Hybrid seed production treated as agricultural activity, preserving exemption where basic farm operations predominate.

Production of hybrid seeds through farmers' fields was treated as agricultural activity because it involved sowing, weeding, irrigation, inter-cultivation and other basic agricultural operations. Commercial sale of the seeds did not change the character of the underlying activity, and the jurisdictional precedent recognising seed production as agricultural was followed. On that basis, exemption under section 10(1) of the Income-tax Act was considered allowable, and the Revenue's attempt to classify the activity as purely commercial was rejected.

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Issues: Whether the assessee's activity of producing hybrid seeds through farmers' fields constituted agricultural activity eligible for exemption under section 10(1) of the Income-tax Act, 1961.

Analysis: The assessee's operations included sowing, weeding, irrigation, inter-cultivation and other basic agricultural processes in the production of seeds. The issue had already been examined in the assessee's own case and in similar cases concerning seed production entities, where the activity was held to be agricultural in nature. The fact that the seeds were ultimately sold commercially did not alter the character of the basic agricultural operations. The binding jurisdictional precedent recognising seed as a product of agricultural activity was followed, and the Revenue's attempt to characterise the activity as purely commercial was rejected.

Conclusion: The claim for exemption under section 10(1) was held allowable and the Revenue's challenge failed.

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