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TMI Blog2019 (1) TMI 1359X X X X Extracts X X X X X X X X Extracts X X X X ..... gains has to be set aside, on facts. The Tribunal has also held that it being long term capital loss, is entitled to be carried forward. We do not see any question of law arising from the order of the Tribunal and, hence, uphold the order to that extent - Decided against revenue Disallowance of slump sale - sale of two estates as going concerns - claim of agricultural income - levy under Section 50B - Held that:- We found on a reference to the agreement of sale that there was a transfer as a going concern and it does not change by the mere fact that the employees were taken over by the purchasing company as a measure to avoid any retrenchment compensation being paid. We had specifically referred to the terms of the agreement and the Tribunal too in the present case does refer to the facts here, which we find to be similar to the earlier sale. The fact finding authorities also notice that the terms of the agreement are identical with that entered into in the earlier year. The issue being on facts as to the specific terms of the agreement and not giving rise to a question of law we refuse to answer question No.(iv). The order of the Tribunal to the extent of deleting the levy und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added to the profit and loss account and would be reflected in the book profits, for assessment under Section 115JB. There is no statutory provision enabling a downward adjustment of the said sum from the book profits in the computation as provided in Section 115JB. Also in the relevant year, there was The Kerala Agricultural Income Tax Act, 1991 (AIT Act) applicable to the State and there is no contention raised by the assessee that the amounts received as consideration on sale of estate was offered under that enactment. We also notice the levy under the AIT Act of the State to be 60% for the relevant year, which is a lot higher than the levy under the Income Tax Act. We, in such circumstances, answer question in favour of the Revenue and against the assessee. - I. T. A. No. 238 of 2012 - - - Dated:- 6-12-2018 - MR K. VINOD CHANDRAN AND MR ASHOK MENON, JJ. For The Appellant : ADV. SRI. JOSE JOSEPH, SC FOR GOI (TAXES) For The Respondent : ADVS. SRI. JOSON MANAVALAN, SRI. K. JOHN MATHAI, SRI. KURYAN THOMAS, SRI. M. GOPIKRISHNAN NAMBIAR, SRI. PAULOSE C. ABRAHAM AND SRI. P. GOPINATH (SR. ) JUDGMENT Vinod Chandran, J . The following quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment: 18. The further question raised is on the justification in treating the consideration received on sale of shade trees as long term capital loss entitled to be carried forward from the earlier years. We see that the Tribunal had considered the facts and had held that the order of the CIT (Appeals) directing deletion of such deduction in the capital gains has to be set aside, on facts. The Tribunal has also held that it being long term capital loss, is entitled to be carried forward. We do not see any question of law arising from the order of the Tribunal and, hence, uphold the order to that extent . Hence, question No.(iii) is answered in favour of the assessee and against the Revenue. 5. On the question of slump sale, again in the Revenue's appeal for another year, was considered in I.T.A.No.1782 of 2009 in common judgment dated 17.09.2018. In paragraphs 11 and 12, we found on a reference to the agreement of sale that there was a transfer as a going concern and it does not change by the mere fact that the employees were taken over by the purchasing company as a measure to avoid any retrenchment compensation being paid. We had specifically referred to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of old rubber exigible to tax under the Income Tax Act? ( viii) (a) Whether on the facts and in the circumstances of the case, the Tribunal is right in its order/direction to exclude the profit on sale of two estates from computing book profit for the purpose of Section 115JB as agricultural income? ( b) Whether, on the facts and in the circumstances of the case rubber income being partially taxable should not capital gain be viewed and decided similarly? 8. The learned Senior Counsel, Government of India (Taxes) would contend that the assessee while claiming expenditure under Section 36(1)(iii) should come squarely within the ambit of the aforesaid provision. The business for which the funds have been utilised is the business of the sister concerns and not the business of the assessee itself. Hence, there could be no claim raised under Section 36(1)(iii) on the portion as dis-allowed by the AO. 9. We look at Annexure-A order to better understand the disallowance made. The assessee had claimed as Head Office expenditure ₹ 9,75,12,638/- as interest on overdrafts, term loans, etc. Those overdrafts and term loans were used for the purpose of the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elding rubber trees. We need only to refer to (2011) 203 Taxman 63 [ Commissioner of Income Tax v . Thiruvambadi Rubber Co.Ltd. ], wherein a Division Bench of this Court had clearly found that sale of old and unyielding rubber trees would not give rise to an agricultural income. If there is no agricultural income, then there is no question of application of Rule 7A. In such circumstances, question No.(vii) is answered in favour of the assessee and against the Revenue. The order of the Tribunal to that extent is sustained. 11. In answering question (viii), we cannot but notice that in the earlier order of the Tribunal, referred to in the order impugned here, there is no finding as to the consideration received on sale of estate being an agricultural income as such. The question decided there was only whether there was a slump sale involved or not. On the question of slump sale all the authorities had followed the earlier orders and found the facts to be identical,in the sale of estate carried out in this particular year also. There is however considerable argument raised on the other issue as to the sale consideration being agricultural income. Considering the importance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition of capital gains under Section 2 (14), sub-section (5) of Section 115JB; has to be given effect and the same excluded from computation of book profits under Section 115JB, since it is not exigible to tax at all, is the argument. 