2015 (6) TMI 1187 - HC - Income Tax

Income from sale of breeder seeds classified as agricultural despite scientific process

The court upheld the classification of income from the sale of breeder and foundation seeds as agricultural income, despite the controlled and scientific ... Agricultural income - income from sale of breeder and foundation seeds - HELD THAT:- It is not denied that for growing breeder and foundation seeds, seeds are sown in field and usual agricultural operations, basic and subsequent, are undertaken utilizing human skill. In addition to this, measures are taken for restricting role of nature. Such measures are only taken in enhancing the yield. Such measures, thus, have nothing to do with the biological growth that takes place in the soil or such other substratum where the seeds are sown. An agriculturist while growing his crops, is known to have used conventional as well as scientific method for reducing hostile interplay of natural forces on his crop. When such activity is taken to highest standard, it would still not make the growing operation a synthetic one. Thus, growing seeds can never be non-agricultural. In view of this, we do not see any substantial question of law in these appeals. Issues Involved:Challenge to classification of income from sale of breeder and foundation seeds as agricultural income.Analysis:The judgment involves a challenge to the classification of income from the sale of breeder and foundation seeds as agricultural income. The Assessing Officer contended that growing such seeds did not constitute agricultural activity as it involved a high level of scientific intervention and control over natural forces. However, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal held in favor of the respondent, considering the process of growing breeder and foundation seeds as agricultural activity. The key issue revolved around whether the controlled and scientific process of growing these seeds could still be considered agricultural activity.The appellant argued that the lower authorities' decision was erroneous and relied on a judgment by the Income Tax Appellate Tribunal in a different case. The appellant claimed that this judgment had been overturned by the Karnataka High Court in another case, suggesting a substantial question of law. However, the court rejected this argument, stating that the appellant's case was primarily based on a specific paragraph in the Assessing Officer's order and was not directly related to the judgment cited by the appellant. The court emphasized that the focus should be on whether growing breeder and foundation seeds constituted agricultural activity rather than on the cited judgment.The court analyzed the nature of growing breeder and foundation seeds, acknowledging the need for scientific expertise and control over natural forces in the process. Despite the controlled conditions, the court concluded that the act of growing these seeds involved traditional agricultural practices like sowing seeds in the field and undertaking agricultural operations. The court emphasized that the measures taken to enhance yield did not alter the fundamental agricultural nature of the activity. Therefore, the court affirmed that growing such seeds should be classified as agricultural activity, rejecting the appellant's argument that it should be considered nonagricultural due to the level of control and scientific intervention involved.In conclusion, the court dismissed the appeals, upholding the classification of income from the sale of breeder and foundation seeds as agricultural income. The judgment clarified that the controlled and scientific process of growing these seeds did not negate the agricultural nature of the activity, emphasizing the traditional agricultural practices involved in the process.