2012 (1) TMI 410 - HC - Income Tax

Summary

Issues involved: Assessment of income as agricultural or business income, application of Rule 7 of the Central Income Tax Rules, double assessment by Central and State Governments, interpretation of Circular No.5 of 2003, relief against double taxation.

Judgment Summary:

Assessment of Palm Oil Income:
The petitioner, a public limited Company engaged in oil palm cultivation and crude palm oil production, faced assessments by both Central and State tax authorities for the years 1997-2008. The Income Tax Department sought to tax business income from palm oil production, challenging the long-standing practice of treating it as 100% agricultural income under the Agricultural Income Tax Act. The Court upheld Central Income Tax assessments for business income from palm oil under Rule 7, allowing the petitioner to challenge double assessments in a pending Writ Petition.

Circular No.5 of 2003 Interpretation:
Circular No.5 of 2003 aimed to prevent double taxation for income from rubber and coffee, allowing assessees who paid agricultural income tax on 100% of such income to avoid reopening of assessments. The petitioner sought similar relief for palm oil income, arguing that the Circular's principle should apply due to consistent agricultural income tax payments. The Court agreed, directing waiver of tax collection on business income from crude palm oil up to 2004-2005 assessment year.

Relief and Refund of Excess Tax:
The Court set aside agricultural income tax assessments from 2005-2006 onwards, directing modification in line with Central Income Tax assessments. Any excess tax paid under the Agricultural Income Tax Act was to be refunded to the petitioner. The petitioner was instructed to remit tax to the Central Income Tax Department for the relevant assessment years based on Central Income tax assessments, bringing clarity to the tax treatment of palm oil income.

Conclusion:
The Writ Petition was allowed, providing relief against double taxation and ensuring consistent tax treatment for palm oil income in line with Circular provisions and Central Income Tax assessments.