Bhupinder Dass v. Income Tax Officer, Nabha

ITA No. 147 of 2005 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Bhupinder Dass Versus Income Tax Officer, Nabha ITA No. 147 of 2005 Date of Decision: 8.12.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. J.S. Puri, Advocate for the appellant. Mr. Tajender K. Joshi, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of four appeal being ITA Nos. 147to 150 of 2005 as common questions of law are involved therein. 2.ITA No.147 of 2005 was admitted by this Court fordetermination of the following substantial questions of law:- “1.Whether the Tribunal was correct in law inholding that proceedings under Section147/148 of the Income Tax Act, 1961 werevalidly initiated against the assessee? 2. Whether the Tribunal was correct in law inholding that the income derived by theassessee under the lease deed executed in favour of M/s Smith Kline Beecham ConsumerHealthcare Limited was not exempted underSection 2(1-A) of the Income Tax Act?” 3.Briefly stated, the facts for adjudication as narrated in theappeal are that the assessee along with his brothers owned agriculturalland measuring 27 acres 1 kanal and 10 marlas which they leased outto M/s Smith Kline Beecham Consumer Healthcare Limited (SBCHL)vide agreement dated 13.11.1997 for agricultural purposes. Theassessee claimed such share of lease money out of land given to thesaid company as his income out of agricultural land and filed returnsclaiming refund of TDS which was deducted by the lessee on the leaserent paid to the assessee. The returns were processed under Section143(1) of the Income Tax Act, 1961 (in short “the Act”) and refund ofTDS was granted along with interest for all the three years, i.e.assessment years 1998-99 to 2000-01. Thereafter, the AssessingOfficer initiated proceedings under Section 147 of the Act and assessedthe agricultural income as claimed under the head “income from othersources” and charged tax thereon. However, the refund made wasordered to be withdrawn and interest under Sections 234A and 234Bwas also charged. The relevant observations read thus:- “The land was leased out to the said company for disposalof water that was being discharged from the EffluentTreatment Plant of the Company. The amount paid hasbeen debited by the Co. in its books of account asexpenditure incurred for purposes of business. Thecompany has also deducted tax at source on the said payment u/s 194-I by treating the same as rental income.Hence the income of Rs.1,54,688/- claimed as agriculturalincome by the assessee is, in fact rental income receivedby the assessee from the said Co. Sh. B.S. Goyal C.A.,however, contended that it was agricultural income sincethe land was used for agricultural purposes by the Co. Thecontention of the assessee is not acceptable. The land hasbeen taken by the said Co. for disposal of water that wasbeing discharged from the Co's Effluent Treatment Plantand any agricultural operations carried out by the companyare also for the purpose of disposal of water. This isapparent from the letter dated 03.06.1999 which reads asunder:- “We are using this land for disposal of water from ourEffluent Treatment Plant growing eucalyptus treesthere for evaporating the water. The payment to theland lord is booked as rent and we are deductingTDS on the said payments as per Income Tax Act.”It is apparent that growing of eucalyptus trees on the saidland is only for disposal of water by evaporating the same.The land has been taken on rent for disposal of water andthe payment made for the purpose has nothing to do withagricultural operations. There is no nexus between the rentincome and agricultural operations as the rent is being paidto the assessee for water from the Effluent TreatmentPlant. Moreover, there is case law, as per ITR 258, page- “We are using this land for disposal of water from ourEffluent Treatment Plant growing eucalyptus treesthere for evaporating the water. The payment to theland lord is booked as rent and we are deductingTDS on the said payments as per Income Tax Act.”It is apparent that growing of eucalyptus trees on the saidland is only for disposal of water by evaporating the same.The land has been taken on rent for disposal of water andthe payment made for the purpose has nothing to do withagricultural operations. There is no nexus between the rentincome and agricultural operations as the rent is being paidto the assessee for water from the Effluent TreatmentPlant. Moreover, there is case law, as per ITR 258, page- 179 in the case of B. Nagi Reedi V. Commissioner ofIncome-Tax. According to this case there should be nexusbetween the agricultural produce and the business of theconcerned assessee who is claiming agricultural income.” 4.Feeling aggrieved, the assessee took the matter in appealand the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”]upheld the view of the Assessing Officer. 5.On further appeal, the Income Tax Appellate Tribunal,Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “theTribunal”) affirmed the order of the CIT (A) and dismissed the appeal ofthe assessee. 