9911796707
TMI Blog2014 (2) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... , since the full requirement of Proviso (i) to Section 2 (1A) (c) is not only of the building being in the immediate vicinity of the land, but also that the building is required by the receiver of the rent or the revenue, or the cultivator, or the receiver of the rent-in-kind, by reason of his connection with the land, as a dwelling house, or as a store-house, or other out-building - Proviso (i) is subservient to the main provision of Section 2 (1A) (c) and since the assessee does not fulfill the conditions of the main provision of Section 2(1A) (c), the factum of the building being in the immediate vicinity of the land, by virtue of being constructed thereon, does not bring the income earned by the assessee within the ken of 'agricultural income' as defined in Section 2 (1A) (c) - the explanation offered by the assessee before the Assessing Officer was accepted by the Assessing Officer without dealing with as to how such explanation was acceptable – thus, the grievance of the assessee is rejected and the action of the. CIT in holding the assessment order to be an erroneous order prejudicial to the interests of the revenue is confirmed – Decided against Assessee. - ITA No. 1632/D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, duly examined the claim of the assessee that the income was derived by the assessee firm as an income from agriculture within the meaning of Section 2 (1A) (c) of the Act; that the ld. CIT further failed to comprehend that there was no material brought on record to show that the godown was not put to use for agricultural purposes, but was used for other purposes; that in the assessment proceedings, vide questionnaire dated 22.03.2007, the Assessing Officer had raised a specific query in this regard and the assessee, vide its reply dated 31.03.2007, had furnished a detailed explanation, and it was after considering such explanation filed by the assessee only, that the Assessing Officer accepted the claim of the assessee; that the view adopted by the Assessing Officer is a plausible view, i.e., a view permissible in law and therefore, the CIT erroneously exercised his power u/s 263 of the Act to differ with the view taken by the Assessing Officer; that alternatively, the CIT failed to appreciate that the partners of the assessee firm had, before the Assessing Officer, agreed to include the income of the godown in the hands of the firm and therefore, no income could be ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any agricultural activity thereat in accordance with Section 2 (1A) of the Act; that then, the tenants were using the godown for business purposes; that since the land was owned by the partners of the assessee firm, rather than the assessee firm itself and the firm, which owned the building, was not a cultivator, in accordance with the provisions of Section 2 (1A) (c) of the Act, the rental income cannot be termed as agricultural income; that since the assessment order was erroneous and prejudicial to the interests of the revenue, the ld. CIT rightly invoked the provisions of Section 263 of the Act; that since during the year, the assessee was not carrying on any business activity, interest to partners was rightly disallowed by the ld. CIT; and that in these facts, there being no merit in the appeal filed by the assessee, the same be dismissed and the well reasoned order passed by the ld. CIT be confirmed. 7. We have heard the parties and have perused the material on record. The assessee partnership firm came into existence w.e.f. 01.01.2005 as per Agreement of Partnership dated 20.11.2005. Under the Deed, the partners of the assessee firm agreed to carry on the business of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm; and that the existing godown had been let out for storage of agricultural produce only and so, the income derived by the assessee firm from the renting out of the godown was agricultural income within the meaning of Section 2 (1A) (c) of the Act. 9. The assessee filed another reply dated 08.02.2007 (APB 12-14) before the Assessing Officer, giving therein, legal provisions concerning the income in question as agricultural income and it was contended that the income in question should be treated as agricultural income. 10. The Assessing Officer issued another notice u/s 142 (1) of the Act (APB 15-16) dated 22.03.2007 to the assessee. A questionnaire (APB 17-18) was attached therewith. The assessee was asked to comply with the notice by 09.04.2007. The said questionnaire (relevant portion) reads as follows:- "i) You have disclosed a net agricultural loss of Rs.3,804/- in your return of income. Since the income derived by you is totally non agricultural and is in the nature of income from house property because only rent of godowns has been disclosed, please explain as to why it should not be assessed under the head 'Income from house property' as per provisions of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) In any area comprised within the jurisdiction of a municipality, or a cantonment board having a population of not less than 10,000 as per the last preceding census published before the first day of the previous year; or (ii) In any area within a specified distance [not being more than 8 km] from the local limits of such municipality/cantonment board. From the assessment year 2001-02, income derived from such building or land from any non-agricultural purpose is not treated as agriculture Income (Explanation 2 to the clause)." 