2009 (12) TMI 31 - HC - Income Tax

Agriculture Income - Whether the Tribunal was correct in law in holding that agricultural income in question belongs to assessee firm - Sri Tula Ram had certain agricultural land. After the death of Tula Ram, the agricultural land devolved on his four sons. One of the sons separated himself and the remaining three sons formed a partnership firm through partnership deed dated 21st of October, 1960 - The object of the said partnership firm is to manufacture and sell Khand and molasses by running crusher and such other business which the partners may from time to time agree upon held that - in the earlier assessment year the agricultural income was shown by the assessee as firm s income - . The only explanation which could be given by the learned counsel for the assessee is that the agricultural income was wrongly shown as that of the assessee firm in the earlier assessment years - There is no justification for giving a different treatment to the agricultural income on the mere saying of the assessee Firm Moreover findings of fact of the ITAT can not be held as illegal or perverse

Summary

Issues involved:
1. Whether the agricultural income in question belongs to the assessee firm.

Detailed analysis:
The judgment involved two Income Tax References heard together, concerning the ownership of agricultural income by the assessee firm. The assessment year in question was 1976-77, with the previous year ending on Diwali, 1975. The firm comprised three partners, brothers and sons of late Sri Tula Ram, who owned agricultural land. After Tula Ram's death, the land passed to his four sons, with three forming a partnership firm in 1960. The firm's purpose was to engage in various businesses, including agriculture. The assessing officer sought to add the agricultural income to the firm's total income, contending it belonged to the firm. However, the firm argued that the income belonged to the Hindu undivided family of the three brothers, not the partnership firm. The Commissioner of Income Tax (Appeals) sided with the firm, leading to the issue being referred to the High Court.

The main contention was whether the agricultural income rightfully belonged to the partnership firm or the individual partners. The firm's counsel argued that the agricultural land was never considered firm property, as it was inherited individually by the partners and not contributed as capital. On the other hand, the revenue's counsel highlighted that in previous years, the firm itself treated the agricultural income as its own, recording profits and expenses accordingly. The Tribunal found that the income belonged to the firm, considering the historical treatment of the income and the evidence on record.

The High Court analyzed the facts and submissions, noting that the land originally belonged to Tula Ram and was inherited by his sons. It was observed that in previous assessments, the firm had treated the agricultural income as its own. The Court emphasized that the Tribunal's finding was based on a factual assessment of the evidence, which was not disputed by the firm's counsel. As the Tribunal is the final fact-finding authority, and there was no error in the evidence's appreciation, the Court concluded that the agricultural income indeed belonged to the assessee firm. Therefore, the Court ruled in favor of the Revenue and against the assessee, upholding the Tribunal's decision regarding the ownership of the agricultural income.

In conclusion, the High Court affirmed that the agricultural income in question belonged to the assessee firm based on the factual findings and evidence presented. The Court's decision was supported by the historical treatment of the income by the firm and the absence of any errors in the Tribunal's assessment of the evidence. Both references were decided accordingly in favor of the Revenue.