6.This gave rise to the assessee for filing the instant appeal. 7.We have heard learned counsel for the parties and haveperused the record. 8.Learned counsel for the assessee submitted that as peragreement with the lessee, the assessee had let out the land foragricultural purposes and, therefore, the rent which was received by theassessee from the lessee was agricultural income under Section 2(1A)(a) of the Act. According to the learned counsel, the said income wasexempt under Section 10(1) of the Act. He placed reliance on thejudgment of the Apex Court in Commissioner of Income Tax v. RajaBenoy Kumar Sahas Roy [1957] 32 ITR 466 and that of Madras HighCourt in Commissioner of Income-Tax v. Sun Paper Mills Ltd. [2002]253 ITR 709. He further submitted that the rent which was received bythe assessee from the lessee was treated as “agricultural income” forthree years and it was thereafter that the re-assessment proceedings were initiated. The initiation of reassessment proceedings underSection 147 of the Act were claimed to be vitiated and bad in law.9.Controverting the aforesaid submissions of learned counselfor the assessee, the learned counsel for the revenue submitted thatsince the income was not agricultural income, the same had escapedassessment and, therefore, reopening of the assessment under Section147 of the Act was valid. It was further submitted that under Section 2(1A)(a) unless the land is used for agricultural purposes, the assesseecannot derive any benefit by treating the rent which was received, asagricultural income. 10.We have given our thoughtful consideration to therespective submissions of learned counsel for the parties and do notfind any merit in the submission of the learned counsel for theassessee. 11.The point for consideration in the appeal is whether theincome derived from letting out the land to SBCHL by the assesseeamounted to agricultural income under Section 2(1A)(a) and, thus,exempted under Section 10(1) of the Act and the action of thedepartment to take recourse to Section 147 of the Act was justified. 12.Section 2(1A) defines agricultural income and reads thus:- “Section 2(1A): “Agricultural income” means: (a)any rent or revenue derived from land which issituated in India and is used for agricultural purposes;situated in India and is used for agricultural purposes;(b)any income derived from such land by- (i)agriculture; or (ii)the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employedby a cultivator or receiver of rent-in-kind torender the produce raised or received by him fitto be taken to market; or 12.Section 2(1A) defines agricultural income and reads thus:- “Section 2(1A): “Agricultural income” means: (a)any rent or revenue derived from land which issituated in India and is used for agricultural purposes;situated in India and is used for agricultural purposes;(b)any income derived from such land by- (i)agriculture; or (ii)the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employedby a cultivator or receiver of rent-in-kind torender the produce raised or received by him fitto be taken to market; or (iii)the sale by a cultivator or receiver of rent-in-kind of the produce raised or receive by him, inrespect of which no process has beenperformed other than a process of naturedescribed in paragraph (ii) of this sub clause. XXX XXXXXX” 13. 13.It emerges from the above definition that the followingessential requirements are to be satisfied so as to term a receipt asagricultural income:- (I)rent or revenue which is directly derived fromany land situated in India which is used foragricultural purposes; (II)revenue which is derived must also be directly,and not indirectly, associated with the landwhich is used for agricultural purposes; and (III)the effective source of the receipt being fromagricultural land by a process involvingagricultural activity.” 14.The CIT(A) while upholding the order of the assessingauthority recorded the following findings:- “13.The company is ready to bear even the taxes,if any, imposed by the Income Tax Authorities. Thisif any, imposed by the Income Tax Authorities. This further shows that rent is not in relation to the valueof production of agriculture produce. Rather it is innature of charges for the use of land for businesspurposes of M/s. Smithkline Beecham Ltd. Theoperations are done by the company to comply withthe statutory provisions of preventing the pollution.The basic operations which are now being done areto raise the eucalyptus trees or other plantations forthe purpose of preserving the environment. Theagriculture operations and preservations ofenvironment are two distinct things. 