“Tax on agricultural income” falls under purview of State Governments
"Central Government is not competent to levy I tax on agricultural income,”says affidavit of Union of India
Chandigarh, April 16, 2018: During resumed hearing of a PIL filed by Advocate Hari Chand, before the Bench of Justices Ajay Kumar Mittal and A.S. Grewal, an affidavit has been filed on behalf of Union of India, under signatures of Vivek Vardhan, Deputy Commissioner of Income Tax (HQ) (Judicial), stating that item “Taxes on agricultural income” falls under Entry 46 in “State List” under the Constitution of India, and hence only the State Governments are competent to enact legislations imposing a tax on agricultural income.
Therefore, taxation of agricultural income. If any, has to be considered by the State Governments only.
The affidavit further states that as regards the recommendations of Tax Administration Reforms Commission, in its Third report, the tax on agricultural income can be imposed by Central Government only if the States pass a resolution under Article 252 of the Constitution of India, authorizing the Centre to impose such tax on agricultural income. It is further stated that as per scheme of direct rtaxes at present, income of agriculture is utilized for rate of tax purpose only in cases where the income from other sources exceeds the income not chargeable to tax, and net agricultural income exceeds five thousand rupees.
The petitioner-cum-advocate Hari Chand Arora had challenged the provisions contained in Section 10 (1) of the Income Tax Act, 1961, providing total exemption of agricultural income from Income tax is highly arbitrary, as even the rich and affluent farmers have been given benefit of this provision. He alleged that big industrialists, transporters, liquor barons are taking benefit of this provision and causing huge loss to revenue by diverting income from other business to show it to be agricultural income for avoiding liability to pay income tax. He further contended that exemption under section 10 (1) is against basic principles of our Constitution which envisages India to be “a socialist republic”, when very rich and affluent farmers are being given benefit of this provision by exempting their agricultural income also from tax. The petitioner had contended that this provision is arbitrary and discriminatory also, as other persons with same quantum of income are being made to pay income tax.
Petitioner had referred to affidavits filed by various political leaders of Punjab before the Returning Officers early this year, while submitting nomination papers for Assembly elections, to show that rich political leaders, running other business empires are also availing benefit of such exemption from paying tax on their agricultural income. He specifically referred to instances of Sarv Shiri Parkash Singh Badal, Sukhbir Badal, Manpreet Badal, Rana Gurjit Singh, Kuljit Singh Nagra, and Bhupinder Singh Hooda etc, to substantiate his aforesaid contention.
Petitioner had stated that TARC (Tax Administration Reforms Commission) had submitted its recommendations in 2014 to Government of India/CBDT. One recommendation was that farmers having agricultural income of more than 50 lakhs should atleast be levied tax on their agricultural income, but the CBDT (Central Board of Direct Taxes) did not accept even the said recommendation. Thus, petitioner has no other alternative except to approach the High Court for intervention. He has prayed that respondent Governments be directed to exclude rich and affluent farmers from the benefit of exemption under Section 10 (1) of the Income Tax Act, 1961, just as the respondents have done by denying the benefits of reservation in Government jobs to those persons belonging to OBCs (Other Backward Classes), who have wealth or income above specified limits, as they do not deserve the support of such concessions or exemptions.