Krish Homes Private Limited, 203, Caxton House, 2E,Jhandewalan Extension, New Delhi v. Income Tax Officer, Ward 2(3), Alwar

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 53/2019 Krish Homes Private Limited, 203, Caxton House, 2E,Jhandewalan Extension, New Delhi 110055 In The State Of Delhi ----Appellant Versus Income Tax Officer, Ward 2(3), Alwar Having Its Address At NewAayakar Bhawan, 22, Moti Doongri Road, Alwar 301001 In TheState Of Rajasthan ----Respondent For Appellant(s) : Mr. Siddharth Ranka, Adv.For Respondent(s): HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA 19/07/2019 Judgment 1.The appellant-assessee is aggrieved by the order of theIncome Tax Appellate Tribunal (“ITAT”) in this appeal underSection 260A of the Income Tax Act, 1961 (hereinafter referred asthe “Act”). 2.The question of law urged by the assessee is that the ITATfell into error in ignoring the Explanation to second proviso ofSection 115JB(2)(ii) of the Act. 3.The relevant facts are that the Assessing Officer brought totax a sum of ₹2,43,15,546/-, as income for Assessment Year (AY)2014-15, as against the return of income filed by the assessee,who had declared loss to the tune of ₹1,26,493/-. Agriculturalincome to the tune of ₹1,40,000/- was claimed by the assessee.The Assessing Officer was of the opinion that sale of agriculturalland, and its exclusion, from the MAT provision had resulted in its exclusion from the calculation of the book profit of the assesseewhich was wrong. The assessee appealed successfully to theCIT(A), who noted the Section 2(14) and Section 10(1), whichexclude agricultural income. The CIT(A) also relied upon decisionsreported as under: “i.Harrisons Malayalam Ltd v. ACIT-1(2), Ernakulam [2009] 32 SOT 497 (Cochin)[2009] 32 SOT 497 (Cochin) ii.S.K. Celebration Pvt. Ltd. in ITA/367/NGP/2014 iii.Agri Gold Foods & Farm Products Ltd. Vs. CIT Vijayawada in ITA No.451/Vizag/2012Vijayawada in ITA No.451/Vizag/2012 iv.ACIT, Circle-1, Kottayam vs. The Nilgiri Tea Estate Ltd; I.T.A. No.37/Coch/2014”Estate Ltd; I.T.A. No.37/Coch/2014” 4.The reasoning of the CIT(A), is as follows: 5.10 The scope of Explanation 1 to section2(1A) is explained by the Hon’ble SupremeCourt in the case Singhal Rakesh Kumar vs.Union of India as under:“9.It appears that by reason of the decision ofthe Bombay High Court in Manubhai A. Seth v.N.D. Nirgudkar, Second ITO [1981] 128 ITR87.1 an Explanation was added by the FinanceAct, 1989, with effect from 1-4-1970 to clause(1A) of section 2 which reads as thus:2(1A) is explained by the Hon’ble SupremeCourt in the case Singhal Rakesh Kumar vs.Union of India as under:“9.It appears that by reason of the decision ofthe Bombay High Court in Manubhai A. Seth v.N.D. Nirgudkar, Second ITO [1981] 128 ITR87.1 an Explanation was added by the FinanceAct, 1989, with effect from 1-4-1970 to clause(1A) of section 2 which reads as thus: “Explanation.-For the removal of doubts, it ishereby declared that revenue derived from landshall not include and shall be deemed never tohave included any income arising from thetransfer of any land referred to in item (a) oritem (b) of sub-clause (iii) of clause (14) of thissection.” 10.The position, as a result, is that incomearising from the transfer of agricultural land thatfalls within the terms of items (a) and (b) ofsub-clause (iii) of clause (14) of section 2 fallsoutside the ambit of revenue derived from land,and therefore, outside the ambit of ‘agriculturalincome’. Such income, therefore, is liable tocapital gains tax chargeable under section 45 ofthe 1961 Act.” 5.The revenue appealed to the ITAT, which was of the opinionthat the Assessing Officer’s findings were correct. The ITAT heldthat agricultural income is undoubtedly exempted under Section10(1) and deserves exclusion. It proceeded however to analyse 10.The position, as a result, is that incomearising from the transfer of agricultural land thatfalls within the terms of items (a) and (b) ofsub-clause (iii) of clause (14) of section 2 fallsoutside the ambit of revenue derived from land,and therefore, outside the ambit of ‘agriculturalincome’. Such income, therefore, is liable tocapital gains tax chargeable under section 45 ofthe 1961 Act.” 5.The revenue appealed to the ITAT, which was of the opinionthat the Assessing Officer’s findings were correct. The ITAT heldthat agricultural income is undoubtedly exempted under Section10(1) and deserves exclusion. It proceeded however to analyse whether as a matter of fact rent or profit derived on account ofsale of agricultural land, per se amounted to revenue or rentderived from agricultural land and therefore excluded,definitionally, by virtue of Section 10(1). The ITAT relied uponseveral rulings in addition to dealing with the issue of the realintent of the sale having regard to use of the land. 6.Learned counsel argued that ITAT fell into error in holdingthat the amount received as consideration, did not constituteagricultural income. He reiterated the grounds urged in support ofthe appeal are related particularly to the provision of Section2(14) and Section 10(1) and further stated that on account ofthese inclusions, amounts could not have been disallowed, havingregard to relevant second proviso to Section 115JB(2). He reliedupon rulings of the Tribunal which were recorded by the CIT(A).Lastly, it was urged that upon sale of agriculture property, theamount received can very well be considered as revenue in thelight of Explanation-1 to Section 2(1A) of the Act. 7.Section 2(1A)(a) of the Act reads as under: “2(1A):“agricultural income means“2(1A):“agricultural income means (a) any rent or revenue derived from land which issituated in India and is used for agricultural purposes(b)(c) Explanation 1.-For the removal of doubts, it is herebydeclared that revenue derived from and shall notinclude and shall be deemed never to have includedany income arising from the transfer of any landreferred to in item (a) or item (b) of sub-clause (iii)of clause (14) of this section.” 8.Textually, it is clear that “revenue” derived from land is notdeemed to have been included in any income arising from transferof land. This Explanation was introduced with retrospective effectfrom 01.04.1989 and was subject matter of the challenge beforeUnion of India Vs. S. Muthyam Reddy, (1999) 240 ITR 341. Theprovision, per se, in opinion of the court, itself is clinching. In theabsence of any specific definition as to what constitutes “revenue”under the Act, the normal meaning attributable (having regard tothe rule of ejusdem generis, with respect to the expression “rent” used) would necessarily mean any form of income derived fromthe asset i.e. land which in turn pre-supposes its existence in thehands of assessee. The other interpretation given by the assessee,that even sale constitutes “revenue” cannot be pressed intoservice because the transaction of sale results in destruction of arevenue or rent generating asset. 9.For these reasons, the court is of the opinion that noquestion of law arises. The appeal is dismissed. The pendingapplication also stands dismissed. (SANJEEV PRAKASH SHARMA),J (S. RAVINDRA BHAT),CJ FATEH RAJ BOHRA /RAMESH VAISHNAV/S-62