14.It may also be noted that the lease is meant fortwelve years which can further be renewed as permutual agreement. After planting the trees, no basicoperations would be needed to call it an agricultureproduce. The photographs shown by the appellantindicate that the trees have attained almost fulllength. In fact, it is like a jungle having spontaneousgrowth. In fact, on facts of the case would comewithin the ratio of decision of Supreme Court in thecase of CIT Vs. Raja Benoy Kumar Sahas Roy 32ITR 466. The Hon'ble Supreme Court held asunder:- “We are of opinion that mere performance ofthese subsequent operations on the productsof the land, where such products have not been raised on the land by the performance ofthe basic operations which we have describedabove would not be enough to characterisethem as agricultural operations, thesesubsequent operations must necessarily be inconjunction with and a continuation of the basicoperations which are the effective cause of theproducts being raised from the land. It is only ifthe products are raised from the land by theperformance of these basic operations that thesubsequent operations attach themselves tothe products of the land and acquire thecharacteristic of agricultural operations. Thecultivation of the land does not comprisemerely of raising the products of the land in thenarrower sense of the term like tilling of theland, sowing of the seeds, planting, and similarwork done on the land but also includes thesubsequent operations set out above all ofwhich operations, basic as well as subsequent,form one integrated activity of the agriculturistand the term “agriculture” has got to beunderstood as connoting this integrated activityof the agriculturist. One cannot dissociate thebasic operations from the subsequentoperations and say that the subsequent operations can constitute agriculturaloperations by themselves. If this integratedactivity which constitutes agriculture isundertaken and performed in regard to anyland that land can be said to have been usedfor “agricultural purposes” and the incomederived therefrom can be said to be“agricultural income” derived from the land byagriculture. If the term “agriculture” is thus understood ascomprising within its scope the basic as well assubsequent operations in the process ofagriculture and the raising on the land ofproducts which have some utility either forconsumption or for trade and commerce, it willbe seen that the term “agriculture” receives awider interpretation both in regard to itsoperations as well as the results of the same.Nevertheless there is present all throughoutthe basic idea that there must be at the bottomof it cultivation of land in the sense of tilling ofthe land, sowing of the seeds, planting, andsimilar work done on the land itself. This basicconception is the essential sine qua non of anyoperation performed on the land constitutingagricultural operation. If the basic operations are there, the reset of the operations foundthemselves upon the same. But if these basicoperations are wanting the subsequentoperations do not acquire the characteristic ofagricultural operations. All these operations no doubt require theexpenditure of human labour and skill but thehuman labour and skill spent in theperformance of the basis operations only canbe said to have been spent upon the land. Thehuman labour and skill spent in theperformance of subsequent operations cannotbe said to have been spent on the land itself,though it may have the effect of preserving,fostering and regenerating the products of theland. This distinction is not so important in caseswhere the agriculturist performs theseoperations as a part of his integrated activity incultivation of the land. Where, however, theproducts of the land are of spontaneousgrowth, unassisted by human skill and labour,and human skill and labour are spent merely infostering the growth, preservation andregeneration of such products of land, thequestion falls to be considered whether these subsequent operations performed by theagriculturist are agricultural operations andenjoy the characteristic of agriculturaloperations. It is agreed on all hands that products whichgrow wild on the land or are of spontaneousgrowth not involving any human labour or skillupon the land are not products of agricultureand the income derived therefrom is notagricultural income. There is no process ofagriculture involved in the raising of theseproducts from the land. There are noagricultural operations performed by theassessee in respect of the same, and the onlywork which the assessee performs here is thatof collecting the produce and consuming andmarketing the same. No agriculturaloperations have been performed and there isno question at all of the income derivedtherefrom being agricultural income within thedefinition given in section 2(1) of the IndianIncome Tax Act. Where, however, theassessee performs subsequent operations onthese products of land which are of wild orspontaneous growth, the nature of thoseoperations would have to be determined in the light of the principles enunciated above.” 15.The facts of appellant's case are that there areno basic primary operations intended to earn incomefrom agriculture operations. The trees are havingspontaneous growth. 16.To sum up the receipt in the hands of thelessees would be income from other sources in viewof the following points:- I)The rent received is not in connection with thevalue of agriculture produce which can beraised during any assessment year, but in thenature of receipts for allowing the use of landfor business necessities of M/s. SmithKlineBeecham Ltd., II) light of the principles enunciated above.” 