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2021 (7) TMI 888 - ITAT SURATCapital gain arising from transfer of agricultural land - Addition u/s 68 in respect of agriculture income - HELD THAT:- Section 10(1) of the Income Tax Act provides that agricultural income is not to be included in the total income of the assessee. The result is that agricultural income is not only exempt from tax but, under the scheme of Income Tax Act, is also to be excluded in computing the total income on the basis of which the rate applicable to the taxable income is determined. Since 1973 the annual Finance Act has superseded this scheme by providing for inclusion of agricultural income in the total income for the limited purpose of determining the rate applicable to the taxable income. These provisions are constitutional. Agricultural income has to be exempted from tax under the Income Tax Act because Parliament has no power under the Constitution to levy tax on agricultural income - Parliament has power to levy tax on capital gain arising from transfer of agricultural land. The State legislatures are entitled to impose a tax on any of the categories of agricultural income which are exempted from tax under Income Tax Act. As based on the land holdings and land taken on rent basis to do agricultural activities, the farmers have justified the agricultural income earned by them by furnishing evidences such as, land holding records in the form No. 7, 12, 8-A and 6 etc. Besides, addition was sustained by the Ld. CIT(A) based on the statement of Shri Gajanand B. Patel without providing an opportunity to cross examine, wherein we noted that addition cannot be sustained only on the basis of the statement of Shri Gajanand B. Patel. We also note that CIT(A) has sustained the addition in the hands of all the eighteen farmers based on the statement of Shri Gajanand B. Patel without providing an opportunity to cross examine the said statement hence conclusion reached by the CIT(A) based on the statement of Shri Gajanand B. Patel is not acceptable. We have preceded and for the reasons alluded, we are of the opinion that addition should be deleted.
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