1998 (11) TMI 155 - AT - Income Tax

Tribunal excludes agricultural income from rate calculation under Income-tax Act

The Tribunal upheld the CIT(A)'s decision that the assessees' shares of agricultural income from the firms should not be included for rate purposes under ... Exemptions, Share In Firm Issues Involved:1. Whether the assessees' shares in agricultural income from the firm should be included for rate purposes under section 10(2A) of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Inclusion of Agricultural Income for Rate Purposes:The revenue's appeals pertain to the assessment years 1993-94, 1994-95, and 1995-96, questioning the orders of the learned CIT(A) that treated the assessees' shares in agricultural income from the firm as not includible for rate purposes under section 10(2A) of the Income-tax Act, 1961.In the case of both assessees, the returns filed declared agricultural income separately. The Assessing Officer included this agricultural income for rate purposes, rejecting the assessees' contention that such income should not be considered for rate purposes as per section 10(2A).The CIT(A) accepted the assessees' submissions, noting that section 10(2A) effective from 1-4-1993, and the omission of section 67 and Rule 5 of Part IV of the First Schedule of the Finance Act, 1992, with effect from the same date, meant that the share of agricultural income from the firm should not be aggregated for rate purposes.The Departmental Representative argued that the language of the statute was clear and unambiguous, citing the Supreme Court decision in Commissioner of Income-tax vs T. V. Sundaram Iyengar & Sons (P.) Ltd. [1975] 101 ITR 764. They contended that agricultural income, defined in section 2(1A), should be included for rate purposes as per Rule 2 of Part IV of the First Schedule.Countering this, the assessees' Authorised Representative argued that section 10(2A) specifically excluded the share of agricultural income from the firm from being considered as the partners' income for rate purposes. They emphasized that the Finance Act, 1992, and subsequent amendments supported this interpretation.After considering the submissions, the Tribunal upheld the CIT(A)'s decision. It noted that section 2(9)(d) of the Finance Act, 1992, and Rule 5 of Part IV of the First Schedule, as amended, clearly indicated that the agricultural income of a firm should not be regarded as the agricultural income of its partners. The Tribunal concluded that the Assessing Officer was not justified in including the assessees' shares of agricultural income for rate purposes.In conclusion, the Tribunal confirmed the CIT(A)'s orders, directing that the assessees' shares of agricultural income from the firms should not be included for rate purposes while computing their other income. The revenue's appeals were dismissed.