Nursery income as agricultural income was upheld, confirming exemption for cultivation-based plant business receipts.

Income derived from a nursery and plant business was treated as agricultural income because the activity involved cultivation and allied operations on land, bringing it within the statutory concept under the Income-tax Act, 1961. The Court preferred the approach in Soundarya Nursery over a narrow distinction between basic and subsequent agricultural operations, and held that nursery-grown plants and saplings constitute agricultural produce on these facts. Explanation 3 to section 2(1A), deeming income from saplings or seedlings grown in a nursery as agricultural income, was also regarded as supportive of the assessee's case for the relevant assessment year. The income was therefore exempt under section 10(1), and the Revenue's challenge failed.

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Issues: Whether income derived from the assessee's nursery and plant business was agricultural income exempt under section 10(1) of the Income-tax Act, 1961, and whether Explanation 3 to section 2(1A), inserted by the Finance Act, 2008, applied only from assessment year 2009-10 onwards.

Analysis: The assessee was found to be carrying on nursery-related activity involving cultivation and allied operations on land. The authorities below had accepted that the income from nursery fell within the statutory concept of agricultural income. The Court noted that the doctrine in Raja Benoy Kumar Sahas Roy distinguishes basic agricultural operations from mere subsequent operations, but held that the present case was governed by the reasoning in Soundarya Nursery, where plants and nursery products grown through cultivation on land were treated as agricultural produce. The Court further held that Explanation 3 to section 2(1A), which deems income from saplings or seedlings grown in a nursery to be agricultural income, supports the assessee's case for the relevant assessment year.

Conclusion: The income from the nursery was held to be agricultural income and therefore exempt under section 10(1); the Revenue's challenge failed, and the answer was against the Revenue.

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