2012 (9) TMI 1105 - AT - Income Tax

Agricultural income qualifying for exemption under section 10(1) - Held that - The authorities belong indeed erred in law and on facts of this case in holding that the impugned income is not agricultural income. We therefore direct the Assessing Officer to treat the said income as agricultural income under section 2 (1A)(b)(i) of the Act. As a corollary to this direction the Assessing Officer shall also exclude the said income from the total income under section 10(1) of the Act.

Summary

Issues:
- Challenge to the impugned order of the Ld CIT(A) for the A.Y. 2007-08.
- Whether income from floriculture/tissue culture activities qualifies as agricultural income.
- Application of previous Tribunal decisions on similar issues.

Analysis:
1. Challenge to Ld CIT(A) Order:
The Revenue challenged the Ld CIT(A)'s order directing the Assessing Officer to treat the assessee's income as agriculture income under section 2(1A)(b)(i) of the Income-tax Act, 1961 and to exclude said income under section 10(1) of the Act. The Revenue contended that the activities of the assessee did not qualify as agriculture income, as there were no basic operations on land, such as in a greenhouse or tissue culture laboratory, for growing plants. However, the Ld CIT(A) allowed the claim of the assessee based on previous Tribunal decisions.

2. Nature of Income from Floriculture/Tissue Culture:
The assessee was engaged in plant floriculture/tissue culture activities and claimed exemption of income under section 10(1) r.w.s. 2(1A)(b)(i) as agriculture income. The Assessing Officer disagreed with this claim, citing a pending appeal before the Hon'ble Bombay High Court. The Ld CIT(A) supported the assessee's claim, following previous Tribunal decisions in the assessee's favor for different assessment years. The Tribunal upheld the Ld CIT(A)'s decision, emphasizing that the basic operations were carried out on land, qualifying the income as agricultural income.

3. Application of Previous Tribunal Decisions:
The Tribunal referred to its earlier decision in the assessee's case for A.Y. 2004-05, where similar issues were discussed and decided in favor of the assessee. The Tribunal relied on various judicial precedents, including decisions of the Hon'ble Supreme Court and High Courts, to establish that the income from such operations should be treated as agricultural income. The Tribunal highlighted that the nature of the produce raised had no relevance to the character of agricultural operations, emphasizing the importance of basic operations on land. The Tribunal also addressed the retrospective effect of a clarificatory amendment in the law regarding income derived from saplings or seedlings grown in a nursery.

4. Conclusion:
The Tribunal upheld the Ld CIT(A)'s order, dismissing the Revenue's appeal and confirming the treatment of the income as agricultural income under section 2(1A)(b)(i) and the exclusion under section 10(1) of the Act. The decision was based on the consistent application of previous Tribunal decisions in the assessee's case and the legal principles established by various judicial authorities. The Tribunal found no reason to deviate from the established position and upheld the order in favor of the assessee for the A.Y. 2007-08.