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2021 (9) TMI 1093 - AT - Income TaxBenefit of exemption claimed u/s 10(1) - Agricultural income - assessee is in the business of cultivation, production and marketing of hybrid seeds - HELD THAT:- As in assessee’s own case for assessment year 1998-99 to 2004-05 [2011 (10) TMI 488 - KARNATAKA HIGH COURT] had held that contract farming done by assessee cannot be treated as agricultural income and that assessee is not eligible to claim exemption under section 10(1) of the Act in respect of revenue generated from contract farming. Authorities below in the present facts of the case made categorical observation that assessee has not provided any details regarding about the revenue generated out of each streams of land. Admittedly, assessee still carries out the activities under the same 3 categories, as has been considered in the preceding assessment years by Hon’ble High Court. The only income upheld by Hon’ble High Court to be in the nature of business income in the preceding years, is the revenue generated from contract farming. Issue needs to be remanded to the Ld. AO for years under consideration for categorising the income earned by assessee under the 3 categories. For that assessee is directed to file the bifurcation of income generated from growing, processing and sale of seeds from owned and leased lands as well as contract lands. AO is then directed to disallow of the deduction claimed under section 10 (1) in respect of the income earned from growing, processing and sale of seeds from contract lands as per the observations of Hon’ble Karnataka High Court (supra)in assessee’s own case. Disallowance made under section 14A read with Rule 8D(iii) - no suo moto disallowance was made by the assessee towards earning of exempt income - HELD THAT:- Disallowance under section 14A read with Rule 8D shall not exceed exempt income earned for the year. This principle is supported by the decision of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] where it was clearly held that disallowance of expenditure u/s 14A shall not exceed exempt income earned for the year. Respectfully following the same we direct the Ld. AO to restrict the disallowance under section 14A read with rule 8D to the extent of dividend income earned by assessee during the year under consideration. Accordingly, this issue raised by assessee stands partly allowed.
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