2001 (5) TMI 8 - HC - Income Tax

Charitable Purposes Agricultural Income Exemption - (i) Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal is justified in holding that the agricultural income will not form part of total income for the purpose of computing the accumulation of income in excess of 25 per cent. of the total income as laid down under section 11 of the Income-tax Act 1961? - Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal is justified in holding that the agricultural income will not form part of total income for the purpose of computing the accumulation of income in excess of 25 per cent. of the total income as laid down under section 11 of the Income-tax Act 1961? - Section 10(1) of the Act excludes agricultural income and in that view of the matter we are of the opinion that the reference as sought for is uncalled for.

Summary

Issues:
1. Interpretation of the Income-tax Act, 1961 regarding the inclusion of agricultural income in the total income for computing accumulation of income under section 11.

Analysis:
The petitioner raised a question regarding the treatment of agricultural income in the computation of income accumulation under section 11 of the Income-tax Act, 1961. The Revenue filed an application asking the court to direct the Tribunal to refer the question of whether agricultural income should be included in the total income for this purpose. Mr. Arya argued that agricultural income must be considered for accumulation under section 11(1)(a) of the Act, contrary to the Tribunal's view that such income is exempt from tax under section 10(1) and not chargeable under section 4. He cited a decision of the Allahabad High Court to support his argument, emphasizing that the Tribunal's view contradicted the Allahabad High Court's decision in a similar case.

The Allahabad High Court's decision highlighted that section 10(1) excludes agricultural income, while section 11(1) excludes income from property held under trust to a specified extent. The court emphasized the need for separate accounts to determine the application of income for charitable or religious purposes. In the absence of separate accounts, the Income-tax Officer had to allocate the amount spent between agricultural and non-agricultural income fairly. However, in the current case, where section 10(1) excludes agricultural income, the court concluded that the reference sought by the Revenue was unnecessary, as the situation did not align with the case discussed by the Allahabad High Court.

The judgment emphasized that section 10(1) of the Act excludes agricultural income, while section 11(1) excludes income from trust property to a specified extent. The court differentiated the current case from the Allahabad High Court decision, stating that the reference requested by the Revenue was unwarranted due to the clear exclusion of agricultural income under section 10(1). Consequently, the court dismissed the application, affirming that the inclusion of agricultural income for accumulation under section 11 was unnecessary based on the provisions of the Income-tax Act, 1961.