Rental Income received from Agricultural Land shall be exempt from Tax and be treated as Agricultural Income: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the rental income received from the agricultural land shall be exempt from tax and be treated as agricultural income.

The assessee derived agricultural income in the form of rental income in accordance with the provisions of Section 2(1A)(a) of the Income Tax Act, 1961 which is fully exempt from tax under Section 10(1) of the Income Tax Act. The assessee is the owner of the three acres of agricultural land which has been given on rent to A.S Agri and Aqua LLP for farming and cultivation of agricultural produce.

A promissory note between the assessee and A.S Agri and Aqua LLP was executed wherein it was agreed that the assessee will provide its agricultural land to A.S Agri and Aqua LLP on a monthly remuneration of ₹.8,00,000/-. The assessee will make a refundable deposit worth ₹.1.60 crores in the business of A.S Agri and Aqua LLP in which the assessee will hold a 50% stake.

The Assessing Officer completed the assessment by treating the rental income received by the assessee as income from the business.

The Authorized Representative submitted that it is fact on record that the assessee has received ₹.64,00,000/- from the above said LLP for the use of agricultural land. Therefore, it is an agricultural income that is exempt from tax and the Assessing Officer cannot charge the rental income of the assessee under the head business income.

The Two-member bench comprising of Amit Shukla (Judicial member) and S. Rifaur Rahman (Accountant member) held that the impossibility of performance exists, it cannot be charged to tax under any head of income.

Therefore, the bench was not inclined to accept the findings of the lower authorities, hence the Assessing Officer was directed to treat the rental income as agricultural income. Thus, the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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