1. The appeals by the assessee and the cross-objections therein by the revenue arising for the assessment years 1971-1972, 1972-73, 1973-74 and 1974-75 are directed against the order of the Commissioner (Appeals) dated 30-10-1982 sustaining the levy of additional wealth-tax on the value of three items of immovable properties treated by the WTO as urban assets for the purpose of the levy under Clause (2), Para A, Part I of the Schedule to the Wealth-tax Act, 1957 ('the Act').
2. The main contention of the assessee before us is that these properties are not urban assets but are 'business premises' specifically excluded from the levy of additional wealth-tax under the said Clause (2). The concerned assets are 5.40 acres of land at Kaloor, one acre of land at Sivarama Menon Road and 56 cents of land near Kasba Station all within the Corporation limits. The aggregate value of these items as determined by the WTO exceeds Rs. 5 lakhs. The Commissioner (Appeals) has found that these three assets owned by the assessee are agricultural land in the sense that the assessee had originally carried on agricultural activities on the land and the trees which were matured and yielding were standing thereon and that the trees were regularly tanded and the crop collected. In his opinion, the land did not constitute a 'business asset' in the sense that no systematic entrepreneurial activity is carried on. He, therefore, held that additional wealth-tax is leviable on the value of these assets.
3. Section 3 of the Act provides for the levy of wealth-tax at the rates specified in Part I of the Schedule. The relevant clause in the Rate Schedule for the levy of additional wealth-tax is as under: (2) In addition, in the case of every individual and Hindu undivided family, where the net wealth of the individual or Hindu undivided family includes the value of any asset, being building or land (other than business premises) or any right in such building or land, situated in an urban area (such asset being hereafter in this: Part referred to as urban asset):- (i) 'business premises' means any building or land or part of such building or land, or any right in building or land or part thereof, owned by the assessee and used throughout the previous year for the purposes of his business or profession and includes any building used for the purpose of residence of persons employed in the business or any building used for the welfare of such persons as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch-room, but does not include any premises in the nature of a guest house; (ii) 'previous year', in relation to a business or profession, means the period which would be the previous year if an assessment of the profits and gains of such business or profession were to be made under the Income-tax Act for the assessment year; 4. Shri Venugopal C. Govind, on behalf of the assessee, contended before us that the Kaloor property of 5.40 acres planted with the coconut trees is agricultural land owned by the assessee in the urban area and used throughout the previous year for purpose of the business of agriculture and the property, therefore, constitutes 'business premises' and is excluded from the category of 'urban asset' for the purpose of the levy of additional wealth-tax. It is stated that the term 'business' in a broad sense means everything that occupies the time, attention and labour of men for the purpose of livelihood or profit. Agriculture is an active occupation continuously carried on and agricultural operations involve carrying on systematic entrepreneurial activity with the help of capital and labour with a view to earn profits and the element of risk is not absent from such operations and, therefore, agricultural operations will fall within the category of 'business', it is argued. According to the assessee's representative, where agricultural operations are carried on in urban land systematically, the land would fall within the definition of the expression 'business premises' in Rule 1 of Para B of Part I of the Rate Schedule and would be entitled to exemption from the charge of additional wealth-tax on urban assets under Para A, Clause (2).
Reliance was placed on the decision of the Punjab and Haryana High Court in the case of CWT v. Hari Singh [1980] 123 ITR 558 in support of this contention. Reference was also made to an earlier order of the Tribunal in the case of Mrs. Sara Varghese v. WTO [WT Appeal Nos. 31 to 35 (Coch.) of 1979 dated 28-10-1980]. In that case the Tribunal has held that running of rubber estate is certainly business and in view of the ruling of the Punjab and Haryana High Court in the case of Hari Singh (supra) the assessee in that case would be entitled to the exemption in respect of additional wealth-tax.
5. The departmental representative relying on the orders of the lower authorities pointed out that the urban land owned by the assessee does not constitute 'business premises', agricultural operations on the land do not amount to business activity and in the case of the assessee there had been no systematic or organised course of activity with a set purpose. The assessee had been only carrying on the ordinary acts of husbandry in the land and by such operations the assessee cannot be said to have been using the land for purpose of business. It was also pointed out that the assessee while carrying on the agricultural operations like manuring, turning the top soil, trimming the trees and collecting coconuts had not undertaken the replanting of the old trees by the new ones as a systematic or organised course of activity. The decision relied on by the assessee's representative was sought to be distinguished on facts.
