Nursery income from saplings and seedlings qualifies as agricultural income, subject to limited verification of disputed sale details.

Income derived from saplings or seedlings grown in a nursery falls within agricultural income under Explanation 3 to section 2(1A) and is exempt under section 10(1) of the Income-tax Act. The Tribunal noted supporting records such as land details, sale registers and bank statements, and also referred to prior years' acceptance of the same income treatment. However, because certain sale particulars were incomplete, including address, dates, mode of supply and consideration details, limited verification of the disputed sales was required. The matter was therefore remanded to the Assessing Officer only for that narrow verification, while the income's agricultural character was recognized on the stated reasoning.

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Issues: Whether the income from sale of nursery plants, saplings and seedlings was agricultural income exempt under section 10(1) read with Explanation 3 to section 2(1A) of the Income-tax Act, 1961, and whether the addition as income from other sources could be sustained without a fresh verification of the supporting sale details.

Analysis: The assessee claimed that its receipts arose from agricultural operations connected with nursery activity, and the record showed production of land ownership details, sale register, bank statements and other supporting material. Explanation 3 to section 2(1A) treats income derived from saplings or seedlings grown in a nursery as agricultural income, and such income falls within the exemption under section 10(1). The Tribunal also noted that the same line of income had been accepted in earlier assessment years, which supported consistency in treatment. At the same time, the lower authorities had recorded a deficiency in the particulars relating to certain sales, including complete address, dates, mode of supply and consideration details, making limited verification necessary.

Conclusion: The receipt was held to be capable of qualifying as agricultural income and not taxable as income from other sources on the existing reasoning, but the matter was remanded to the Assessing Officer for limited verification of the disputed sale details.

Ratio Decidendi: Income derived from saplings or seedlings grown in a nursery is agricultural income under Explanation 3 to section 2(1A) and is exempt under section 10(1), though a limited remand may be ordered where specific sale particulars require verification.

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