AI Drafter 
TaxTMI 
TaxTMI 
2016 (5) TMI 956
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.... required to explain the claim with regard to the agricultural income. As per the assessee, its total agricultural income arose out of the sale of mother plants and other floriculture items. The sales claimed by the assessee consisted of the following : Domestic sales Rs. 1,79,33,098/- Export sales to subsidiary Rs.22,74,57,820/- Export sales to other parties Rs. 7,26,162/- 3. Of the above, the sum of Rs. 22,74,57,820/- were export sales were to a wholly owned subsidiary of the assessee called M/s. Ethiopian Meadows in Ethiopia. Assessee had also filed an audit report in form 3 CEB relating to the international transactions as required u/s.92 CA of the Income-tax Act, 1961 (' the Act' in short). As per such audit report, ALP of the international transactions on sales effected by the assessee to its subsidiary in Ethiopia were as under 4. As per the AO it was clear from the above audit report that for every sale effected to the subsidiary, assessee was raising two invoices. ALP for the supplementary invoice was certified by the auditor as zero in each case. AO after verification found that only the primary invoice was routed through the Cust....
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....nversion of a part of the dues to share capital. Further as per the assessee contention of the AO that agricultural income was inflated and artificial, was only a surmise without any evidence in support. Argument of the assessee was that there was a legitimate reason for raising two invoices for each transaction. As per the assessee even if the agricultural income was from domestic transactions it still remained exempt. Thus according to the assessee addition made by the AO was not justified. 7. CIT (A) was appreciative of the above contentions. According to him, claim of the assessee that first invoice was at a notional value and the second invoice was raised based on ultimate realisation was an acceptable one. As per the Ld. CIT (A), this was a general practice followed in floriculture exports. Further as per the CIT (A) once there was an export of agricultural produce and realisation, exemption claimed for agricultural income could not be denied for non adherence to procedures and minor errors in documentation. He accepted the contention of the assessee that agricultural income arising out of the sales whether in India or outside India was eligible for exemption. He deleted t....
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....As per the Ld. AR this was the reason why supplementary invoice was raised. Such supplementary invoice was raised once the realisation from auction were known. Ld. AR submitted that even if the agricultural income shown by the assessee was disbelieved, there was no case for an addition, since there was nothing on record to show that assessee had derived any taxable income to that extent. Just because the supplementary invoice was not routed through RBI or because cess was not paid on the figures shown in the supplementary invoice, could not discredit the claim of the assessee. As per the Ld. AR supplementary invoices were made available to the Customs authorities. In any case according to him, no comparable case was shown by the AO for coming to a conclusion that the yield of the assessee was much higher than the accepted standards. According to the Ld. AR, inflation of agricultural income by itself would not get converted to undisclosed income. 10. We have perused the orders and heard the rival contentions. Ld. AR of the assessee has not disputed the contention of the Department that the total area under cultivation was 10 hectares where there were six numbers of green houses c....
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....hether the agricultural income claimed by an assessee is correct or not, and whether it falls within the definition of that term given in Section 2(1A). When an assessee asserts that the income raised by it is on account of sale of agricultural produces, onus is on the assessee to prove such agricultural income. In our opinion, assessee before us has failed to discharge this onus. Despite number of opportunities given by the AO assessee was unable to establish how it could raise so much plants and saplings from five hectares of green house area. 13. As for the claim of the Ld. AR that even if the agricultural income is found to be incorrect, it would not warrant addition since there was no real income, we are afraid we cannot accept. This for the reason that a sum of Rs. 12 crores out of the dues shown by the assessee as receivable from its subsidiary has been converted by the assessee to share capital or treated as share application money. Whether converted to share capital or to transferred to share application money, there is an infusion of capital which is not a fictitious, but a real one. 14. CIT (A) in our opinion was oblivious to the date of accounting of the supplemen....