AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1505
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....ning that the assessee is not directly involved in any agricultural activity and the income earned by it from the production of seeds was not in the nature of agricultural income. Therefore, the Assessing Officer required the assessee company to explain as to why its claim for exemption under Section 10(1) Act should not be disallowed and after receiving the explanation offered by the assessee, Assessing Officer has held that the Assessee company could not be said to be either cultivating the seeds or deriving any agricultural income. 3. Accordingly, the Assessing Officer required the assessee to explain as to why its claim for exemption under Section 10(1) of the Act should not be disallowed and directed the assessee to furnish reply. The assessee submitted its explanation on 26.03.2014, which was not found acceptable by the Assessing Officer and accordingly it was held that production of hybrid seeds was markedly different from normal agricultural crop production i.e., it involved elaborate scientific operations etc, by the assessee company. The assessee company used to yield hybrid seeds finally produced to undergo series of physical and chemical treatments before they sold i....
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.... 6. Having gone into the merits of the case and uphold the impugned order of the learned Commissioner of Income Tax directing disallowance of Rs. 1,48,00,979/- made by the Assessing Officer on account of interest under Section 14A of the Act read with Rule 8D of the Rules following the ratio laid down by the High Court of Bombay and keeping in you the facts of the assessee held that investment of Rs. 20.30 crores having been presumably made with assessee out of its own funds, no disallowance on account of interest, expenditure under Section 14A can justifiably be made. 7. It is further held by learned Commissioner of Income Tax (Appeals) that it is not justified in deleting the disallowance made by the Assessing Officer and therefore, modified the impugned order of the Assessing Officer on the issue, and restored disallowance made by the Assessing Officer under Rule 14(A), read with 8D to the extent of Rs. 5,07,695/- which is made by the Assessing Officer on account of other common expenses by applying Clause (iii) Rule 8 (D). It was further held that the common expenses incurred by the assesses, such as office and administrative expenses, etc, can reasonably be attributed to so....
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....rcumstances of the case, the Tribunal was correct in not appreciating the fact that assessee itself did not undertake any agricultural operations but procured hybrid seeds from farmers and as such the activities carried by the farmers can only be said to the agricultural activities and not that of the assessee? 4. Whether on the facts and in the circumstances of the case, the Tribunal was covered in deleting the addition u/s. 14A of the Act ignoring the clear mandate of law and rules.? 11. Learned counsel for the appellant argued that the activities carried out by the assessee are not natural but series of scientific and stress less process as the assessee enter into the business of production of hybrid seeds as they carry out research and development activity which involves scientific study of parent seed and hybridization of different varieties of parent seeds so as to evolve the high yielding variety of hybrid seeds and these hybrid seeds are sold in the market for agricultural production by the farmers. Learned counsel further submits the hybrid seeds are so engineered that when the crops from it are used as seeds for subsequent cultivation by farmers the yields are....
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....he land and in the strict sense of the term meaning thereby tilling the land, sowing of the seeds, planting and similar operations on the land, which are the basic operations which require the expenditure human skill and labour upon the land itself. He further pointed out that there are however other operations which have got to be resorted to by the agriculturist and which are absolutely necessary for the purpose of effectively raising the produce from the land. These are operations to be performed after the seed germinates from the land e.g., weeding, digging the soil around the growth, removal of undesirable under growths and all operations which foster the growth and preserve the same not only from insects and pests but also from degradation from outside, tending, pruning cutting, harvesting and rendering the produce fit for the market. The latter would also classify as agricultural operations when taken in conjunction with the basic operations described. It is only if the products are raised from the land by performance of the normal basic operations indicated above then it can be characterized as agricultural operations. 15. It is clear that the process to be performed by ....
