AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 901
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....llate Tribunal in ITA No. 1501/Ahd/1997 for the assessment year 1991-92 which was admitted by this Court for consideration of the following substantial question of law: "Whether on the facts and in the circumstances of the case, the income was agricultural income as defined in section 2(1A) and therefore exempt u/s 10(1) of the I.T. Act, 1961?" 1.2 Since the assessee as well as question of law raised in the reference as well as the appeal are the same, the matters were ordered to be heard together by this Court. 2. The assessee - an HUF firm had filed return of income for the years in question claiming the entire income to be exempted u/s 10(1) of the Act on the ground that the said income was earned from the agricultural nurseries at Baroda in the name and style of M/s. Roses Garden and that the said income therefore represented agricultural income. 2.1 So far as Tax Reference No. 40 of 2000 is concerned, the Assessing Officer treated the agricultural land and the income therefrom as belonging to an Association of Persons of the members of the family of Shri Puransingh M. Verma with indeterminate shares and t....
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....o have been considered as agricultural income: (a) Commissioner of Income-Tax vs. Green Gold Tree Farmers P. Ltd. reported in [2008] 299 ITR 262 (Uttarakhand); (b) A.T. Parthasarathiah & Bros. vs. Commissioner of Income Tax, Mysore reported in [1963] 48 ITR 830 (Mysore); (c ) Commissioner of Income Tax vs. Saundarya Nursery reported in [2000] 241 ITR 530 (Madras); (d) Commissioner of Income-Tax, West Bengal vs. Raja Benoy Kumar Sahas Roy reported in [1957] 32 ITR 466 (SC). 4. Mr. Varun Patel, learned advocate appearing for the revenue in Tax Appeal No. 24 of 2003 submitted that in view of the amendment which is sought to be made by amending act and Explanation 3 which was added with effect from 01.04.2009 clearly indicates that prior thereto such incomes were not included as agricultural income and nursery is not an agricultural produce. 5. Mr. Nitin Mehta, learned advocate appearing for the revenue in Tax Reference No. 40 of 2000 supported the impugned orders passed by the Tribunal and submitted that the same having been passed in accordance with law does not call for any interference by this Court. 5.1 In support of their submissions, the following decisions hav....
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....itself in Art. 366(1) to mean agricultural income as defined for the purposes of enactments relating to Indian income tax and there is a definition of " agricultural income " to be found in s. 2(1) of the Indian Income-tax Act. We have therefore got to look to the terms of the definition itself and construe the same regardless of any other consideration, though, in so far as the terms " agriculture " and " agricultural purposes " are concerned, we feel free in view of the same not having been defined in the Act itself, to consider the various meanings which have been ascribed to the same in the legal and other dictionaries. We may also note here the dictionary meanings of the terms "Forestry" and "Cultivation." The Shorter Oxford Dictionary, Vol.1, page 735, gives the meaning of "forestry" as the "science and art of forming and cultivating forests, management of growing timber." Webster's New International Dictionary, Vol. 1, page 990, gives the following meaning of forestry: " Science and art of farming, caring for, or cultivating forests; the management of growing timber." Webster....
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....ther operations either by themselves or in conjunction with the former which of course necessarily involved the expenditure of human skill and labour in carrying out those operations, there were instances of products of land which grew wild or were of spontaneous growth without the expenditure of human skill and labour and which it was agreed on all hands could not be comprised within "agriculture" and the income from which could not fall within the definition of "agricultural income". We shall briefly discuss the various cases dealing with these different aspects and try to evolve some principle therefrom which would serve as a guide in the determination of the question before us. A critical examination of the definition of "agricultural income" as given in s. 2(1) of the Indian Income tax Act and the relevant provisions of the several Agricultural Income- tax Acts of the various States also lends support to this position. In the first instance, it is defined as rent or revenue derived from land which is used for agricultural purposes; and it is next defined as income derived from such land by agriculture or by the activities described in cls. 2 and 3 of s. 2(1)(b) of the Act. ....
