2009 (4) TMI 222 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the receipts from the sale of old silver oak trees which were shade trees in the assessee s coffee estate and which have outlived their normal life and which were posing a threat to the existing coffee plants, as agricultural income and not assessable under the head Capital gains ? since tax effect involved in this case is less than Rs. 2 lakhs which is the monetary limit for preferring appeal by the Revenue, prescribed by the Central Board of Direct Taxes Circular F. No. 279/126/98-IT dated March 27 2000., appeal file by department is dismissed - It is not the case of the Revenue that the issue involved in these appeals before the Tribunal fall within any one of the exceptions provided in the circular - circular issued by the Central Board of Direct Taxes is much binding on the Revenue and that requires no support of judicial precedent.- so appeals are dismissed

Summary

Issues:
1. Appeal against order of Income-tax Appellate Tribunal regarding assessment of capital gains on sale of trees.
2. Substantial question of law on whether receipts from sale of trees constitute agricultural income.
3. Applicability of monetary limit for preferring appeal by Revenue set by Central Board of Direct Taxes Circular.
4. Interpretation of exceptions to monetary limit for filing appeals by Revenue as per Circular.
5. Binding nature of Circular on Revenue when tax effect is less than prescribed limit.

Analysis:
1. The High Court heard appeals filed by the Revenue against the Income-tax Appellate Tribunal's order on the assessment of capital gains from the sale of trees on the assessees' coffee estate. The Tribunal allowed the assessees' appeals based on previous decisions, leading to the Revenue's appeals before the High Court.

2. The substantial question of law revolved around whether the receipts from the sale of old silver oak trees, which were shade trees posing a threat to existing coffee plants, should be considered agricultural income or assessed under the head 'Capital gains.' The Tribunal's decision was challenged by the Revenue in this regard.

3. The Court considered the monetary limit for Revenue to file appeals, as prescribed by the Central Board of Direct Taxes Circular. The Revenue admitted that the tax effect in this case was below the limit, which was a crucial factor in determining the admissibility of their appeals.

4. The Court analyzed the exceptions to the monetary limit set by the Circular, citing a previous case where it was held that the exceptions included scenarios like Revenue audit objections being accepted, adverse orders on Board's circulars, contemplation of prosecution, or constitutional validity challenges. The Court found that none of these exceptions applied to the present case.

5. Relying on various precedents, the Court emphasized the binding nature of the Circular on the Revenue when the tax effect is below the prescribed limit. The Court dismissed the appeals by the Revenue, citing the Circular's applicability and the fact that the tax effect in this case was below the specified threshold, thus upholding the Tribunal's decision in favor of the assessees.