High Court Of Madhya Pradesh
CIT vs. Nabhinandan Digamber Jain
Section 256(2)
Asst. Year 1988-89
C.K. Prasad & Arun Mishra, JJ.
IT Ref. No. 71 of 1999
2nd May, 2001
Counsel Appeared : Arya, for the Revenue Judgment
BY THE COURT :
The following question of law was proposed by the petitioner for the year 1988-89 :
“(i) Whether, on the facts and in the circumstances of the case, the 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 s. 11 of the IT Act, 1961 ?”
2. The Revenue has filed this application under s. 256 of the IT Act, 1961, asking this Court to direct the Tribunal to state the case and refer the following question for our determination : “Whether, on the facts and in the circumstances of the case, the 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 s. 11 of the IT Act 1961 ?”
3. Mr. Arya submits that the agricultural income has to be taken into account for the purpose of computing the accumulation under s. 11(1)(a) of the IT Act (hereinafter referred to as “the Act”) and the view taken by the Tribunal that income from agriculture is exempted from the tax under s. 10(1) of the Act and not chargeable to tax under s. 4 of the Act, which is the charging section, is erroneous. In support of his submission he has placed reliance on a Bench decision of the Allahabad High Court in the case of CIT vs. Panchayati Akhara Nirmal (1991) 97 CTR (All) 41 : (1991) 190 ITR 121 (All) : TC 23R.1260. According to Sri Arya the view taken by the Tribunal runs contrary to the decision of the Allahabad High Court in the case of Panchayati Akhara Nirmal (1991) 97 CTR (All) 41 : (1991) 190 ITR 121 (All) : TC 23R.1260.
4. In the said case, the Allahabad High Court held as follows : “A reading of the opening words of s. 10 as well as s. 11 shows that both the provisions exclude certain types of incomes from being included in the total income of a person. Sec. 10(1) excludes agricultural income while s. 11(1) excludes income derived from property held under trust to the extent specified. Now we are concerned with an assessee who has got both the types of income, namely, income from agriculture and income derived from property held under trust wholly for charitable or religious purposes. However, the exemption under s. 11 is not an absolute one. The exemption is available only to the extent such income is applied for such purposes in India or is accumulated to the extent permitted. What the ITO had to determine was how much income derived by the assessee from non-agricultural property held under trust for charitable or religious purposes has been applied for such purpose in India. The assessee had not maintained a separate account of the income derived from non-agricultural property. He had mixed up both the agricultural income (which was derived from the property which was also held under trust wholly for charitable/religious purposes) and income from other trust properties (which too were held under trust wholly for charitable/religious purposes). Out of the income so received, he had spent a certain amount towards the specified charitable/religious purposes. The question is whether the agricultural income should be excluded altogether from consideration when determining the extent of income applied for the said purposes within the meaning of s. 11(1)(a). We are of the opinion that, in such a situation, it is not so much a question of law but one of applying a fair and equitable rule. It is to be remembered that both the agricultural properties and non-agricultural properties are held under trust for specified purposes. Had the income from both these sources been kept apart, it would have been possible to know how much income derived from non-agricultural properties has been applied towards the specified purposes, but in the absence of separate accounts, the ITO had no option but to allocate the amount spent between agricultural and nonagricultural income in an appropriate ratio.”
5. From a close reading of the judgment of the Allahabad High Court it is evident that it had held that s. 10(1) of the Act excludes agricultural income while s. 11(1) of the Act excludes income derived from property held under trust to the extent specified. In the said case the assessee had not maintained a separate account of the income derived from non-agricultural property, and in such a situation, the Court observed that it is not so much a question of law but one of applying a fair and equitable rule and in the absence of separate accounts the ITO had no option but to allocate the amount spent between agricultural and non-agricultural income in an appropriate ratio. This is not a situation here. Sec. 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.
The application stands dismissed.
[Citation : 257 ITR 91]
