2016 (3) TMI 744 - AT - Income Tax

Profit on sale of the land - claim of the assessee for exemption as agricultural income rejected - Held that - The fact that the land is classified as agricultural land is not in dispute. It is also not in dispute that the assessee has returned agricultural income year after year. The adangal extract clearly shows that the land in question was subjected to agricultural operation. Therefore, it was obvious that the land is an agricultural land. Therefore, the profit arising out of such land has to be treated as agricultural income as found by the Apex Court in Singhai Rakesh Kumar (2000 (11) TMI 2 - SUPREME Court) and All India Tea and Trading Co. Ltd. (1996 (3) TMI 4 - SUPREME Court ) which was followed by the decision of Cochin Bench of this Tribunal in Nilgiri Tea Estates Ltd. (2012 (2) TMI 553 - ITAT COCHIN ). The CBDT has also subsequently clarified that the profit on sale of the land has to be treated as agricultural income and will not constitute revenue within the meaning of Section 2(1A)(a) of the Act. In view of the above, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that the profit on sale of the land has to be classified as agricultural income. - Decided in favour of assessee Computation of profit u/s 115JB - Minimum alternate tax (MAT) - Only contention of the assessee is while computing book profit under Section 115JB the agricultural income cannot form part of book profit - Held that - Computation of total income of previous year of any person, agricultural income shall not be included therein. In this case also, it is an admitted fact that the land in question is an agricultural land and the assessee was carrying on agricultural operation. Therefore, as discussed earlier, the profit on sale of the land has to be treated as agricultural income. Therefore, if any such income is credited to the Profit & Loss account, the same has to be reduced from the book profit while computing income under Section 115JB of the Act. Therefore, this Tribunal is unable to uphold the order of the CIT(Appeals) on this issue. By following the order of Cochin Bench of this Tribunal in Harrisons Malayalam Ltd. (2009 (5) TMI 124 - ITAT COCHIN ), the orders of the lower authorities are set aside. The Assessing Officer is directed to reduce the profit on sale of agricultural land from the book profit for the purpose of computing income under Section 115JB of the Act. - Decided in favour of assessee

Summary

Issues:
Classification of land as agricultural land for tax exemption under Section 2(14) of the Income-tax Act, 1961. Treatment of profit on sale of agricultural land as exempt agricultural income. Inclusion of agricultural income in the book profit for computing income under Section 115JB of the Act.

Analysis:
1. The case involved appeals by both the assessee and the Revenue against the order of the Commissioner of Income Tax (Appeals) regarding the classification of land as agricultural land. The Assessing Officer rejected the claim of the assessee for exemption as agricultural income due to the high sale price and the buyer being a real estate dealer. The CIT(Appeals) found the land to be agricultural based on evidence of cultivation and revenue records, following relevant judgments.

2. The representative for the assessee argued that the land was indeed agricultural, evidenced by cultivation and revenue records. They cited judgments supporting the classification of land based on actual use and intention, even if sold for industrial purposes. The representative emphasized that profit on the sale of agricultural land should be treated as agricultural income, citing relevant circulars and case law.

3. The Tribunal considered the submissions and found that the land in question was classified as agricultural land and was used for agricultural operations, making the profit on sale eligible for classification as agricultural income. The Tribunal referred to previous judgments and CBDT circulars supporting this classification. However, the Tribunal disagreed with the CIT(Appeals) regarding the inclusion of agricultural income in the book profit for computing income under Section 115JB of the Act.

4. The Tribunal allowed the appeal of the assessee, directing the Assessing Officer to reduce the profit on the sale of agricultural land from the book profit for the purpose of computing income under Section 115JB of the Act. The appeal of the Revenue was dismissed based on the classification of the land as agricultural and the treatment of profit as exempt agricultural income.

In conclusion, the Tribunal upheld the classification of the land as agricultural and the treatment of profit on the sale of agricultural land as exempt agricultural income. However, it disagreed with including agricultural income in the book profit for computing income under Section 115JB of the Act, allowing the appeal of the assessee and dismissing the appeal of the Revenue.