13. It was on the above pointed enquiry carried out by the Assessing Officer, that he, being satisfied with the explanation offered by the assessee, accepted the assessee's claim, observing as follows in the assessment order (relevant portion):- ".......since it was noticed that the income derived by the assessee was from (sic) letting out of godowns, it was required to explain as to why its income should not be assessed as income from 'House property.' The assessee has filed a detailed written reply in this behalf wherein the assessee has relied upon the provisions of Section 2 (1A) (c) (sic) of the Income-tax Act, 1961. Having considered the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue, for invocation of Section 263 of the Act. On the other hand, if the view taken by the Assessing Officer is a view possible in law, power u/s 263 of the Act cannot be exercised. The following decisions support this proposition:- i) 'Malabar Industrial Company vs. CIT', 243 ITR 83 (SC); ii) 'CIT vs. Max India Ltd.', 295 ITR 282 (SC); iii) 'CIT vs. Honda Siel Power Products Ltd.', 333 ITR 547 (Del); iv) 'CIT vs. Saluja Exim Ltd.', 329 ITR 603 (P H); v) 'Grasim Industries vs. CIT', 321 ITR 92 (Bom); vi) 'CIT vs. Sunbeam Auto Ltd.', 227 CTR 133 (Del). 18. It goes without saying that if the view taken by the Assessing Officer is a possible view and the CIT does not agree with such a view, the assessment order cannot be treated as an erroneous order prejudicial to the interests of the revenue. In the following cases, it has been held that unless the assessment order is erroneous, substitution of the judgement of the Commissioner for that of the Assessing Officer does not stand visualized under the provisions of Section 263 of the Act:- i) 'CIT vs. Munjal Castings', 303 ITR 23 (P H); ii) 'Pradeep Bandhu vs. CIT', 32 Taxman.com 24 (Jodhpur-Trib); iii) 'Gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... last preceding census of which the relevant figures have been published before the first day of the previous year ; or (B) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette Explanation 1. For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section. Explanation 2. For the removal of doubts, it is hereby declared that income derived from any building or land referred to in sub-clause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under sub-clause (a) or sub- clause (b) shall not be agricultural income. Explanation 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm does not own the land, it is proved not to be the receiver of the rent or revenue of such land." Then, the requirement of the phrase is that the income should be derived from any building owned and occupied by the receiver of the rent or revenue of the land. Now, the relevant word here is 'and'. The building should be owned as well as occupied by the receiver of the rent or revenue of the land. Here, neither is the assessee receiver of the rent or revenue of the land, nor is the building occupied by it. Thus, the ld. CIT is found to have correctly held that the assessee is not covered under the first limb of Section 2 (1A) (c). 23. The second phrase employed in Section 2 (1A) (c) states: - "or occupied by the cultivator or the receiver of the rent-in-kind of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on." Thus, the requirement of this limb of the Section is that the building must be occupied by the cultivator or the receiver of rent-in-kind of any land with respect to which or with respect to the produce of which, any process which is ordinarily employed by a cultivator or receiver of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated-- (A) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or (B) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette." 26. Thus, the main Section 2 (1A)(c) is subject to the above-said two Provisos. That is to say, that the income described in the main provision of Section 2 (1A) (c) shall be agricultural income subject to the two Provisos appended to the Section. This m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 2 (1A) (c) of the Act. 31. Before us, it has been contended on behalf of the assessee (page 5, para 2, eighth line of the assessee's written submissions/brief synopsis) that - "and that such godown were in the vicinity of the agricultural land.... ." It has further been submitted (page 7, para 5, second sentence, of the assessee's written submissions) that - "in the instant, it is submitted that the super structure is constructed by the assessee on the agricultural land belonging to the partners of the firm, and godown was in the immediate vicinity of the agricultural land, and had been constructed for the purpose of the storage of the agricultural produce only and as such, income derived therefrom is agricultural income." 32. In its written submissions, in para 5 thereof, the assessee has further submitted that it had filed detailed submissions before the ld. CIT, copy whereof is stated to be at APB 37-39. These submissions before the ld. CIT (relevant portion at APB 37-38) have been reproduced. However, at page 4 of the written submissions before us, at Item No.12, it has been stated "12 - 5.03.2009 - asessee prepared a detailed reply regarding the initiation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either that the land is not situated in an urban area within the jurisdiction of a Municipality, etc., as envisaged by Clause (A) to Proviso (ii), or that it is not situated within a distance of eight Kms. from the local limits of any Municipality, etc., as given in Clause (B) to Proviso (ii). 38. Thus, besides not being covered under the main provision of Section 2(1A) (c), the assessee has also not been able to make out the fulfillment of the two Provisos thereto. 