TaxTMI 
TaxTMI 
2015 (9) TMI 794
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....g Officer was of the view that in view of the provisions of sec.2(1A) of the I. T. Act, unless an assessee carries out the basis operations upon the land i.e. tilling of the land, sowing of seeds, planting etc., requiring exploitation of human skill and labour upon the land, it cannot be said that the income earned by the assessee was agricultural income. According to him, the subsequent operations to the above operations carried out would also be agricultural activities only if taken in conjunction with the basic operations but the subsequent operations by themselves cannot be considered as agricultural operations and therefore, any income derived from carrying on only such subsequent operations without carrying the basic operations could not be treated as agricultural income. The Assessing Officer further noted that in the case of the assessee, the assessee was not carrying on any basic agricultural operations on the land but was engaged in the business of production of tissue culture of banana and other plants which involved indoor activities in controlled and artificial atmosphere and surrounding. The Assessing Officer pointed out that even the partnership deed of the assessee ....
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....e decision that in order to be termed as agricultural activities; there must be involvement of the basic agricultural operations as described above, In the present case, the Assessing Officer while concluding that the income derived by the appellant was not in the nature of agricultural income, has held that the appellant was not carrying out any basic operations on the land but it its activity was confined to production of tissue culture of banana and other plants involving indoor activities in controlled and artificial: atmosphere, Therefore, what we have to examine is whether the basic agricultural operations are carried out by the appellant in preparation of the saplings/seedlings as being claimed. 5.1 The various stages that are involved in tissue culture carried out by the appellant are stated to be as under:- a. First Step: After sowing the seeds of various plants, production of small mother plants, selecting appropriate plant and keeping them disease free. b. Second Step: Isolation of biological parts of plant to enable these parts to have uncontaminated and disease free development. c. Third Step: This step covers actual tissue culture where many plants can be ....
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....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. The Hon'ble High Court in the above mentioned case held that income from sale of plants grown in pot can also be considered to be agricultural income if such plants were the result of the basic operations on the land on expending human skill and labour thereon. In the present case also, as noted hereinabove, the primary source of the plant grown in soil-filled bags in green house is the mother plant which is reared on earth involving the basic operations. Similar view has been taken by the ITAT, Pune in the case of KF Bioplants Pvt. Ltd in ITA No.146/PN/08 for the A.Y. 2004-05. In the said case, the ITAT held that since the activities carried out by the assessee involved basic agricultural operations, income from sale of plants, even if grown through a tissue culture laboratory/green house, would constitute agricultural income. 5.4 The Id. A.R. for the appellant also drew attention to the Expl....
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....ged at the time of the hearing, the order of the Commissioner of Income-tax (Appeals) may be vacated and that of the Assessing Officer be restored. 6. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal during the course of the appellate proceedings before the ITAT." 5. The Ld. Departmental Representative heavily relied on the order of the AO. Referring to the decision of the Hon'ble Allahabad High Court in the case of H.H. Maharaja Vibhuti Narain Singh Vs. State of Uttar Pradesh reported in 65 ITR 364 he submitted that the Hon'ble High Court in the said decision has held that even if the keeping of a nursery necessarily involves the use of some land and earth for the purposes of rearing plants, that would not by itself amount to carrying on of a primary agriculture operation in the sense of cultivating the soil. He submitted that unless an assessee carries out the basic operations upon the land, i.e. tilling of the land, sowing of seeds, planting etc. requiring exploitation of human skill and labour upon the land, it cannot be said that the income earned by the assessee was agriculture income. He also relied on the decision of the Coo....
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....n the business of production of nursery plants and banana plants and claimed the income from such activity as agriculture income which is exempt from income-tax. We find the AO declined such income as agriculture income on the ground that unless the assessee carries out the basic operations upon the land, i.e. tilling of the land, sowing of seeds, planting etc., requiring the exploitation of human skill and labour upon the land, it cannot be said that the income earned by the assessee is agricultural income. Since in the present case according to the AO the assessee is not carrying out any basic operations on the land as the nature of activity itself of the farm is to produce tissueculture of banana and other plants, the AO rejected the claim of the assessee that the income is agricultural income. He accordingly brought the same to tax as business income. We find the Ld. CIT(A) following the decision of Hon'ble Madras High Court in the case of Soundarya Nursery (Supra), decision of the Pune Bench of the Tribunal in the case of K.F. Bioplant Pvt. Ltd.(Supra) and the Explanation (3) to section 2(1A) of the Finance Act, 2008 held that the asessee's activities involved basic agricultur....
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....e Tribunal in the case of the assessee for A.Y. 2004-05 (supra) are being reproduced hereunder for a ready reference: "33. In our considered view, therefore, the operations carried out on the facts of the case before us are agricultural operations in nature. The objections taken by the authorities below are devoid of any legally sustainable merits/, Applying the ratio of the Hon'ble Supreme Court's judgment in the case of Raja Benoy Kumar Sa has Roy (supra), the income from these operations has to be treated as agricultural income. 34. We would also like to deal with Hon'ble Madras High Court's judgment in the case of CIT Vs. Soundarya Nursery (supra) at this stage. As far as the facts of the case were concerned, Their Lordships, inter alia, noted as follows: The Tribunal, after considering all the relevant facts, as also the applicable law, concluded that the assessee's activities are to prepare seedlings on scientific lines: that the other plants are grown on prepared beds on lands owned by it and the plants are then grafted or budded; that' the resulting grafts are transplanted in suitable containers and are reared in green houses or in shade and....
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....er the growth and to protect the produce, we find that the income from these operations can only be said to be agricultural income. Their Lordships were also dealing with a situation in which operations were carried on in a greenhouse. Therefore, merely because a greenhouse in involved, the nature of operations would not change. Learned CIT(A) has distinguished this precedent on the ground that in assessee's case, basic operations have not been carried out on land. That premises itself, for the detailed reasons set out earlier in this order, rests on a unsustainable legal foundation. The basic operations have been, and can only be, carried out on the land. The fact that this land is in a greenhouse does not change the character of operations. The distinction was thus wrongly made out by the CIT(A), in our considered view, the principles laid down by the Hon'ble Madras High Court's judgment in the case of Soundaraya Nursery (supra) apply to the facts of the case before us as well. 38. We may also refer to Hon'ble Allahabad High Court judgment in the case of Jugal Kishore Arora Vs DCIT (269 ITR 133). In this case, Their Lordships, after taking note of and analyzing....