Basic Agricultural Operations enough to classify Income from Land as ‘Agricultural Income’ under 2(1A): ITAT [Read Order]

Basic Agricultural Operations - Income from Land - Agricultural Income - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT) Hyderabad clarified that basic agricultural operations are enough to classify income from a land as ‘agricultural income’ under 2(1A) of the Income Tax Act and claim benefits under it.

The assessee, Mr. Nadeem Mohd. Abdul’s return of income was selected for scrutiny under CASS to examine the assessee’s claim of agricultural income. Accordingly, notices u/s 143(2) and 143(1) were issued to the assessee requiring the assessee to furnish certain information. The assessee furnished some information in support of his claim of agricultural income. After perusal of the same, the Assessing Officer (AO) observed that the assessee is having agricultural land of 20 acres and 10 guntas in Survey No.426 and 427 respectively at Kadavergu Village of Warangal District. Apart from this, the assessee has taken on lease 10 acres and 21 guntas of dry land situated at Chellampally Village of Tallakondapally Mandal, Ranga Reddy Distt from one Shri Mod.Abdul Azeem (lessor), vide lease deed dated 1.5.2013 and agricultural land of 10 acres and 24 guntas situated at Devethpalle Village, Nampally Mandal, Ranga Reddy Distt from one Avula Sreenu (lessor). Thus, a total agricultural land of 41.15 acres situated at different places have been leased out by the assessee to a company by name Adisa Agro Pvt. Ltd, Mumbai and observed from the copies of Khasra Pahani produced by the assessee, that they did not specify any crop The AO had observed that the assessee is not having any agricultural land to claim that he has got an amount of Rs.29,09,280/- from agricultural activities and as the land he was holding was either on lease or leased to Adisa Agro Pvt. Ltd. He also observed from the lease deed entered into with Adisa Agro Pvt Ltd Mumbai that the lease rent @ Rs.40,000/- per acre is to be paid to the assessee but there was no Tax Deducted on Source (TDS) made by Adisa Agro P Ltd. Therefore, he rejected the assessee’s claim of agricultural income and treated the income as “income from other sources” and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A) who confirmed the order resulting in this is in second appeal before the Tribunal.

Judicial Member P Madhavi Devi while allowing the appeal of the assessee stated, “The only requirement is that the basic agricultural operations are to be carried out. The nature of the crop being commercial in nature will not therefore, disentitle the assessee from claiming the income as ‘agricultural income’. Thus, the finding of the CIT (A) that the assessee’s intention of taking the agricultural lands on lease is to exploit them commercially is not sustainable to disentitle the assessee from making the claim of agricultural income. Having gone through the decisions relied by the learned CIT (A), I am of the opinion that they are all are distinguishable from the facts of the case before the Tribunal and therefore, are not applicable. In view of the same, I set aside the order of the AO and direct him to treat the lease rent received by the assessee from ‘Adisa Agro (P) Ltd’ for use of the agricultural land as agricultural income.

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