6. In order that the assessee is to escape the liability from additional wealth-tax, it is necessary for the assessee to establish that the assets in question constitute 'business premises' as defined in Rule 1(i), extracted above. The assessee has to show that the land was used throughout the previous year for the purpose of his business or profession. It is in this context, the assessee's representative has attempted to show that agriculture is business and by carrying on agricultural operations in the land the assessee must be deemed to have used the land for his business. The assessee is no doubt supported by the decision of the Punjab and Haryana High Court in the submission that agricultural operations involve carrying on systematic entrepreneurial activity with the help of capital and labour with a view to earn profits and the element of risk not being absent from such operations, agricultural operations will fall within the category of business. In that case the Court held that where agricultural operations are carried on in urban land, the land would fall within the definition of the expression 'business premises' as provided in Rule 1(i) of the Rate Schedule. The Tribunal in the case of Mrs. Sara Varghese (supra) only followed the ratio of this decision in holding that rubber plantation is a business activity. As rightly pointed out for the revenue, the decision of the Punjab and Haryana High Court is distinguishable.
7. The assessee's land in question was notified by the Greater Cochin Development Authority for development and a part of the Kaloor property was compulsorily acquired in 1974. There is no controversy that the assessee, since growing coconut trees in the land before such notification, of late had not undertaken any replantation. It appears that the assessee had carried on the basic agricultural operations and continued to use the land for agricultural purposes during the relevant accounting years. The income derived from the land by agricultural operations on it is agricultural income and not profits or gains of business or profession. Agricultural income is defined in the Income-tax Act, 1961 ('the 1961 Act') and is exempt from assessment under that Act. Agriculture is not thus an activity capable of producing a profit which can be taxed in the hands of the owner of the land as profits or gains of business or profession. The term 'business'in the context of Rule 1 in Para B of Part I of the Rate Schedule means any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, as defined in Section 2(13) of the 1961 Act. This is clear from the phraseology used in the definition of 'business premises' in Rule 1(i) and Rule (ii) defining 'previous year' in relation to a business or profession as the period which would be the previous year if an assessment of the profits and gains of such business or profession was to be made under the 1961 Act for the assessment year. Therefore, we are of the opinion that urban land to be treated as business premises for the purpose of Part I must be land used for such activity that the profits and gains derived therefrom are capable of being assessed as profits and gains of business or profession. The activity for which the land is used by the owner during the previous year should have been capable of producing profits taxable as business profits in order that the land could be classified as business premises for the purpose of exclusion from the levy of additional wealth-tax.
8. The definition of the term 'business' in Section 2(13) being inclusive and not exhaustive is indicative of extension and expansion.
The word 'business' is one of large and indefinite import and connotes something which occupies time, attention and labour of a person normally with the object of making profit. It denotes continuous and systematic exercise of an occupation or profession with the object of making income or profit. The Supreme Court in the case of Narain Swadeshi Wvg. Mills v. CEPT [1954] 26 ITR 765 has observed that the word 'business' connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose. The activity organised on normally accepted commercial lines constitute the essence of any business. In short, 'business' is an activity capable of producing a profit which can be taxed. Agricultural operations on land is not such an activity capable of producing a profit which can be taxed as business profits. The income derived as a result of agricultural operations carried on by the owner of the land is the income derived from the land, i.e., springing from the land or arising from the land and not income from any business activity thereon. By carrying on the agricultural operations, the owner is only enjoying the land and not using the same for business premises in the same way as a businessman exploiting a business asset. In order to grow a coconut garden, one has to do various basic operations on the land. Firstly, he shall have to dig pits in the soil at regular intervals, fill them up with fresh soil mixed with manure, plant the seedlings or saplings in each of the pits, stamp the earth round about the stem of the sprouts and generally do all such things as may be necessary to make the coconut seeds or saplings sprout above the surface. These are all primary or basic operations on the land itself and will have to be done for a sufficiently long period till the saplings establish themselves.
Subsequent operations have to be resorted to for the efficient production of the crop such as weeding, tending, pruning, cutting, preservation of the crop from insects and pests and from depredation by cattle. Such basic and subsequent operations are the integrated activities of the agriculturists to derive the income from the land.
The income yielded in the hands of the owner is only agricultural income and is not business income. It cannot, therefore, be said that even if agricultural operations by the assessee are systematic or organised, it would, amount to use of the land for the purpose of the business of the assessee.
9. The Punjab and Haryana High Court in Hari Singh's case (supra), in holding that agricultural operations fall within the category of business, has not noticed the implications of Sub-rule (ii). The Tribunal in following the said decision has also failed to notice this provision. That judgment must be read as applicable to the particular facts of that case. With respect, therefore, we are unable to follow the decision as authority for the proposition that the owner of agricultural land by carrying out the agricultural operations is using the land for purpose of business. We hold that agricultural land even if used for systematic and organised agricultural operations would not constitute business premises For the purpose of Para A of Part I of the Rate Schedule. In this view, we hold that the assessee is not entitled to the exemption claimed from the levy of additional wealth-tax in respect of the assessee's urban land. The appeals filed by the assessee are, therefore, to be dismissed.
11. In the result, all the appeals and the cross-objections are dismissed.