Nursery contract receipts from site-based maintenance and allied services were held outside agricultural income treatment.

Income derived from saplings or seedlings grown in a nursery is treated as agricultural income under the Income-tax Act. However, receipts from composite nursery contracts executed at a client's site, including site preparation, soil, fertilizer, manpower, insurance, pit making and post-planting maintenance, were found to be commercial or maintenance activity rather than agricultural operations on the assessee's land. Only the portion attributable to saplings or seedlings grown in the assessee's own nursery qualified for agricultural income treatment; the balance was not eligible for exemption.

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Issues: Whether income arising from composite nursery contracts, including supply of plants along with site preparation, soil, fertilizer, manpower, insurance, pit making and related activities, constituted agricultural income eligible for exemption.

Analysis: Section 2(1A) of the Income-tax Act deems income derived from saplings or seedlings grown in a nursery to be agricultural income, but the wider concept of agriculture requires basic operations on land and, where relevant, subsequent operations in continuation of those basic operations. The receipts in question were found to arise not merely from sale of saplings grown in the assessee's nursery but from composite work executed at the client's site. The activities after planting were in the nature of maintenance and site-based services, not agricultural operations carried out in conjunction with the basic operations on the assessee's land. The authority relied on the distinction between agriculture and ancillary commercial or maintenance activity.

Conclusion: The income attributable to activities other than sale of saplings and seedlings grown in the assessee's own nursery was not agricultural income and was not eligible for exemption.

Ratio Decidendi: Only income derived from saplings or seedlings grown in the assessee's nursery qualifies as agricultural income; composite site-based contracts involving maintenance and allied services do not fall within the statutory definition.

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