Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2011 (10) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2011 (10) TMI 488 - HC - Income TaxAgricultural income - denial of exemption – conversion of foundation seeds into certified seeds- assessee supplying foundation seeds to farmers owning land, who under directions issued by company cultivate such seeds and get compensation for it - Held that:- The term "agriculture" cannot be confined merely to the production of grain and food products for human beings and beasts,but must be understood as comprising all the products of the land which have some utiliy either for consumption or for trade and commerce. It comprises within its scope the basic as well as subsequent operations in the process of agriculture. If this integrated activity which constitutes agriculture is undertaken and performed in regard to any land that land can be said to have been used for "agricultural purposes" and the income derived there-from can be said to be "agricultural income". The mere fact that an activity has some connection with or is in some way dependent on land is not sufficient to bring it within the scope of the term. Subsequent operations must necessarily be in conjunction with and a continuation of the basic operations. Subsequent operations performed to make produce fit for market can also be termed as agricultural operations. It means if the agricultural produce is taken to a market after making it as a marketable produce, it would also be considered as agricultural produce. Further, the section does not contemplate the sale of an item or a commodity which is different from what is cultivated and processed. If commercially a different article or commodity results after processing, then it would be a manufacturing activity. In present case, except supplying the foundation seeds and giving scientific advice from time to time, either at the time of sowing or pollination or harvesting, none of the normal activities of agriculture are undertaken by the assessee-company. The assessee-companies neither have derivative interests in the land nor actually cultivate the land. Even if they cultivate the land, they are not lessees of the land in view of terms of agreement eliminating such relationship. At the most, they cultivate the land on behalf of the farmer or owner. The entire terms of agreement only indicate that the foundation seeds grown by the farmer would be purchased by the assessee at the end for a certain price provided seeds qualify the specifications as per the agreement. Such input or scientific method in giving advice to the farmer cannot be termed as either basic agricultural operation or subsequent operations ordinarily employed by the farmer or agriculturist. Even if the assessee has benefits under Section 80J or 80HHC of the Act treating the conversion of foundation seeds to certified seeds as manufacturing activity, assessee would not get benefit of total exemption u/s 10(1) of the Act. - Decided against the Assessee by holding as business income.
|