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....kill and labour, and human skill and labour are spent merely in fostering the growth, preservation and regeneration of such products of land, the question falls to be considered whether these subsequent operations performed by the agriculturist are agricultural operations and enjoy the characteristic of agricultural operations. " [Emphasis Supplied] 6.2 In the case of Green Gold Tree Farmers P. Ltd. (supra), similar case wherein the assessee also used to carry on nursery business came up for consideration before the Uttarakhand High Court. The Uttarakhand High Court relying upon the decision of the Apex Court in the case of Raja Benoy Kumar Sahas Roy (supra) held that sale proceeds of the land belonging to the assessee constituted income from agriculture and hence should be exempted from tax under the Act. The relevant paragraphs are quoted as under: The terms "agriculture" and "agricultural purposes" not having been defined in the Indian Income-tax Act, but necessarily fall back upon the general sense in which they have been understood in common parlance. "Agriculture" in its root sense, means a gear, a field and cultivate, cultivation of field which of course implies exp....
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....y Kumar Sahas Roy , has held that: "the term 'agriculture' cannot be confined merely to the production of grain and food products for human beings and beasts but, must be understood as comprising all the products of the land which have some utility either for consumption or for trade and commerce and would also include forest products such as timber, sal and piyasal trees, casuarina plantations, tendu leaves, horranuts, etc. " Therefore, on the facts of the case, as well as on the basis of the judicial pronouncements detailed above, we have no hesitation in holding that the sale proceeds of the land belonging to the assessee constitute income from agriculture, hence exempt from tax under the Income-tax Act. We do not find any good ground to interfere with the findings recorded by the Income-tax Appellate Tribunal. The question of law framed in this reference is answered against the Revenue Department and in favour of the assessee. 6.3 In the case of A. T. Parthasarathiah & Bros. (supra), the Mysore High Court has held as under: I4. We have now to see which of these contentions is correct. Section 2(1)(b)(ii) reads : &....
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....f the definition. That clause, in our opinion, cannot be applied to the case before us. The manufacture of tea as a marketable commodity from the green leaves cannot be held to be the performance by a cultivator of a process ordinarily employed by a cultivator to render the produce raised by him fit to be taken to market. The assertion of the company that the actual leaf of the tea plant is of no value as a marketable commodity must be taken with a qualification. The green leaf is not a marketable commodity for immediate use as an article of food, but is a marketable commodity to be manufactured by people who process the requisite machinery into tea fit for human consumption. We must further observe in view of the expression used in the definition, that the manufacturing process cannot properly be said to be employed to render the tea leaves fit to be taken into the market. The means employed for the cultivation and manufacture of tea are well known and are succinctly stated in an article on tea by Mr. John McEwan in volume 26 of the eleventh edition of the Encyclopedia Britannica; they are described in fuller detail in the standard works on cultivation and manufacture of tea by Li....
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....veral operations, such as weeding, watering, manuring, etc., they are made ready for sale as plants all these questions would be agricultural operations all this involves human skill and effort. Thus, the plants sold by the assessee in pots were the result of primary as well as subsequent operations comprehended within the term "agriculture" and they are clearly the products of agriculture. So far as the seeds are concerned, we are surprised that, that question should have been raised at all by the Revenue, as it is not possible for the seeds to exist without the mother plants, and the mother plant, it is nobody's case, was not grown on land. It is also not the case of the Revenue that the seeds were the result of the wild growth and not on account of cultivation by the assessee. The seeds were clearly a product of agriculture and the income derived from the sale of seeds, was agricultural income." 7. We have also gone through the decisions cited by learned advocates for the respondents. In the case of Namdhari seeds (supra) the Karnataka High Court has held that the assessee neither had derivative interest in the land nor did it actually cultivate the land and that the enti....
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....treated the income from the nursery as income from a business. It is only clear that the materials before the agricultural income-tax authorities in the case before us were wholly insufficient to justify the conclusion that the income from the nursery was agricultural income. No facts which would give rise to an inference that there was a nursery were discussed. Perhaps the income-tax authorities went into the matter in more satisfactory manner before they determined the income from the nursery to be income from a business. However, we have not even got any order or judgment of the income-tax authorities before us. All we can say with certainty is that the materials before the agricultural income-tax authorities could not justify the conclusion that the income from the nursery in this case constituted agricultural income. " 8. Considering the decisions cited hereinabove, we come to the conclusion that a careful reading of the above clearly shows that unless the assessee has carried out the basic operations upon the land i.e., tilling of the land, sowing of the seeds planting, etc. requiring the expenditure of human skill and labour upon the land, it cannot be said that the incom....