TMI Blog2011 (5) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... of making a field inspection of the assessee’s site and thereafter if he finds that any of the agricultural activities are carried on in the laboratory, then he shall compute the ratio of the expenditure between the agricultural and non agricultural operations and apportion the agricultural income in the same ratio. Both the appeals of assessee and Revenue are allowed for statistical purposes. - 724/B/2010, 827/B/2010, 557/B/2010, 558/B/2010, 587/B/2010, 588/B/2010 - - - Dated:- 31-5-2011 - SMT. P MADHAVI DEVI, SHRI A MOHAN ALANKAMONY, JJ. Revenue by : Shri G.V Gopala Rao Assessee by : Shri H Guruswamy O R D E R PER SMT. P MADHAVI DEVI, JUDICIAL MEMBER These are cross appeals filed by both the assessee as well as the Revenue. The relevant assessment years are 2002-03, 2005-06 and 2006-07. The appeal is directed against the order of the Commissioner of Income-tax (Appeals) I at Bangalore dated 31.12.2009 and 06.04.2010. The appeal arises out of the assessments completed u/s 143(3) of the Income-tax Act, 1961. 2. The brief facts of the case are that the assessee is a company which is engaged in the business of growing and exporting of ornamental pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants can be obtained. This is called the propagation phase and involves obtaining many micro segments through tissue culture from the mother plant and each of which is capable of developing into an independent plant. This propagation or multiplication of mother plant without losing its genetic characteristics is the most important phase. d) Phase Three : The plants obtained in phase two are now transferred back to the soil and root formation is induced. However steps are taken to cut down unnecessary growth of the plant through auxiliary shoot formation etc. e) Phase Four : Growth of the micro plant, in the soil till it attains sustainability and capability to survive when transferred to the main filed. 6. Thus, the learned DR explained that the micro propagation or tissue culture begins and ends with field operations but part of the intermediary activities are carried out in their laboratory for betterment of plants, which are ultimately produced and, therefore, the AO was right in estimating 30% of the income as non agricultural income by taking into consideration various processes employed by professional scientists using technical skills. He submitted that as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible in the laboratory without the medium of mother plant. Therefore, income earned by this process is considered as agricultural income. 9. The assessee has also placed reliance upon the following decisions in support of his contention that the income earned by the assessee is agricultural income. 1) CIT Vs. Soundarya Nursery, 241 ITR 530 (Mad) 2) CIT Vs. Green Bold Pre-farmers Pvt. Ltd. (2000) Tree 299 ITR 262 3) CIT Vs. K.E Sundhara Mudaliar, 18 ITR 259 4) M/s K Lakashmansa Co. Vs. DCIT in ITA No.23/Bang/2000 dt. 17.9.2003 (ITAT, Bangalore Bench) 5) ACIT Vs. M/s Namdhari Seeds Pvt. Ltd in ITA No.3102/Bang/2004 dated 14.7.2006 (ITAT, Bangalore Bench) 10. The learned counsel for the assessee has also filed copies of the said decisions and has drawn our attention to the relevant portions thereof to drive his point. 11. Having heard both the parties and having considered the material on record, we find that the definition of agricultural income is given under sec. 2(1A) of the Income-tax Act to mean - Section 2(1) - a) Any rent or revenue derived from land which is situated in India and is used for agricultural purposes; b) Any income der ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. However, this argument is contrary to the assessee s submission before the Assessing Officer, wherein the different phases of tissue culture involving Phase zero to Phase 4 have been explained in detail. 14. Further on a research made by us on the issue of plant tissue culture, we find that it is the following is the process of tissue culture: It is a practice used to propagate plants under sterile conditions, often to produce clones of a plant. Plant tissue culture relies on the fact that many plant cells have the ability to regenerate a whole plant. Single cells, plant cells without cell walls, pieces of leaves, or roots can often be used to generate a new plant on culture media given the required nutrients and plant hormones. The different techniques in plant tissue culture offer certain advantages over traditional methods of propagation and these techniques are - 1) The production of exact copies of plants that produce particularly good flowers, fruits, or have other desirable traits. 2) To quickly produce m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re such as tilling of the land, sowing of the seeds etc. are not carried out. Of course, once the sampling has been planted in the soil and is let to grow into a mature plant, this operation is definitely agricultural operation and income there-from has to be treated as agricultural income. Thus, we are in agreement with finding of the assessing authority that the entire operation of the assessee is not agricultural income and, therefore, the entire income cannot be treated as agricultural income. AO had held that 30% of the income is non agricultural income but he has not given any basis for such bifurcation. The criteria to bifurcate the income into agricultural and non agricultural income would be to take into account the expenditure incurred by the assessee on the micro propagation i.e tissue culture operation carried out by it and the expenditure incurred by it on growing of the plants after they are planted in the soil and in this proportion of expenditure only income can also be bifurcated into agricultural and non agriculture income. It is further observed that the assessee has filed an affidavit stating that no operations are carried on in the laboratories. This fact also ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
