Income from Grass Growing Deemed Agricultural; Remand for Income Bifurcation

The Tribunal determined that income from growing and harvesting grass was agricultural, while income from subsequent activities was business income. The case was remanded for verification and computation of agricultural income based on this distinction. The assessee was directed to provide a detailed income bifurcation. The appeal was partly allowed, with the primary grounds rejected and an alternate ground accepted. The order was pronounced on 29th December 2017.

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Issues Involved:
1. Nature of the activity carried out by the assessee (agricultural vs. business).
2. Treatment of income derived from the activity (agricultural income vs. business income).
3. Bifurcation of activities into agricultural and non-agricultural components.

Detailed Analysis:

1. Nature of the Activity Carried Out by the Assessee:
The primary issue was whether the activities carried out by the assessee, which involved growing and laying turf grass for the Commonwealth Games (CWG) 2010, constituted agricultural activities. The assessee argued that the entire process, including growing grass on leased agricultural land and subsequent operations, was agricultural. The Assessing Officer (AO) and CIT (A) contended that only the initial growing of grass was agricultural, while the subsequent operations (cutting, bundling, transporting, and laying the turf) were specialized business activities.

2. Treatment of Income Derived from the Activity:
The AO treated the entire income from the CWG contract as business income, arguing that the activities beyond growing the grass did not constitute agricultural operations. The assessee claimed the income as agricultural, citing various judicial precedents. The Tribunal examined the contract terms, including the requirements to grow, deliver, and maintain the grass turf, and the payment structure. It concluded that the growing of grass till harvesting was agricultural, but the subsequent activities were not.

3. Bifurcation of Activities into Agricultural and Non-Agricultural Components:
The Tribunal determined that the activities could be bifurcated. It held that the operations up to the harvesting of grass on agricultural land were agricultural activities, while the subsequent activities (transporting, laying, and maintaining the turf) were service-oriented and non-agricultural. The Tribunal referenced several judicial decisions to support this bifurcation, including CIT vs. Raja Binay Kumar Sahas Roy and CIT vs. Soundarya Nursery, which clarified the scope of agricultural activities.

Conclusion:
The Tribunal concluded that the income from the growing and harvesting of grass should be treated as agricultural income, while the income from subsequent activities should be treated as business income. The case was remanded to the AO for verification of the documents and computation of agricultural income based on the bifurcation. The assessee was directed to provide a detailed bifurcation of income from agricultural and non-agricultural activities. The appeal was partly allowed, with the alternate ground of appeal being accepted and the primary grounds being rejected.

Order Pronouncement:
The order was pronounced in the Open Court on 29th December, 2017.

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