Case Law Details
K. Vinuthna Reddy Vs ITO (ITAT Hyderabad)
From the facts of the case it is apparent that both the assessees has proximity with the company to whom they have leased the land. Further, the apprehension of the Ld. AO appears to be quite reasonable because both the assessee has received the lease rent for the entire period of 5 years during the relevant assessment year, i.e., in the fag end of the expiry of the lease. In normal circumstances, such transactions do not occur. Further, I am unable to understand as to why such an extent of 40 acres of land is required for the Company to conduct research and development/ sea development activity. It is therefore possible that no activity was carried out on the land and the transaction is a modus-operandi to syphon cash out of the Company without attracting tax. Keeping in view of these facts of the case, the Ld. AO’s observation cannot be simply brushed aside. Further, as pointed out by the Ld. CIT (A) it is quite apparent that the company which had obtained land from the assessee on lease has not performed any agricultural operation on the land. Section 2(1A) (a) of the Act stipulates that agricultural income means “rent or revenue derived from land which is situated in India and is used for agricultural purposes”. From the provisions of the Act, it is crystal clear that the land from which rent is received should be used for agricultural purposes. In the case of assessee, it is evident that the land was either used for research and development or kept vacant but not used for agricultural purposes. The Honourable apex court in the case CAT vs. Raja Benoy Kumar Sahas Roy [1957] reported in 32 ITR 466 (SC) has held that unless there is some measure of cultivation of land and some skilled labour is performed on the land for cultivation, the land cannot be said to have been used for agricultural purposes. It is essential that basic primary operation, prior to germination of the produce, involving expenditure of human skill and labour on the land and subsequent post-germination operations such as weeding, digging of the soil around the growth, etc., should be performed in order to constitute agricultural activity. In the case of assessee, the company which had obtained the land on lease from the assessees has apparently not indulged in any such activities. Therefore, I do not find it necessary to interfere with the Order of the Ld. CIT (A) as well as with the apprehensions of the Ld. AO in the case of both the assesses. Hence, I hereby sustain the order of the Ld. CIT(A) with respect to both the appeals.
FULL TEXT OF THE ITAT JUDGEMENT
These appeals are filed by the assessee Ms. Sri Varshitha Kondamadugula and Smt. Vinuthna Reddy against the order of the Ld. CIT (A)-6, Hyderabad in appeal No. 10279 & 10278/2017-18/B2/CIT(A)-6, both dated 20/07/2018 passed U/s. 143(3) r.w.s 250(6) of the Act for the AY 2015-16. Since the issues in both the appeals are identical and related to the same issue, they are taken up for hearing together and disposed off by this common order.
2. Both the assessees have raised three identical grounds in their appeals however, the crux of the issue is that Ld. CIT (A) has erred in treating the lease income derived from the agricultural land of the assessees as ‘income from other source’ as against the claim of “agricultural income” which is exempt from tax U/s. 10(1) of the Act.
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