2019 (9) TMI 101 - HC - Income Tax

MAT computation - exclusion of revenue generated from sale of agriculture land from the book profit - Explanation to second proviso of Section 115JB(2)(ii) - HELD THAT - Revenue derived from land is not deemed to have been included in any income arising from transfer of land. This Explanation was introduced with retrospective effect from 01.04.1989 and was subject matter of the challenge before Union of India Vs. S. Muthyam Reddy, 1999 (10) TMI 2 - SUPREME COURT . The provision, per se, in opinion of the court, itself is clinching. In the absence of any specific definition as to what constitutes revenue under the Act, the normal meaning attributable (having regard to the rule of ejusdem generis, with respect to the expression rent used) would necessarily mean any form of income derived from the asset i.e. land which in turn pre-supposes its existence in the hands of assessee. The other interpretation given by the assessee, that even sale constitutes revenue cannot be pressed into service because the transaction of sale results in destruction of a revenue or rent generating asset. The court is of the opinion that no question of law arises.

Summary

Issues:
1. Interpretation of Explanation to second proviso of Section 115JB(2)(ii) of the Income Tax Act, 1961.
2. Exclusion of agricultural income from book profit calculation under MAT provision.
3. Applicability of Section 2(14) and Section 10(1) in determining agricultural income.
4. Analysis of Explanation 1 to section 2(1A) regarding revenue derived from land.
5. Determination of whether the amount received from the sale of agricultural land constitutes agricultural income.

Issue 1:
The appellant-assessee challenged the ITAT's order under Section 260A of the Income Tax Act, contending that the ITAT erred in ignoring the Explanation to the second proviso of Section 115JB(2)(ii) of the Act. The appellant argued that the exclusion of certain amounts from the book profit calculation was incorrect based on the provisions of the Act.

Issue 2:
The Assessing Officer included a sum as income for Assessment Year 2014-15, despite the assessee declaring a loss and claiming agricultural income. The CIT(A) noted relevant sections and rulings to support the exclusion of agricultural income from the MAT provision, ultimately allowing the assessee's appeal. The ITAT, however, upheld the Assessing Officer's findings, leading to the appellant's challenge.

Issue 3:
The CIT(A) relied on Section 2(14) and Section 10(1) to support the exclusion of agricultural income. Various decisions were cited to establish the correct interpretation of these sections, emphasizing the treatment of income arising from the transfer of agricultural land.

Issue 4:
The court analyzed Explanation 1 to section 2(1A) in detail, highlighting the Supreme Court's explanation of the scope of the provision. The court clarified that income from the transfer of agricultural land falling within specific criteria is not considered revenue derived from land, thus subject to capital gains tax under section 45 of the Act.

Issue 5:
The appellant argued that the amount received from the sale of agricultural property should be considered revenue based on Explanation-1 to Section 2(1A) of the Act. However, the court emphasized that the normal meaning of "revenue" derived from land does not encompass income from the sale of land, as it results in the destruction of a revenue-generating asset. The court dismissed the appeal, stating that no question of law arose in this case.

In conclusion, the judgment addressed various issues related to the interpretation of provisions under the Income Tax Act concerning agricultural income, book profit calculation, and the treatment of revenue derived from land. The court's analysis of relevant sections, explanations, and precedents provided a comprehensive understanding of the legal principles applied in the case.