15.The facts of appellant's case are that there areno basic primary operations intended to earn incomefrom agriculture operations. The trees are havingspontaneous growth. 16.To sum up the receipt in the hands of thelessees would be income from other sources in viewof the following points:- I)The rent received is not in connection with thevalue of agriculture produce which can beraised during any assessment year, but in thenature of receipts for allowing the use of landfor business necessities of M/s. SmithKlineBeecham Ltd., II) The primary purpose of use of land is fordisposal of water in effluent treatment plant tocomply with laws relating to pollution. III) The growth of trees is spontaneous growth andnot meant to be cut for earning some revenue.Rather it is meant for preserving theenvironment which is a different concept thanagricultural operations. IV) Increase of lease money after every threeyears establishes that income generated is foruse of land for business purpose. 17. In this case the eucalyptus are grown not for the purpose of selling in the market but to remain inthe land for the purpose of effluent treatment plant.The rent derived from land which the appellant areclaiming to be the agriculture income is in fact anannual charges on the land. Once the trees aregrown that there is spontaneous growth of trees, thusnot involving any amount of labour and operation asenvisaged by the Hon'ble Supreme Court. On thefacts and circumstances of the said case, the actionof the assessing officer is confirmed.” 15.The tribunal on appreciation of material on record had alsoconcluded that the income derived by the assessee was not agriculturalincome. The observations of the tribunal while affirming the order ofCIT(A) reads as under:- “27.We, after observing the above discussion andconsidering the above decisions of various courtsand after taking into consideration various terms ofthe deed of agreement, are of the opinion that theagreement between the assessee and SBCHL wasmeant for use of land by SBCHL basically for itsbusiness operation on some terms and conditionsand on a fixed annual charges to be increased by25% after every three years without considering anyuse of such land for agricultural purposes by thelessee and knowing the primary intention of thelessee to use the said land for releasing its water on land and, therefore, also included a clause 18, whichcontained that in case lessor were subjected toincome-tax the same will be borne by the lessee. Wehave also considered the fact that the trees whichwere being grown on the said land had spontaneousgrowth which was to be cut and harvested by thelessee only after expiry of the agreement, as evidentfrom clause 14 of said agreement and suchspontaneous growth was not to be considered asagricultural income in view of the above judgments. 28.All above terms and conditions of deed ofagreement and the prevailing facts in this caseclearly suggest that the lease of land by theassessee was meant for granting rights to SBCHL touse the same for its business operation and,therefore, was rightly treated as 'income from othersources'. We, therefore, based on our abovediscussion and keeping in view the totality of factsand circumstances of the present case, find that theCIT(A) while sustaining the action of the AO, haspassed a well reasoned and speaking order whichdoes not call for any interference from our side. We,therefore, uphold the same and reject the groundraised by the assessee.” 16.Learned counsel for the assessee was unable to point outany illegality or perversity in the aforesaid finding of fact which may warrant interference by this Court. 16.Learned counsel for the assessee was unable to point outany illegality or perversity in the aforesaid finding of fact which may warrant interference by this Court. 17.Further, there are no two opinions on the principle of lawenunciated in the judgments relied upon by the learned counsel for theassessee. However, the same has no applicability to the present casebeing on individual fact situation. Once it is held that the income derivedby the assessee was not agricultural income, the department wasjustified in taking recourse to Section 147 of the Act as the income hadescaped assessment. 18.In view of the above, we do not find any merit in theseappeals and the same are hereby dismissed. (AJAY KUMAR MITTAL) JUDGE December 8, 2010gbs (ADARSH KUMAR GOEL)JUDGE ITA No. 147 of 2005 -16- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Varinder Dass Versus Income Tax Officer, Nabha ITA No. 148 of 2005 Date of Decision: 8.12.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. J.S. Puri, Advocate for the appellant. Mr. Tajender K. Joshi, Advocate for the respondent. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see the detailed order of even date recorded in ITA No. 147 of 2005 (Bhupinder Dass v. Income Tax Officer,Nabha). