TaxTMI 
TaxTMI 
2010 (4) TMI 364
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....oning the validity of the estimate of income under section 44AD for the assessment years 1996-97 and 1997-98 ? 2. These cases relate to the assessment years 1993-94 to 1998-99. The questions are identical. The appellant claims that it is engaged in growing and maintenance of teak farms. The assessee admitted the total income for the relevant years and claimed that it was exempt as agricultural income. As against the returns filed, intimation and reassessment was made under section 147 of the Income-tax Act, 1961. The assessee filed a petition under section 154 of the Act. 3. The case of the Department was that they came into possession of the information, subsequent to the rectification of the assessment, that the assessee's claims were factually incorrect. The assessee had entered into agreements with the owners of lands pursuant to which they were also put into possession of the same. M/s. Sterling Tree Magnum (India) Ltd. ("STM", in short), a company engaged in the business of growing and selling teak, introduced a scheme promising its investors specified return from the rearing of teak trees. The assessee agreed to earmark the lands in its possession for the purpose of th....
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....hat it was no one's case that the agreements were not genuine. 6. The learned standing counsel appearing for the Department would support the impugned decision. According to him, the nomenclature of the receipt cannot clinch the issue, but only the actual nature of the receipt. 7. The assessee claimed that they "are doing agricultural activities in our own lands and cultivating seasonal and long-term crops like dhal, soya, vegetables, teak etc." The factual finding is that the assessee had not grown long-term or seasonal crops like dhal, soya and vegetables. This is not disputed. So the finding that the assessee had furnished incorrect particulars stands proved. Therefore, on the basis of the above concurrent factual findings, the reopening was justified. 8. The actual fact was that, it was only because of the diligence of the Assessing Officer that, in the words of the Commissioner of Income-tax (Appeals), he had "ferreted out relevant information on ownership of lands, growing and maintenance of teak saplings". The assessee did not own the lands but the land owners have put them in possession of the lands. Learned counsel for the assessee admitted that the assessee does ....
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....n notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or (B) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette. Explanation 1.-For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section ; Explanation 2.-For the removal of doubts, it is hereby declared that income derived from any building or land referred to in sub- clause © arising from the use of such building or la....
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....xercising such dominion over the property as would enable others being excluded therefrom and having right to use and occupy the property in his own right would be the owner of building for the purpose of section 32(1), though a formal deed of title may not have been executed and registered, and he would be entitled to depreciation thereon." Learned counsel also relied on a decision of the Income-tax Appellate Tribunal, Chennai B Bench made in I. T. A. Nos. 1147 of 1999 etc. (Premier Farms Pvt. Ltd. v. Deputy CIT) dated December 30, 2003, where with regard to another assessee who had entered into identical agreements with STM, but. had passed on that duty to one Sastha Pharms as in the instant case where the assessee has passed on the duty to WRF, the Tribunal held that non-utilisation charges is rent received by the assessee from agricultural land the amounts received for cultivation and maintenance charges is not an agricultural income. 13. A copy of the agreement has been produced before us. The agreement of the assessee with STM contains inter alia the following items : (a) Assessee is the absolute owner of the agricul....
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....wth of teak saplings/trees. 16. From this it is clear that the operations that should be done on the land for STM are really carried out by WRF, which is STM's own sister concern and apart from allowing the land to be used the assessee does nothing, and the income is for allowing the land to be used by STM. The Assessing Officer found that all that the assessee did was to place at the disposal of STM 41.59 acres, for which the above payments were made and that it shifted the entire responsibility under its agreement to WRF. The above tabular column will also substantiate this finding. The Assessing Officer also found that what the assessee did was to provide the lands used by it and lease out some to STM and for that non-utilisation charges were paid. This cannot be treated as income derived from lands or as rents received from land and found on facts that the nexus between the land and agricultural operations thereon have not been established. On appeal, the appellate authority specifically dealt with the suppression of information regarding what is actually grown on the lands on behalf of STM and projection as if agricultural operations to grow dhal....
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....g of the definition." 20. In CIT v. Kunwar Trivikram Narain Singh [1965] 57 ITR 29, the Supreme Court referred to the observations of the Privy Council in the judgment cited above and from the same judgment, quoted the following (page 33) : "'Agricultural income' as defined in the Act is obviously intended to refer to the revenue received by direct association with the land which is used for agricultural purposes and not by indirectly extending it to cases where that revenue or part thereof changes hands either by way of distribution of dividends or otherwise." The Supreme Court held thus (page 34) : 21. "It follows from the decisions of the Privy Council and the judgments of this court that if it is held in this case, that the source of the allowance or pension is the arrangement arrived at in 1837, then the income cannot be held to be derived from land within the meaning of the definition in section 2(1)(a) of the Act." 22. They quoted the following passage from the speech of Viscount Simon in Commissioners of Inland Revenue v. Wesleyan General Assurance Society [1948] 16 ITR (E.C.) 101, 103 (HL) : "It may be well ....