TMI Blog2014 (7) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. In our view, it should be reduced from the net profits as per profit loss account while computing the book profits for the purposes of 115JB of the Act. See HARRISONS MALAYALAM LIMITED. VERSUS ACIT [ 2009 (5) TMI 124 - ITAT COCHIN ] - Decided against revenue - ITA No.451/Vizag/2012 - - - Dated:- 30-7-2014 - Shri j. Sudhakar Reddy, Accountant Member And Shri Saktijit Dey, Judicial Member Assessee by: Shri G.V.N. Hari, Advocate Revenue by: Shri K.V.N. Charya, CIT(DR) ORDER Per Bench:- This is an appeal by the assessee directed against the order of the CIT Vijayawada dated 28.3.2012 u/s 263 of the Income-tax Act. The facts are brought out in para 1 2 of the order of the CIT, which are extracted hereunder for ready reference. The assessee-company is engaged in manufacturing of Cattle Feed and production of seeds. For the assessment year under consideration, it had filed the return of income on 29.9.2008, declaring the taxable income at NIL (In fact, a loss of ₹ 1,74,88,295/- was disclosed). This return was processed u/s 143(1) on 19.3.2010 and a refund of ₹ 76,600/- was issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the Ld. CIT has erred in treating the assessment order as erroneous and prejudicial to the interest of the revenue. The Ld. CIT is not justified in directing revision to the assessment order to include agricultural capital gain in the computation of book profits u/s 115 JB. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT has erred in misinterpreting the provisions of the Direct Tax Laws (Amendment) Act, 1987 and Explanation-(1) to Sec.2(14). The Ld. CIT is not justified in bringing in gains on the sale of agricultural lands to tax which are not covered by the provisions of sec.2(14)(iii)(a) and (b) of the Income Tax, 1961. The Ld. CIT ought to have considered that the amount of income to which the provisions of sec.10 has to be reduced from the net profit of the Profit and Loss account in the computation of book profit and he ought to have treated agricultural capital gain as equivalent to agricultural income u/s 10(1). 4. Such other ground/grounds that may be urged with the leave of the Hon ble ITAT during the hearing of the appeal. 4. We have heard Mr. G.V.N. Hari, the Ld. Counsel for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese legal issues before the assessing officer. It is submitted that assessee has derived profit from sale of agricultural land and it is only after inclusion of this profit under the Companies Act and the same is required to be considered for determination of book profits under the MAT provisions. 6. In reply, the Ld. Counsel for the assessee submits that specific directions have been given by the CIT Vijayawada and under those circumstances, the coordinate bench order in the case of Harrisons Malayalam Ltd. Vs. ACIT (2009) 32 SOT 497 (Coch) has to be followed. 7. After hearing rival submissions, we hold as follows: The undisputed fact in the case of the assessee is that, the land transferred is agricultural land. This is so because the assessing officer has not assessed the income arising out of those lands under the regular provisions of Income-tax Act. In fact, the Ld. CIT Vijayawada has accepted the correctness of computation of total income under the regular provisions of the Act. Consequently, the profit on sale of agricultural land would become agricultural income u/s 2(1A) of the Act and hence not part of total income as per provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 CTR (AP) 99 : (1988) 169 ITR 174 (AP) has held that the capital gains arising from sale of land used for agricultural purposes constituted revenue derived from agricultural land and therefore agricultural income under s. 2(1A) of the Act and therefore not chargeable to central income-tax. 17. The Hon'ble High Court of Kerala has also held the same view as reflected in the judgment of their Lordships in the case of CIT vs. Alanickal Co. Ltd. (1986) 52 CTR (Ker) 247 : (1986) 158 ITR 630 (Ker). The Hon'ble jurisdictional High Court held that where the rubber estate sold by an assessee was in a rural area, transaction of sale of a rubber estate with rubber trees standing on it did not involve transfer of any capital asset and as such the sale of rubber estate along with rubber trees amounts to sale of agricultural land alone and the transaction cannot be split up as sale of agricultural land and sale of trees and any gains arising from that sale of trees are not liable to tax on capital gains. 18. Obviously, the profit on sale of agricultural land is agricultural income and the Court further held that standing trees also form part of the immovable property ..... X X X X Extracts X X X X X X X X Extracts X X X X
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