1976 (8) TMI 30 - HC - Income Tax

Building in Cuttack Qualifies as Agricultural House Property: Full Interest Income Assessable

The court held that the assessee's building in Cuttack qualified as agricultural house property, exempting its income from assessment under the Income-tax ... Agricultural Income, Income Tax Issues:1. Whether the assessee's building at Cuttack Town qualifies as agricultural house property and its income is exempt from assessment under the Income-tax Act.2. Whether the Tribunal was justified in assessing only a portion of the interest income received by the assessee.Analysis:Issue 1:The case involved the assessment year 1965-66 where the assessee claimed exemption for the income from a house called Kanika House in Cuttack Town, situated near 35 acres of agricultural land. The contention was that this income fell under the definition of agricultural income. The Income-tax Officer added the income from the house, but the Tribunal ruled that the income was exempt based on the provisions of the Income-tax Act. The court analyzed the definition of 'agricultural income' under the Act and the relevant provisos. The court noted that the amended proviso expanded the scope of exemption for income from a building, even if the land was not assessed to land revenue, under certain conditions. As the lands in question were subject to land revenue, the court held that the exemption granted by the Tribunal was justified. Therefore, the court concluded that the assessee's building in Cuttack qualified as agricultural house property, and its income was not assessable under the Act.Issue 2:Regarding the second question on the assessment of interest income, the court referred to a previous judgment which clarified that interest accrues to the assessee only when the compensation is quantified, not on a yearly basis. The court held that the total interest was assessable in the year of receipt, i.e., assessment year 1965-66. The Tribunal's decision to assess only a portion of the interest was deemed unjustified. Therefore, the court answered the second question by stating that the Tribunal was not justified in assessing only the installment due for the year under consideration.In conclusion, the court ruled in favor of the assessee on both issues, determining that the building qualified as agricultural property and the full interest income was assessable in the relevant assessment year.