in the book profits calculation under section 115JB. The appeal was allowed in favor of the assessee, overturning the CIT's order.
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