1987 (1) TMI 25 - HC - Income Tax

Summary

Issues Involved:
1. Statutory exemption under the Tamil Nadu Agricultural Income-tax Act.
2. Deduction for "pannai cultivation" expenses.
3. Inclusion of non-agricultural income in the assessment.
4. Application of Central Government exemption to state agricultural income-tax.

Detailed Analysis:

1. Statutory Exemption under the Tamil Nadu Agricultural Income-tax Act
The Tribunal held that the petitioner had not obtained any statutory exemption under the Tamil Nadu Agricultural Income-tax Act from the Government of Tamil Nadu. The petitioner argued that since the Mutt was exempted by the Central Government from income-tax under section 10(23C)(v) of the Income-tax Act from the assessment year 1972-73, it should also be deemed exempt under the Tamil Nadu Agricultural Income-tax Act. The Tribunal rejected this contention, stating there was no provision in the Tamil Nadu Agricultural Income-tax Act enabling the Agricultural Income-tax Officer to grant such an exemption.

2. Deduction for "Pannai Cultivation" Expenses
The petitioner claimed that the entire amount of expenses incurred for "pannai cultivation" should have been allowed. The Agricultural Income-tax Officer allowed expenses only for 22,04-2/3 acres and failed to account for 165.13 standard acres of dry lands in "Sirumalai" village. The Tribunal found that the petitioner had not produced proper accounts or vouchers to substantiate the expenses. The Tribunal remanded the matter to the Agricultural Income-tax Officer for fresh verification of the claim.

3. Inclusion of Non-Agricultural Income in the Assessment
The petitioner contended that the lower authorities were unjustified in taking into account receipts from hundial agra sambhavanai and pada puja under non-agricultural income. The Tribunal observed that non-agricultural income is not taxed, but it is necessary to fix the non-agricultural income to determine the proportion of trust expenditure met from agricultural and non-agricultural income. Therefore, the Tribunal upheld the inclusion of amounts under the head "Non-agricultural income."

4. Application of Central Government Exemption to State Agricultural Income-tax
The petitioner argued that the Mutt's exemption under the Central Government's notification should apply to the Tamil Nadu Agricultural Income-tax Act. The Tribunal's observation that the petitioner had not obtained any statutory exemption from the Tamil Nadu Government was challenged. The petitioner cited the case S. K. Muthukumaraswami Thambiran v. Agrl. ITO [1978] 113 ITR 889 (Mad), where it was held that if a trust is exempt under the Central Act, no assessment is possible under the State Act for that year.

The court held that the Central Government's notification exempting the petitioner from tax under section 10(23C)(v) of the Income-tax Act also applied to the Tamil Nadu Agricultural Income-tax Act. Consequently, the agricultural income derived by the trust cannot be taxed. The court concluded that if a religious or charitable trust is exempt under the Central Act, it is also exempt under the State Act for the same year.

Conclusion
The tax case revision was allowed, granting exemption on the entire income. The order of the Tribunal was set aside, and relief was granted to the petitioner for the entire income. No order as to costs was made.