TaxTMI 
TaxTMI 
2010 (6) TMI 673
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....4 of the Income-tax (Appellate Tribunal) Rules, 1963, the hon'ble President, Income-tax Appellate Tribunal, transferred the case file from Hyderabad Bench to Bangalore Bench in the light of the appropriate petition filed before his honour. This is how the matter has been placed before us. The assessee is a company engaged in the business of production and sale of hybrid seeds. The company is engaged in the research, development, processing and marketing of hybrid seeds. The assessee-company carried out studies and researches to find out the most suitable genetic composition of seeds in the respective local environment. The assessee procures germplasm prototype of the hybrid seeds from laboratories for employing the same in its subsequent....
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..... But in the note enclosed to the computation of income, the assessee has further stated that the company reserves the right to contend at the time of hearing that the entire income of the company is fully exempt since it is agricultural income as per the Income-tax Act. The Assessing Officer relying on the decision of the Income-tax Appellate Tribunal, Delhi in the case of Proagro Seeds Co. Ltd., v. Joint CIT in I.T. A. No. 90/Del/2000, dated November 11, 2002, noticed the assessee on why the claim for partial deduction should not be denied. The assessee replied that the entire income was in the nature of agricultural income and relied on the judgment of the hon'ble Supreme Court rendered in the case of CIT v. Raja Benoy Kumar Sahas Roy....
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.... An exactly similar issue was considered by the Income-tax Appellate Tribunal, "B" Bench of Bangalore in the cases of Indo American Exports and Namdhari Seeds Pvt. Ltd., in their common order dated July 14, 2006, passed in I. T. A. No. 1040/Bang/2002 and I. T. A. No. 3102/Bang/2004. After considering the facts and rival contentions in detail, the Tribunal held as follows : "5.4. After hearing both the sides, we are of the view that the only question to be decided by the Tribunal is as to whether the seeds produced by the assessee and sold in market generates agricultural income or is it a business income. The provision of section 2(1A) of the Income-tax Act is quoted below : `(1A) "agricultural income" means : (a) any rent or revenue ....
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....ituated-' It may be appreciated that agricultural income includes any rent or revenue derived from the land which is used for agricultural purposes. The issue is whether the revenue derived from such land by the assessee is agricultural income or not. For the purpose of deriving income from agricultural land there is no necessity that such land should be owned by the assessee. If the assessee has derivative interest in the land for the purpose of conducting agricultural operations on the said land, then the revenue generated from such land would be agricultural income. This has been so held by the hon'ble Madras High Court in [1951] 20 ITR 151 (CIT v. Maddi Venkatasubbayya). Here it may be appreciated that the assessee entered into a lea....
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....nataka that the assessing authority has held that as per the Land Reforms Act the assessee is not entitled to the benefit of exemption under section 2(1A) of the Act. The bar levied by the Karnataka Land Reforms Act would no more hold good in so far as the Government of Karnataka has granted certificate to the assessee for production and distribution of the specified hybrid seeds and plants. Here it may also be appreciated that the nexus between the income claimed by the assessee as not includible in the total income and the agricultural operations conducted by the assessee and the lands from which the income as so generated have not been disputed by the Revenue. The immediate source of the income is the agricultural operations conducted by....
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....rations, subsequent operations must necessarily be taken in conjunction with and in continuation of the basic operations which are the effective cost of the produce being raised from the land. If we examine the operations carried out by the assessee in the previous year relevant to the assessment year in appeal, we find that the production of basic seeds as well as hybrid seeds are the results of basic agricultural operations carried on by the assessee-company in its own land as well as in leasehold land. The method of contract farming does not take away the character of the basic operations carried out by the assessee-company which are agricultural in nature. The assessee-company procures germplasm and sows it in its own fields, and car....