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) JUDGE ITA No. 147 of 2005 -17- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Preetinder Dass Versus Income Tax Officer, Nabha ITA No. 149 of 2005 Date of Decision: 8.12.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. J.S. Puri, Advocate for the appellant. Mr. Tajender K. Joshi, Advocate for the respondent. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see the detailed order of even date recorded in ITA No. 147 of 2005 (Bhupinder Dass v. Income Tax Officer,Nabha). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) JUDGE ITA No. 147 of 2005 -18- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Rupinder Dass Versus Income Tax Officer, Nabha ITA No. 150 of 2005 Date of Decision: 8.12.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. J.S. Puri, Advocate for the appellant. Mr. Tajender K. Joshi, Advocate for the respondent. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see the detailed order of even date recorded in ITA No. 147 of 2005 (Bhupinder Dass v. Income Tax Officer,Nabha). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) JUDGE Having regard to the above interpretation of agriculturalincome and the income, to be agricultural income,should be derived from land and the land should beused for agricultural purposes. In other words, theremust be nexus between the income, land andagricultural operations, by which is meant somethingdone to the land by human or mechanical agency toproduce out of the land any crop, tree, plantation orother produce or product. The immediate source ofincome must be land of the description or charactermentioned in the definition. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see the detailed order of even date recorded in ITA No. 147 of 2005 (Bhupinder Dass v. Income Tax Officer,Nabha). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) JUDGE Having regard to the above interpretation of agriculturalincome and the income, to be agricultural income,should be derived from land and the land should beused for agricultural purposes. In other words, theremust be nexus between the income, land andagricultural operations, by which is meant somethingdone to the land by human or mechanical agency toproduce out of the land any crop, tree, plantation orother produce or product. The immediate source ofincome must be land of the description or charactermentioned in the definition. Similar situation arose before the Hon'ble MadrasHigh Court in the case of CII V.K. S. Imam Sahebreported in 71 ITR 742, wherein under the terms of alease of certain coconut thopes, the assessee wasallowed to enjoy the fruits of the coconut trees for astipulated period on payment of a fixed annual sum.In some cases, there was a stipulation that the leasedid not include the land. At the end of the term, theassessee had to deliver possession of the trees tothe lessor. On these facts, it was held by theTribunal, that the income from the lease wasagricultural income. On a reference the High Courtheld that the nexus between the income and the landwas missing as the connection of the income waswith the trees themselves without reference to the land or agricultural operation; and, therefore, thesums in question were not agricultural income. Apart from above, we are also of the view that unlessthere is some measure of cultivation of the land,some expenditure of skill and labour upon it, landcannot be said to have been used for agriculturalpurposes, as held in the case of Raja Mustata AliKhan v. CII reported in 16 ITR 330 (PC). What,therefore, is essential is some basic primaryoperation, prior to germination of the produce,involving expenditure of human skill and labour onthe land itself, and not on the growth, subsequentpost-generation operations, i.e. weeding, digging ofthe soil around the growth, etc. by themselves wouldnot constitute agricultural, as held in the case of RajaBenoy Kumar Sahas Roy (Supra), as also reliedupon by the ld. DR, wherein it was held as under:- “Agriculture in its primary sense denotes thecultivation of the field and is restricted tocultivation of the land in the strict sense of theterm, meaning thereby tilling the land, sowingof the seed, planting and similar operations onthe land. These are basic operations andrequire the expenditure of human skill andlabour upon the land itself.” “The mere performance of these subsequent operations on the products of theland, where such products have not beenraised on the land by the performance of thebasic operations, would not be enough tocharacterize them as agricultural operations; inorder to invest them with the character ofagricultural operations these subsequentoperations must necessarily be in conjunctionwith and in continuation of the basic operationswhich are the effective cause of the productsbeing raised from the land. The subsequentoperations divorced from the basic operationscannot constitute by themselves agriculturaloperations.” While going through the above decisions of theHon'ble Supreme Court, we find that in the presentcase of assessee had agreement with SBCHL,though stated to be agricultural