AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1145
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....se of the appellant and liable to be reversed. 2. The learned respondent erred in law in holding that tissue culture is not an agriculture activity and it should be isolated and taken as a source of non- agricultural income and an estimated income therefrom is taxable. 3. The learned authority failed to appreciate that the activity singled out for taxation cannot stand in isolation on its own and is only an intermediary step in the larger activity of raising, seeds, plants and flower in a nursery and selling the same and as such cannot be considered as a source of income under the law of income tax and no income can arise or flow from such non- existent source as made out in the case of the appellant as supra. 4. The decision of the Hon'ble Bangalore Tribunal and that of the Hon'ble Hyderabad Tribunal in the case of MADHU VELAYUDHAN are in sharp contrast to the ratio of the decision of the Hon'ble Special Bench, HYDERABAD, and being contradictory to the decision of the Hon'ble Special Bench fails as a sound law on the accepted judicial norms and as such the decision sought to be upheld on the basis of those two decisions cannot be upheld a....
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....carrying out floricultural operations under his proprietary concern "Florence flora farm" on the lands owned by him. The income from the same is being declared as agricultural income for the AY 2018-19. The assessee has filed his return of income on 31.08.2018 declaring the total income of Rs. 5,64,160/ -. Thereafter the case of the assessee was selected for scrutiny under CASS and accordingly notice u/s. 143(2) as well as 142(1) of the act were issued to the assessee seeking certain details as per the notices sent. After considering the replies furnished by the assessee and relying upon the decision of the Hon'ble ITAT, Bench "A", Bangalore in the case of Invitro International (P) Ltd. v/s Dy. Commissioner of Income Tax, 11(4), Bangalore, the AO held that where any operation is not carried out on land, such an operation cannot be called as agricultural operation. When the assessee is not carrying on the cultivation of land or plants in the soil in pots, the operation cannot be called as agricultural operations. The medium is not the soil or basic operation of agriculture such as tilling of the land, sowing of the seeds, etc are not carrying out. The AO concluded that the tissu....
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....tissue culture laboratory of the assessee as the entire produce is continued to be processed into subsequent basic agricultural operations. 8. The ld. D.R. on the other hand supported the orders of the Authorities below and submitted that the plant tissue culture is used to reproduce clones of a plants to get a multiple plants with the same traits by placing various tissues of the mother plant in containers and required medium, which is definitely not consisting of land or soil. Such multiple plants which are generated or produced in the laboratories are then transferred to the soil and after their adaptation to the natural conditions, they are allowed to the grown into mature plants to be sold to the customers. Where any operation is not carried out on land such an operation cannot be called as agricultural operation. 9. We have heard the rival submissions and perused the materials available on record. The assessee is carrying on the activity of running a nursery under the name & style of "Florence Flora Farm" where the plants, seeds, seedlings, flowers etc. are grown and sold. In the process the assessee deploys large agricultural lands owned by the assessee around Bangalor....
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....re such as tilling of the land, sowing of the seeds etc. are not carried out. We are of the considered opinion that segregation of one single step namely tissue culture and estimating the same as income from business is unwarranted especially when that activity has not been carried out in isolation but carried out only as a part of the larger activity for raising plants, seedlings and flowers. The activity of tissue culture cannot be considered on its own in isolation as an origin of income. The tissue culture is preceded and followed with the main agricultural activity carried out on land. We are also of the considered opinion that 'tissue culture' does not always mean germination of the plants in the laboratory but the mother plant after selection is cut into several portions and each tissue is planted in the soil again to get another plant which are grown in the normal conditions in the soil and after growing into a mature plant are sold as ornamental plants. 9.1 Further, we are of the opinion that as per the explanation 3 to section 2(1A) of the Act which defines agriculture income clearly states that income derived from saplings or seedlings grown in a nursery shall....
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....as the nature of activity itself of the farm is to produce tissue culture 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 agricultural operations and therefore income thereof constitutes agriculture income. 8. We do not find any infirmity in the order of the CIT(A). We find the Pune Bench of the Tribunal in the case of K.F. Bioplant Pvt. Ltd. (Supra) while adjudicating the nature of income from floriculture, horticulture and tissue culture etc., has observed as under: "2. The facts in brief are as under. The assessee is primarily engaged in the business of plant floriculture/tissue culture. The assessee has claimed exemption of the income from the above activities u/s.10(1) r.w.s. 2(1A)(b)(i) of the Act as agriculture in....
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....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 after they take root, they are transmitted to large containers filed with top soil and manure, etc, till they establish themselves; and thereafter those plants are sold and that the primary source of the plant is the mother plant, which is reared on earth and for which activities, certainly contribution of human labour and energy are essential. 35. Their Lordships thus clearly noted "the primary source of the plant in the assessee's activities was the mother plant, which is reared on earth and for which certainly contribution of human labour and energy....
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....er, 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 the landmark Supreme Court judgment in the case of Raja Benoy Kumar Sahas Roy (supra), also observed that "the nature of produce raised has no relevance to the character that "the nature of produce raised has no relevance to the character of agricultural operation". It was noted that cultivation of flowers of artistic and decorative value would also be included in the scope of agricultural operations. This observation will also apply to the facts of the present case. 39. We may mention that our attention was also invited to Ex....
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....s during the assessment year under consideration. The same is upheld. The grounds involving the issue are thus rejected." 4. As the issue is identical in this year, we find no reason to take different view. We, therefore, following the orders of the Tribunal in assessee's own case referred (Supra), confirm the order of the Ld.CIT(A) and dismiss all the grounds taken by the Revenue. 5. In the result, Revenue's appeal is dismissed." 9. Merely because the Department has not accepted the above decision of the Tribunal and has preferred an appeal before the Hon'ble High Court, the same in our opinion cannot be a ground not to follow the order of the Tribunal until and unless the same is reversed by the Hon'ble High Court. Respectfully following the decision of the Coordinate Bench of the Tribunal and in view of the detailed reasoning given by the CIT(A) we do not find any infirmity in the order. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the revenue are dismissed." 9.3 Respectfully, following the above decision of the co- ordinate Bench which is subsequent to the decision of ITAT relied upon by both the Authorit....