39. The assessee has also sought to take recourse to Explanation 2 to Section 2 (1A). This Explanation reads as follows:- "Explanation 2. For the removal of doubts, it is hereby declared that income derived from any building or land referred to in sub-clause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under sub-clause (a) or sub- clause (b) shall not be agricultural income." 40. Thus, as per Explanation 2 to Section 2 (1A), income derived from any building referred to in Section 2 (1A) (c) arising from the use of such building for any purpose other than agriculture fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. In the present case the assessee conducts what is stated and contemplated in clauses (b) which is being submitted below for favourable consideration. Clause (b) (ii) to section 2 (1A) states as under:- The performance by a cultivator......of any process ordinarily employed by a Cultivator...........to render the produce so raised or received by him fit to be taken to market. The assessee in the present case performs the same function as it helps in the storage of agricultural produce so that it remain fit to be taken to the market. In other word the assessee performs the same functions as is contemplated to be performed by a cultivator to render the produce marketable. An independent perusal of the Explanation 2 will show that it only restricts the usage of the building or such building for a specific purpose, without any restriction as to the recipient. The exemption is conferred and conferred indelibly on a particular kind of income and does not depend on the character of the recipient." 43. Thus, according to the assessee, Explanation 2 to Section 2 (1A) is attracted since the godown building has been used by the assessee for agricultural purpose, falling u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... humbly submitted that the test to determine the nature of receipt is whether the same passes the test as is provided in sub clause (ii) (iii) of clause (b) of section 2 (1A) of the Act, and if the user of the godown, is for the purpose of aforesaid sub- clause, the receipt would be agricultural income." 46. Therefore, it is seen that the assessee has taken two mutually divergent stands. Before the ld. CIT, it stated that it stood covered under Explanation 2 to Section 2 (1A). On the other hand, before us, it states that Explanation 2 cannot be invoked, since it (the assessee) passes the test of Section 2 (1A) (b) (ii) and (iii). 47. We, in the preceding portion of this order, have held that the assessee does not pass the test of Section 2 (1A) (ii) (iii). Now, as to the applicability or otherwise of Explanation 2 to Section 2 (1A), it is seen that this Explanation is with regard to income derived from any building referred to in Section 2 (1A) (c). 'Building' as referred to in Section 2 (1A) (c) is any building owned or occupied by the receiver of the rent or revenue of any land situated in India and used for agricultural purposes, or occupied by the cultivator or the receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CIT, is this: "In the present case the assessee conducts what is stated and contemplated in clauses (b) which is being submitted below for favourable consideration. Clause (b) (ii) to section 2 (1A) states as under:- The performance by a cultivator......of any process ordinarily employed by a Cultivator...........to render the produce so raised or received by him fit to be taken to market. The assessee in the present case performs the same function as it helps in the storage of agricultural produce so that it remain fit to be taken to the market. In other word the assessee performs the same functions as is contemplated to be performed by a cultivator to render the produce marketable." 50. Thus, clearly, in the interpretation of Section 2 (1A) (b) (ii) in its favour by the assessee, the operative portion 'the performance by a cultivator or receiver of rent-in-kind' has gone left out, rendering such interpretation vitiated in law. That which cannot be done directly because of the specific mandatory prohibition imposed by a provision of law cannot be allowed to be done indirectly by permitting the non-consideration of a relevant and applicable portion of such provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue, ought to have set aside the matter to the Assessing Officer to decide the head of income. Such a course would have met the requirement of law. Since this has not been done, we remit the alternative contentions of the assessee to the file of the Assessing Officer for decision. The assessee will be at liberty to raise before the Assessing Officer all such alternative contentions as available to it under the law. The Assessing Officer shall decide these alternative contentions on affording adequate opportunity of hearing to the assessee. Ordered accordingly. 55. Ground No.11 states that the ld. CIT has wrongly initiated proceedings u/s 271 (1)(c) of the Act and has erred in levying interest under Sections 234A and 234B. 56. As per Ground No.12, interest of Rs. 23,288, levied u/s 234D of the Act is not in accordance with the directions and that interest of Rs. 13,247/-, withdrawn u/s 244A of the Act is also in excess of the direction of the CIT and, therefore, the notice of demand issued in pursuance of the order be held as not valid. 57. Both these issues are consequential. C.O. No.162/Del/2009 58. A perusal of the Cross Objections raised by the department run ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
