INCOME TAX
INSTRUCTION NO. 5160/1993
Dated: October 19, 1993
Section(s) Referred: 143(1)(a) ,143(3)
Statute: Income - Tax Act, 1961
Recently 32 members of the Parliament submitted a Memorandum to the Hon'ble Prime Minister wherein they have stated that a large number of rice cultivators in Andhra Pradesh have converted their paddy fields into fish tanks and Income tax officials are taking action against those fish farmers who have not filed income tax returns and who have not paid tax properly.
On 30th August, 1993, I visited Bhimavaram in West Godawari District and ascertained the views of several fish farmers, some Members of the Parliament, some MLAs, officials of the Fisheries Department and Income tax officials.
I also consulted the Fisheries Development Commissioner, Shri. K.M. Joseph, Department of Agriculture and Cooperation, Ministry of Agriculture, New Delhi.
A large number of fish farmers are under the wrong impression that fish farming constitutes "agriculture" and is, therefore, exempt from taxation.
Several fish farmers are illiterate or semi-literate and a large number of them are facing the Income-tax Department for the first time in their lives.
To persuade them to voluntarily comply with the Income-tax law, the Finance Ministry has decided to accept the income returned by fish farmers if such income is Rs. 4,000 per acre of water-spread per year. The water spread may be estimated at 70% of the total land area. The remaining 30% will represent the area occupied by the tank embankments. Consequently, the fish farmer with a water area of 7.5 acres (i.e. total gross land area of 10.7 acres) will be below the tax limit.
If a fish farmer discloses income according to this estimate, no survey or search should be conducted.
Of course, where a fish farmer maintains regular accounts then any income or any loss resulting from this business should be computed in accordance with such accounts.
These instruction will apply for the present assessment year 93-94.
The above estimates apply only to inland fresh water fish tanks but not to prawn tanks.
Fish farmers have to file returns in the normal course like other businessmen and this instruction only estimates the income from business in cases where accounts are not maintained.
Please communicate this decision of the Ministry to all your subordinate officers in A.P.
COPY OF THE BOARD's LETTER F.NO. 225/222/93-ITA.II dt. 9-11-93.
Please refer your D.O. letter No. CCIT/Tech/dt. 27-10-93 regarding the estimation of income of fish farmers in A.P. Clarifications on the points raised by you are as under:
i) Board's letter D.O.No. 225/222/93-ITA.II (wrongly communicated from ITA.I(Section) applies only to pond-fish farms located in A.P. If the persons owning such farms are assessed elsewhere, they may take the benefit of the Board's letter in respect of the income from fish farming;
ii) It has been made clear in the Board's letter that income arising from fish farming does not constitute agricultural income and is therefore not exempt from taxation. Hence there could be no objection to the application of the Board's letter in cases where no accounts had been maintained even in respect of past assessments;
iii) The Board's letter will also apply in cases of farmers who had converted fields other than paddy fields into fish tanks. It will also apply to inland fish farming carried out in saline water tanks. The exception is only with reference to prawn farming done either in saline water or sweet water;
iv) In respect of assessees who are engaged in activities other than fish farming there is no ban on survey or search operations if there is adequate information reg. information in respect of such other activities. What was sought to be conveyed through the Board's letter is that no search or survey operation needs to be undertaken to merely estimate income from fish farming.
v) The Board's letter specifies only a method of estimation of income from a particular source under the Head 'Profit & Gains of business or profession'. The set off of loss from any other source under the same head or under any other head shall be governed by the relevant provisions of the Act.
vi) If it can be found that any particular assessee has only a prawn tank and not a fish tank the benefit of the Board's circular need not be extended to such an assessee.
F.No. 225/222/93-ITA.II.