purposes, still it waslacking involvement of manual labour or skill and thetrees which were being grown had spontaneousgrowth and the lessee was only entitled to removesuch trees on the expiry of the agreement, which isevident from clause 14 of the deed reproducedhereunder:- “That the said agricultural land will be used foragricultural purposes; plantation, etc. and such While going through the above decisions of theHon'ble Supreme Court, we find that in the presentcase of assessee had agreement with SBCHL,though stated to be agricultural purposes, still it waslacking involvement of manual labour or skill and thetrees which were being grown had spontaneousgrowth and the lessee was only entitled to removesuch trees on the expiry of the agreement, which isevident from clause 14 of the deed reproducedhereunder:- “That the said agricultural land will be used foragricultural purposes; plantation, etc. and such plantation etc. shall be property of the secondparty and they shall entitled to harvest, cut andremove the same on expiry of this agreementor earlier termination and shall uproot the rootsof all the trees. The second party shall also beentitled to discharge its effluent water in thisland. In case the second party fails to removethe roots of trees the second party shall beliable to pay the first party a reasonable cost ofremoval of the roots.” 24.We also find that in order to determine whether acertain income is agricultural income, the immediateand effective source of the income must be foundout. If the immediate effective source is not land, theincome cannot be considered to be agriculturalincome, as held in the cases of Raja BahadurKamakhaya Narayan Singh reported in 16 ITR 325(SC) and Kunwar Trivikram Naryan Singh reported in57 ITR 29 (SC). 24A. We are also of the view that where the effectivesource is found to be inseparably connected withagricultural land, the income derived would beagricultural income; whereas in the present casefrom perusal of clause 14 or the agreement betweenthe assessee from lease was on account of rent asthe lessee, i.e. SBCHL, was not carrying on any agricultural operations with the help of manual labourand skill except releasing water on the land and theassessee could only cut trees having spontaneousgrowth after expiry/termination of the lease deed,which suggested that the amount received by theassessee was not on account of agricultural incomeby SBCHL, whereas it is necessary that rent orrevenue derived by the assessee could be treated asthe agricultural income only when such land wasused for agricultural purposes. The aboveinterpretation clearly speaks that whereas theassessee received the income, not itself of thecharacter to fall within the definition of agriculturalincome, only then it earns exemption in whatevercharacter the assessee receives it. We, while considering the contention of ld AR thatthe land was used for agricultural purposes, find thatif the term agriculture is thus understood ascomprising within its scope the basic as well assubsequent operations in the process of agriculturaland the raising on the land of products which havesome utility either for consumption or for trade andcommerce, it will be seen that the term 'agriculture'receives a wider interpretation both in regard to itsoperations as well as the results of the same.Nevertheless, there is present all throughout the basic idea that there must be the bottom of itscultivation of land in the sense of tilling of the land,sowing of the seeds, planting and similar work doneon the land itself, which is absent in the present casewhere the assessee is getting rent against suchletting out of land which is being used by the lesseeprimarily for releasing water from its effluenttreatment plant and having trees of the land withspontaneous growth without involving manual labouror skill. Since the rent is a technical conception, itsleading characteristics being that it is a payment inmoney or in kind by one person to another in respectof the grant of the right to use land. basic idea that there must be the bottom of itscultivation of land in the sense of tilling of the land,sowing of the seeds, planting and similar work doneon the land itself, which is absent in the present casewhere the assessee is getting rent against suchletting out of land which is being used by the lesseeprimarily for releasing water from its effluenttreatment plant and having trees of the land withspontaneous growth without involving manual labouror skill. Since the rent is a technical conception, itsleading characteristics being that it is a payment inmoney or in kind by one person to another in respectof the grant of the right to use land. We after perusing the deed of agreement betweenthe assessee and the lessee SBCHL also find thatwhile entering into agreement both had doubt as tothe treatment of such transaction being treated asincome from other sources in the hands of lessorbasically knowing the intention for use of such landas the deed of agreement contained that the lesseewill use the land primarily for releasing water asappearing