2007 (10) TMI 230 - HC - Income Tax

Loss was occasioned to petitioner due to damage to the stock of rubber latex & a claim for insurance was made in Nov. 1992 insurance amount was received during the period of A.Y. 1994-95 in view of section 4(2)(ii), contention raised by the petitioner that the amount received as insurance claim could be related only to 1992-93 and not to the agricultural income of 1994-95 is liable to be rejected contentions raised by the petitioner are devoid of merits & they are accordingly rejected

Summary

Issues:
1. Assessment of insurance claim as agricultural income under the Kerala Agricultural Income-tax Act for the year 1994-95.

Analysis:
The petitioner, an assessee under the Kerala Agricultural Income-tax Act, challenged the assessment of the insurance claim received during the assessment year 1994-95. The dispute arose from damage to the stock of rubber latex in 1992, with the insurance claim being made in November 1992 and received during the assessment year in question. The petitioner contended that the insurance claim should not be considered as part of the agricultural income for the year 1994-95.

Two main contentions were raised by the assessee. Firstly, it was argued that the insurance amount did not constitute agricultural income at all. Secondly, if it were to be considered agricultural income, it should relate to the year 1992-93 and not 1994-95. These contentions were dismissed by the assessing authority, the Deputy Commissioner (Appeals), and the Agricultural Income-tax and Sales Tax Appellate Tribunal.

The question of law raised by the assessee focused on whether the insurance amount received should qualify as agricultural income under the Agricultural Income-tax Act. The petitioner's counsel argued that based on section 4(2)(ii) of the Act, the insurance claim received for the loss incurred in 1992-93 should not be assessed for the year 1994-95.

Section 4 of the Act deems certain incomes to be agricultural income received in the previous year. Under section 4(2)(ii), if an assessee receives any amount in relation to a loss, expenditure, or liability incurred in a previous year, it is considered agricultural income of the previous year. The court emphasized that the deeming provision treats the amount received in the previous year as agricultural income, even if the loss occurred earlier. Therefore, the insurance claim received by the petitioner for the loss in 1992-93 was rightly considered agricultural income for the year 1994-95.

The court rejected the petitioner's argument that the insurance claim should be related only to 1992-93, emphasizing that the compensation for the loss constituted agricultural income under the Act. It was clarified that any amount received in cash or otherwise in relation to a loss or liability is covered under section 4(2)(ii) of the Act. Consequently, the court ruled against the petitioner, affirming that the insurance claim amount was rightfully assessed as agricultural income for the year 1994-95, in favor of the Revenue.