14. The learned Senior Counsel, Government of India [Taxes] would point out that though not exigible to capital gains, the consideration received on sale of estate, will be reflected in the profits as per the books of accounts. There is no provision for exemption as such from income tax, since there is no charge on the sale of agricultural land, not included under Section 2(14)(iii)(a) (b). The Madras High Court decision hence would not apply, since therein there was a specific exemption provided to capital gains and the Court was also considering the question as to whether the capital gains, which form part of the net profit in the profit and loss account of the assessee, should be taken into account for computing tax and book profits under Section 115JB of the Act. Here, the consideration of sale of agricultural land, admittedly within rural area would not be exigible to income tax, nor would it come under the definition of capital gains as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r own High Court reported in Commissioner of Income Tax v. T.K. Sarala Devi [(1987) 167 ITR 136 (Ker)]. 17. Coming now to All India Tea and Trading Co. Lt d . [supra], the question arose as to whether the revenue derived as compensation received on requisition of agricultural land is agricultural income or not. The requisition of agricultural land made therein, was to transfer it to the refugees for the purpose of carrying on agricultural operations. The relevant facts on which the decision came is decipherable from the following paragraph: The claim of the respondent during the Assessment Year 1958-59, with which we are concerned in this appeal, was that the amount of compensation received was exempt from levy of income tax as this amount represented the respondent s agricultural income. The Income Tax Officer did not accept this claim. On appeal, however, the Appellate Assistant Commissioner found that the respondent was using the requisitioned land for agricultural purposes at the time of requisition and also earlier to that. He, therefore, held that the compensation received by the respondent was its agricultural income and, therefore, not liable to tax. The depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laration was as hereunder: The position, as a result, is that income arising from the transfer of agricultural land that falls within the terms of items (a) and (b) of sub-clause(iii) of clause (14) of Section 2 falls outside the ambit of revenue derived from land and therefore, outside the ambit of agricultural income . Such income, therefore, is liable to capital gains tax chargeable under Section 45 of the 1961 Act. The Hon ble Supreme Court held categorically that the sale of agricultural land coming within items (a) and (b) of Section 2(14)(iii) of the Act would stand outside the ambit of agricultural income. We cannot draw a necessary corollary from the aforesaid declaration that sale of agricultural lands not coming within items (a) and (b) of Section 2(14)(iii) of the Act would be agricultural income. 20. We also notice the Madras High Court s decision, which was correctly distinguished by the learned Senior Standing Counsel, Government of India [Taxes]. That was with respect to an exemption as available under Section 54EC. The Division Bench found that the exemption available under Section 54EC has to be interpreted in the context of the provisions under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2(14)(iii) (a) (b) would be agricultural income as defined under Section 2(1A); as a revenue derived from land. 22. Agricultural income as defined under Section 2(1A) inter alia takes within its ambit any rent or revenue derived from land, which is situated in India and is used for agricultural purposes . The question arises as to whether on sale of agricultural land, it could be said that there is an agricultural income derived by the owner of the land, who sells such property. We revert back to All India Tea Trading Co. Ltd.. Therein the specific question considered was whether the compensation received on requisition of agricultural land, would come within the definition of capital gains. The Honourable Supreme Court had specifically noticed that the requisition was for the purpose of handing over the lands to the refugees, again for the specific purpose of carrying on agricultural operations. The owner of the land was not divested of the title, till the subsequent acquisition made. The compensation received by the owner was only insofar as the owner being divested of the right to cultivate his lands, which right was granted to the refugees who were handed ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable under the Act. But the fallacy of that assumption is that, when land is sold, the sale proceeds do not constitute revenue but capital: (see Commr. of Agrl. 2.T. v. Kailas Rubber Co. Ltd. MANU/SC/0206/1965 : [1966]60ITR435(SC) and Vishnudatta Antharjanam v. Commr. Of Agrl. I.T. MANU/SC/0217/1970 : [1970]78 ITR 58(SC). The profits or gains arising from the sale of land constitute income because Section 2(24) of the Act includes as income capital gains chargeable under Section 45. Such gain is, nevertheless, not income derived from land; it is income derived by the sale of land. Although land is the source of the income, income is derived not by the use of the land, but by the sale of the land, that is, by conversion of the land into cash. If income results from the sale of agricultural land, it is not agricultural income within the meaning of Section 2(1). We respectfully follow the dictum as laid down by the Division Bench of this Court in T.K.Sarala Devi and find that the consideration received on sale of agricultural land in rural area, not coming under Section 2(14)(iii)(a) and (b) would not be income or revenue derived from land. But it has to be added ..... X X X X Extracts X X X X X X X X Extracts X X X X
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