TaxTMI 
TaxTMI 
2019 (1) TMI 1359
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....ity "AO"] in taking 30% of the sale proceeds of Grevellea trees as cost and balance sale proceeds brought to tax as capital gains? (iv) Whether the Tribunal was correct in having found the sale of two estates as going concerns, the proceeds of which was claimed as agricultural income was disallowed treating as slump sale and taxing it as income under Section 50B? (v) Whether the Tribunal was correct in having affirmed the action of the AO in having added back the provision for gratuity in computing the income under Section 115JB? These questions are first taken up for consideration, since most of the issues are covered by the decision of this Court itself. 2. On question No.(i) the learned Senior Counsel, Government of India (Taxes) submits that the Department has instructed him to not press the same. In such circumstances, the order of the Tribunal remains untouched on that aspect. We decline to answer the said question. 3. On the question of dis-allowance of delayed payments under the EPF and ESI, since they relate to employees' contributions which the assessee had deducted from the monthly salary payable to them, the issue stands covered against th....
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....under Section 115JB, we have found in I.T.A.No.1 of 2007 vide common judgment dated 09.10.2018 [The Fertilizers & Chemicals Travancore Ltd. v. CIT, Kochi] that the same would be an ascertained liability and, hence, would be capable of being deducted from computation of the Minimum Alternate Tax (MAT) under Section 115JB. We, answer question No.(v) in favour of the assessee and against the Revenue. 7. Now, we have to deal with three other questions raised by the Revenue in the appeal. The first of the said questions as seen from the appeal memorandum is on the dis-allowance of proportionate interest under Section 14A on loans given to the subsidiary companies finding that there is no commercial expediency. The learned Senior Counsel for Government of India (Taxes) would, however, point out that neither in the assessment order nor in the Tribunal's order Section 14A is referred to and, hence, this Court would have to consider whether the dis-allowance was proper dehors Section 14A. The following questions of law also arise in the assessment year: "(vi) Whether, on the facts and in the circumstances of the case,-- a) In the light of S.A.Buildings reported in 288 ....
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....earing funds, which was in the proportion of 9775.94 : 30168.70. Hence, the AO, in that proportion, apportioned the total average loans given to the assessee Companies as being from interest bearing funds and non-interest bearing funds. We are of the opinion that there can be no such device employed of apportionment on ground of it being not permitted by the statute or by prescription in the Rules. Definitely, such an addition could have been made if the non-interest bearing funds available with the assessee was lesser than the loans given to its subsidiary Companies on interest free basis. Here, we notice that the assessee was flushed with non-interest bearing funds as found by the first appellate authority also. Looking at the manner in which the proportion was computed by the AO itself, we find that the assessee had more than Rs. 30,000 lakhs of non-interest bearing funds. The loans which were said to be interest free, granted to its subsidiary Companies came to only Rs. 21,221.04 lakhs. Hence, the assessee is deemed to have granted the interest free loans to its subsidiary Companies from its non-interest bearing funds available with it, which was also in excess of the total loa....
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....Court in S.Muthiyam Reddy, Commissioner of Income Tax v. All India Tea and Trading Co. Ltd. [(1996) 219 ITR 544] and Singhai Rakesh Kumar v. Union of India [(2001) 247 ITR 150]. However, immediately it is to be noticed that the judgment of the Andhra Pradesh High Court in S. Muthiyam Reddy [supra] was overruled by the Hon'ble Supreme Court in Union of India v. S.Muthiyam Reddy [(1999) 240 ITR 341 SC]. Then, it was argued that the proposition insofar as consideration on sale of agricultural land being agricultural income as propounded by the Andhra Pradesh High Court has been left untouched by the Hon'ble Supreme Court. The Division Bench of the Andhra Pradesh High Court has been overruled only on the question of assessment of capital gains on agricultural lands coming under item (a) & (b) of sub-clause (3) of Clause (14) of Section 2 of the Act is the argument. The other decision of the Hon'ble Supreme Court cited herein above would also advance the said argument, according to the assessees Counsel. 13. The learned Senior Counsel Sri.Joseph Markos would refer to an unreported decision of the Madras High Court in TCA No.359 of 2008 dated 09.11.2016, wherein an identic....
