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2020 (9) TMI 954 - AT - Income TaxLease income derived from the agricultural land - income from other source OR agricultural income which is exempt from tax u/s.10(1) - HELD THAT - Land from which rent is received should be used for agricultural purposes. In the case of assessee, it is evident that the land was either used for research and development or kept vacant but not used for agricultural purposes. As in the case CAT vs. Raja Benoy Kumar Sahas Roy 1957 (5) TMI 6 - SUPREME COURT has held that unless there is some measure of cultivation of land and some skilled labour is performed on the land for cultivation, the land cannot be said to have been used for agricultural purposes. It is essential that basic primary operation, prior to germination of the produce, involving expenditure of human skill and labour on the land and subsequent post-germination operations such as weeding, digging of the soil around the growth, etc., should be performed in order to constitute agricultural activity. In the case of assessee, the company which had obtained the land on lease from the assessee has apparently not indulged in any such activities. - Decided against assessee.
Issues:
Appeal against treating lease income from agricultural land as 'income from other source' instead of 'agricultural income' exempt from tax under Section 10(1) of the Act. Analysis: Issue 1: Identical Grounds in Appeals The assessees raised three identical grounds in their appeals challenging the treatment of lease income as 'income from other source' by the Ld. CIT (A) instead of 'agricultural income' exempt from tax under Section 10(1) of the Act. Issue 2: Assessment and Dispute The assessees, who owned agricultural land leased to a company, claimed agricultural income of ?24 lakhs each. The Ld. AO taxed a portion of this income under 'income from other sources.' The Ld. CIT (A) enhanced the addition, leading to the current appeal before the Tribunal. Issue 3: Lease Agreement Examination The Ld. AO questioned the lease agreement's authenticity, given that the assessees received the entire lease rent for five years in the relevant assessment year. The Ld. CIT (A) found that the leased land was used for research and development, not agricultural activities, based on the lease agreement's terms. Issue 4: Legal Interpretation The Ld. CIT (A) relied on various legal precedents to conclude that the lease income did not qualify as agricultural income under Section 2(1A) of the Act. The Tribunal upheld this view, emphasizing the absence of agricultural activities on the leased land. Issue 5: Tribunal Decision After considering the arguments, the Tribunal upheld the Ld. CIT (A)'s decision, emphasizing the lack of agricultural use of the land leased by the assessees. The Tribunal found the lease arrangement suspicious and aligned with the lower authorities' findings. Issue 6: Extraordinary Circumstances The Tribunal acknowledged the delay in pronouncing the order due to the Covid-19 pandemic but justified the decision based on exceptional circumstances. This reference to the pandemic aligns with the Tribunal's discretion exercised in similar cases. Conclusion Ultimately, the Tribunal dismissed the appeals, affirming the Ld. CIT (A)'s decision to tax the lease income as 'income from other sources.' The judgment highlights the importance of actual agricultural use to qualify for agricultural income exemption under the Act.
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