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2014 (11) TMI 901 - HC - Income TaxExemption u/s 10(1) - Whether the income was agricultural income as defined in section 2(1A) and therefore exempt u/s 10(1) – Held that:- Sale proceeds of the land belonging to the assessee constitute income from agriculture, hence exempt from tax under the Income-tax Act - the language of section 2(1)(b)(ii) does not appear to justify the contention of the revenue that for claiming the benefit of section 2(1)(b)(ii) the process employed by the assessee must be of such character as just to make the produce marketable - The true test is what is the process ordinarily employed by the cultivators of any particular locality to render the produce raised by them fit for market - The process adopted in one locality may not necessarily be adopted in another locality – in Commissioner of Income-tax, Central Circle, Bangalore Versus Namdhari Seeds (P.) Ltd. [2011 (10) TMI 488 - KARNATAKA HIGH COURT] – it has been held that the assessee neither had derivative interest in the land nor did it actually cultivate the land and that the entire reading of the terms of agreement would only indicate that the assessee was interested only to have healthy foundation seeds grown for the process of converting them to certified seeds and the entire income amounted to business income of the assessee. 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 income earned by the assessee is agricultural income - subsequent operations would also be agricultural operations if taken in conjunction with basic operations - if any income is earned by carrying out the subsequent operations without carrying out the basic operations then such income would not be considered as agricultural income - the plants have been grown on land owned by the assessee - The assessee during the course of growing and nurturing the plants on the land carried out certain functions such as tilling the soil, weeding, watering, manuring etc. and finally the plants are made ready for sale - It goes without saying that all this involves human skill and effort - When plants are established in the soil only then they are shifted in suitable containers or appropriate place in land – thus, the sale proceeds from the business of nursery carried on by the assessee constitute income from agriculture – Decided in favour of assessee.
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