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.... marketed. The activity carried out by the company is not in nature of purchase of produce and that the Act does not restrict use of technology in agricultural process. It is further stated that the learned Commissioner of Income Tax and the learned Tribunal erred in coming to the conclusion in allowing deduction. 19. Learned counsel for the appellant/Revenue further argued that the basic operation in allowing agricultural activity, pointed out and contended that as the entire activity of the respondent is a business of hybrid seeds which is and not on the ground. He further argued that change so brought by the assessee to produce crops originally produced or raised by it by using them as seed in the next crop and so on through regenerating of the produce over number of times to obtain desired level of traits in one seed does not come under the ambit of 'agriculture' or the process which is ordinarily employed by a cultivator to render the produce raised by it fit to be taken to market. Therefore, the very process undertaken by the assessee does not satisfy the test enumerated in sub-paras (i)(ii)(iii) of clause (b) of Section 2(1A) of the Act. 20. Learned Senior Counsel appe....
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.... Act, 1961. Since the company cannot carry out the agricultural operations on its own throughout the Country, it takes the land on lease from the farmers and through them the Company supplies to the farmers, who carry out the cultivation of the seed under the supervision of the Company and the expenses incurred by the farmers in connection with are reimbursed by the company. It is stated that apart from leasing out the lands to the Company, the farmers also carry out the agricultural operations for enriching themselves with additional income, since the company compensates them for their personal involvement in the operations carried out by them. Further, when the farmers paid lease rentals for their lands and also compensate for carrying out the agricultural operations, it cannot be construed as job work executed by the farmers and terming it as procurement of the produce through Contract. 22. In CIT V. Maddi Venkatasubbayya (20) ITR 151) wherein it was held " In view of such discussion, foundation seeds or Hybrid, seeds produced in own land or lands taken on lease i.e., on contract farming will be the result of agricultural operations and the profit arising out of such activiti....
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....operations carried out by the assessee-company are not agricultural operations. As a matter of fact, it is to be seen that the assessee-company has carried out basic as well as secondary agricultural operations. There for, without any fear of contradiction, It is possible for us to hold that such entire income of the assessee is agricultural in nature which is to be excluded from the nature of total income. 17. The assessee is successful in its appeal: 18. As the main ground of the assessee itself is decided in its favour, we have not considered the alternative contention regarding application of rule 7 and proportionate exemption of income. 19. The reasons pointed out by the assessing authority to deny the claim of exemption made by the assessee company are that the assessee is following international technology, marketing, expertise, integrated scientific and commercial activity, etc. These are all matters strange to the strict code of Income tax. Those premises do not have any role in deciding the nature of income within the fame work of the Income tax Act 1961. The reasons pointed out by the assessing officer are by and large issues to be decided by t....
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....rtain agricultural operations including but not limited to normal agronomic practices required for raising a good crop like irrigation, fertilization, pest/disease combat, weeding, harvesting, threshing etc, for the purpose of production of seeds from the said foundation seeds. 27. It is evident from the terms and conditions imposed on the farmers that the farmers raised crops as desired by the assessee and the whole process is in the nature of production through contract. 28. The learned Tribunal considering the decision of the then High Court of Andhra Pradesh in case of Commissioner of Income Tax-IV, Hyderabad v. M/s. Prabhat Agri-Biotech Ltd, Hyderabad (ITTA No.88 of 2014, dated 21.02.2014) wherein similar issue which arose for consideration and while considering the said issue, the Co-ordinate Bench took a decision in assessee's own case for the earlier order by recording as follows: "Admittedly, the assessee is cultivating by performing agricultural operation in order to generate basic foundation seeds. The said foundation seeds were distributed to farmers for the purpose of generating further seeds. The learned representative for the assessee clarified that in....
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....the land, sowing of the seeds, planting and similar operations on the land." 30. Having considered judgment of the Hon'ble Supreme Court and having considered the entire material placed on record, the parent seeds are produced by way of agriculture and cultivation. As the company gets the cultivation done under its supervision and at its own costs and risks, the production of these seeds, and the farmer wherein under the supervision, technical guidance and control of the company is in agreement for the production of the Hybrid seeds, since they have direct nexus with the land owned by it or on the leased lands by supplying seeds to the farmers and getting them cultivated under its supervision and control and the company plays an active role of action of monitoring and nurturing the plants by the assessee cultivated by the farmers As there is an element of involvement of assessee by entering into an agreement with the farmers for utilizing the lands owned by them and from such agreements, the assessee company is being utilizing for production of hybrid seeds on mass scale from the foundation seeds on payment of certain compensation. Though the assessee may not be directly involve....