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....petent to levy tax on sale of agricultural lands situated within the limits of Municipalities and Cantonments, as provided under Section 2(14)(iii)(a) & (b) of the Act. The assessee therein also held lands coming within item (a) & (b) of Section 2(14) (iii) of the Act. The Division Bench, while considering the issue, found that sale of agricultural land would be agricultural income and also held that the provision bringing in capital gains on such agricultural lands situated within the municipal area would not be exigible to tax. The provision enabling such inclusion was found to be ultra vires. On appeal, the Hon'ble Supreme Court in S.Muthiyam Reddy [supra], noticed the Explanation brought into the definition clause; to find that it takes away the whole basis of the decision of the A.P. High Court. 16. The Hon'ble Supreme Court found the A.P. High Court decision to be without any legal sustenance; in so far as the Explanation having been introduced with retrospective effect. We do not think the declaration, made by the A.P. High Court with respect to the consideration received on sale of agricultural land being agricultural income, would survive for more reason than on....
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....rt affirmed the view of the High Court which accepted the findings of the Tribunal. The subsequent events were also noticed in the last paragraph: 14. Before concluding we may note that the respondent's land which was requisitioned was subsequently acquired by the State of Assam and compensation was paid. In CIT v. All India Tea and Trading Co. Ltd.5(1979) 117 ITR 525(Cal) it was held that as the land in question was agricultural land which was being used for agricultural purposes, even after its being requisitioned, the amount of compensation paid on its acquisition was not taxable under the head "capital gains" as the said land was not a capital asset. It is clear, therefore, that at no point of time or at least till its acquisition the land lost its character of agricultural land. Therefore, compensation paid for the use by the refugees of the said land for agricultural purposes can only be regarded as agricultural income which admittedly is not taxable". 18. The Hon'ble Supreme Court referred to the subsequent events only to find that the land had not lost the character of agricultural land after requisition and till the acquisition was made. As to the finding o....
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....ch circumstances, the other provisions of the IT Act, would be applicable to a Company who is sought to be taxed under the provisions of Section 115JB, only if such provisions do not conflict with those under Section 115JB. It is in this background we have to look at the contentions of the Revenue as also the assessee. 21. We see from Section 10 of the Act that agricultural income is granted an exemption under the Income Tax Act. Sub-clause (2) of the first Explanation to Section 115JB, provides a downward adjustment of the profits as revealed from the books of accounts, to that income, to which any of the provisions of Sections 10, 10A, 10B, 11 or 12 applies. Hence, if any portion of the profits as reflected in the books of accounts relates to agricultural income, then there is a clear exemption provided under Section 10. In view of the exemption under Section 10, any revenue from agricultural land would have to be reduced from the profits in computing the 'minimum alternate tax' (MAT) under Section 115JB. Explanation-1 of Section 2(1A) however specifically excludes any income derived from transfer of land, referred to in item (a) & (b) of Section 2(14)(iii) from the de....
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....ot obliged to carry on agricultural operations, nor can the consideration received on such sale of agricultural land deemed to be agricultural income. We hasten to add that it will not be assessable to income-tax under the I.T. Act unless the land is covered under item (a) & (b) of Section 2(14)(iii), in which event tax would be levied on the capital gains. 24. We were also taken through the decision of a Division Bench of this Court in (1986) 158 ITR 630 [Commissioner of Income Tax v. Alanickal Company Limited]. A sale of agricultural area in rural areas came up for consideration before the Division Bench, wherein the Department wanted to split up the sale of land and sale of trees as separate sales. The contention of the Department was that though sale of agricultural land in rural area is exempted from capital gains, sale of trees would not be so exempted. It was in this context that the Division Bench held that there can be no splitting up of the single sale transaction when the land was sold with the trees and the same has to be considered as a sale of agricultural land in the rural area, which would not be included under the definition of capital gains. 25. We also noti....