in clause 14 of the agreement, we alsofind that the trees being grown on such land hadspontaneous growth without invoking the basicoperations with the help of manual labour or skill andin view of the following judgments income derived 27. from produce of spontaneous growth was notagricultural income:- Raja Pratap Bikram Shah v. CII, (1946) 14 ITR788 (Oudh) Beohar Singh Raghubir Singh v. CII, (1948) 16ITR 433 (Nag) CII v. Jyotikana Chowdhurani, (1957) 32 ITR320 (All) CII v. Ramakrishna Deo, (1959) 35 ITR 312 (SC) Viswanatha Chettiar v. Ag. IIO, (1965) 55 ITR692 (Mys) A.N. Anthony Packia Nadal v. C. Ag. II, (1982)135 ITR 527 (Mad) We, after observing the above discussion andconsidering the above decisions of various courtsand after taking into consideration various terms ofthe deed of agreement, are of the opinion that theagreement between the assessee and SBCHL wasmeant for use of land by SBCHL basically for itsbusiness operation on some terms and conditionsand on a fixed annual charges to be increased by25% after every three years without considering anyuse of such land for agricultural purposes by thelessee and knowing the primary intention of thelessee to use the said land for releasing its water on land and, therefore, also included a clause 18, whichcontained that in case lessor were subjected toincome-tax the same will be borne by the lessee. Wehave also considered the fact that the trees whichwere being grown on the said land had spontaneousgrowth which was to be cut and harvested by thelessee only after expiry of the agreement, as evidentfrom clause 14 of said agreement and suchspontaneous growth was not to be considered asagricultural income in view of the above judgments. 28.All above terms and conditions of deed ofagreement and the prevailing facts in this caseclearly suggest that the lease of land by theassessee was meant for granting rights to SBCHLto use the same for its business operation and,therefore, was rightly treated as 'income from othersources'. We, therefore, based on our abovediscussion and keeping in view the totality of factsand circumstances of the present case, find thatthe CIT(A) while sustaining the action of the AO,has passed a well reasoned and speaking orderwhich does not call for any interference from ourside. We, therefore, uphold the same and rejectthe ground raised by the assessee.” ITA No. 147 of 2005 29. -28- 28.All above terms and conditions of deed ofagreement and the prevailing facts in this caseclearly suggest that the lease of land by theassessee was meant for granting rights to SBCHLto use the same for its business operation and,therefore, was rightly treated as 'income from othersources'. We, therefore, based on our abovediscussion and keeping in view the totality of factsand circumstances of the present case, find thatthe CIT(A) while sustaining the action of the AO,has passed a well reasoned and speaking orderwhich does not call for any interference from ourside. We, therefore, uphold the same and rejectthe ground raised by the assessee.” ITA No. 147 of 2005 29. -28- “19.We have given our careful consideration to the rivalsubmissions made before us, perused the orders ofthe tax authorities, gone through the paperbook filedby the assessee along with photographs and thecase law relied upon by both the parties. Theassessee whereas has claimed the receipt fromSBCHL as income from agricultural operation, therevenue has disputed treating the same as fromother sources.submissions made before us, perused the orders ofthe tax authorities, gone through the paperbook filedby the assessee along with photographs and thecase law relied upon by both the parties. Theassessee whereas has claimed the receipt fromSBCHL as income from agricultural operation, therevenue has disputed treating the same as fromother sources. 20.Ld. AR has heavily relied on the definition ofagricultural income, as appearing in section 2(1A)(a)and (b). Sub-clause (a) of clause (1A) of section 2states that any rent or revenue derived from landwhich is situated in India and used for agriculturalpurposes in place of any rent or revenue derivedfrom land which is used for agricultural purposes andis either assessed to land revenue in India or issubject to a local rate assessed and collected byofficers of the Government as such. Thus, the landused for agricultural purposes by the lessee willqualify for agricultural income.agricultural income, as appearing in section 2(1A)(a)and (b). Sub-clause (a) of clause (1A) of section 2states that any rent or revenue derived from landwhich is situated in India and used for agriculturalpurposes in place of any rent or revenue derivedfrom land which is used for agricultural purposes andis either assessed to land revenue in India or issubject to a local rate assessed and collected byofficers of the Government as such. Thus, the landused for agricultural purposes by the lessee willqualify for agricultural income. 30.21.We find that the position that emergesfrom the above definition or section 2(1A)(a) is asunder:-from the above definition or section 2(1A)(a) is asunder:-