Agricultural income treatment for tissue culture operations depends on land-based cultivation and proper factual verification.

Income from tissue culture and ornamental plant cultivation was examined under Section 2(1A) of the Income-tax Act, 1961, which requires derivation from land used for agricultural purposes. The text distinguishes agricultural operations carried out on land, such as sowing and cultivation, from tissue culture activities performed in laboratory conditions, which do not by themselves constitute agricultural operations. It also notes that the existing 70:30 or 90:10 apportionment lacked a reliable evidentiary basis. A field inspection was directed to verify the actual nature of the activities and to determine whether the income qualified for full agricultural exemption or required bifurcation between agricultural and non-agricultural components.

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Issues: Whether income from tissue culture operations and cultivation of ornamental plants constituted agricultural income in full, and whether the income required bifurcation between agricultural and non-agricultural components.

Analysis: Agricultural income under Section 2(1A) of the Income-tax Act, 1961 requires income to be derived from land used for agricultural purposes. The reasoning distinguished between operations carried out on land, including sowing and cultivation, and tissue culture activities conducted in laboratory conditions, which do not by themselves amount to agricultural operations. At the same time, the record did not establish any reliable basis for the 70:30 or 90:10 apportionment adopted earlier, and the affidavit asserting that no laboratory operations were carried on required verification. A field inspection was therefore directed to ascertain the actual nature of the assessee's activities and to determine the proper apportionment, if any, on the basis of expenditure and operations actually carried out.

Conclusion: The matter was remitted to the Assessing Officer for field inspection and fresh determination of the agricultural and non-agricultural components, with full exemption available only if the activities were found to be carried on in land as claimed; otherwise, income was to be bifurcated appropriately.

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