TMI Blog2016 (10) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... r raised in the assessment proceedings cannot be introduced for the first time, in an appeal under Section 260A, for an answer. Needless to state that questions of law arise on the facts considered by the authorities with reference to the provisions and for the above reasons, we are of the view that the revenue cannot raise the said issue at this stage. - Decided against the revenue - Tax Case Appeal No. 338 of 2016 - - - Dated:- 1-9-2016 - S. Manikumar And D. Krishnakumar, JJ. For the Appellant : Mr. T. Ravikumar For the Respondent : Mr. M. P. Senthilkumar JUDGMENT ( Judgment of the Court was delivered by D. Krishnakumar, J ) This Appeal has been filed by the revenue under Section 260A of the Income Tax Act 1961 against the order of the Income Tax Appellate Tribunal, A Bench, Chennai, in I.T.A. No. 667/Mds/2015 for the assessment year 2007-08. 2. The facts of the case in nutshell are as follows:- The respondent herein is the assessee. The respondent/assessee was carrying on agricultural operation in the agricultural land owned by him at Velichai Village near Kelambakkam and derived income from sale of replanted trees, flowers and creepers, saplings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8/- and agricultural income of ₹ 51,89,480/-. The assessment was completed u/s.143(3) on 11.12.2009 on the assessed income of ₹ 10,47,616/- and agriculture income of ₹ 51,89,480/-. The case was reopened by issuance of notice u/s.148 dated 31.3.2011 of the Income Tax Act, 1961 to the assessee as to why agriculture income should not be treated as business of income. A notice under section 143(2) dated 23.9.2011 was also served on the assessee. Further notice under section 142(1) dated 4.2.2013 was also served on the assessee. 5. Based on the ratio laid down by the Hon'ble Supreme Court in the case of Raja Vinay kumar Sahas Roy reported in 32 ITR 466, wherein it has been held that without the performance of the basic operations such as tilling of land, sowing of seeds, planting and similar operations on the land, mere performance of subsequent operations such as weeding, digging the soil around the growth, tendering, pruning, cutting etc., would not be enough to characterize them as agricultural operations, the assessing officer, after considering the reply of the assessee did not countenance the reasons adduced seeking to treat the income in question as agric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would submit that the order impugned shall be set aside and the Appeal shall be allowed. 7. Mr.M.P.Senthilkumar, learned counsel for the respondent/assessee would submit that the Assessing Officer has erroneously treated the agriculture income as business income. Actually, income from nursery is an agriculture income and the same is exempted under section 10(1) of the Income Tax Act. In the appeal preferred before the Commissioner of Income Tax (Appeals) against the order of the original authority, the claim of the assessee was allowed relying on the decision rendered in CIT vs. Soundarya Nursery (2000) (241 ITR 531) dated 5.8.1998, wherein the decisions rendered in the case of Raja benoy Kumar Sahas Roy (Supra) and Maharaja Vibhuti Narain Singh (Supra), relied on by the Assessing Officer, has been considered, and held that even the plants grown in pots is an agricultural activity as they involve all the activities of agriculture farming like seeding, weeding, watering, manuring etc.,.. Aggrieved by the order of the appellate authority, the appeal preferred by the revenue before the Tribunal was also rightly dismissed based on the ratio laid down by the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural income, the immediate and effective source of income must be land. If it is not land, the income cannot be considered as agricultural income. He referred to the decision of the Hon'ble Supreme Court in the case of CIT vs. Raja Benoy Kumar Sahas Roy (32 ITR 466) wherein it has been held that without the performance of the basic operations such as tilling of land, sowing of seeds, planting and similar operations on the land, mere performance of subsequent operations such as weeding, digging the soil around the growth, tendering, pruning, cutting etc, would not be enough to characterise them as agricultural operations and found that the respondent/assessee had not submitted any document with regard to the expenditure incurred by him towards agricultural operations such as tilling of land, sowing of seeds, plating and similar operation of land. He has also relied on the decision of the Allahabad High Court in the case of H.H.Maharaja Vibhuti Singh vs. State of U.P. (65 ITR 3640) wherein it has been held that income from nursery is not an agricultural income unless maintained by the farmers as an additional or necessary adjunct to the primary process of agriculture for ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kill and labour thereon and it is only after the performance of the basic operations on the land, the resultant product grown or such part thereof as was suitable for being nurtured in a pot, was separated and placed in a pot and nurtured with water and by placing them in the green house or in shade and after performing several operations, such as weeding, watering, manuring etc.,. they are made ready for sale as plants; all these operations would be agricultural operations. All this involves human skill and efforts. Thus, the plants sold by the assessee in pots were the result of primary as well as subsequent operations comprehended within the term 'agriculture' and they are clearly the products of agriculture. 9. So far as the seeds are concerned, we are surprised that, that question should have been raised at all by the Revenue, as it is not possible for the seeds to exist without the mother plants, and the mother plant, it is nobody's case, was not grown on land. It is also not the case of the Revenue that the seeds were the result of the wild growth and not on account of cultivation by the assessee. The seeds were clearly a product of agriculture and the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et, which would all be agricultural operations, when are taken in conjunction with the basic operations. 17. Another decision relied on by the Assessing Officer, viz., Maharaja Vibhuti Narain Singh (Supra), has also been considered in detail by the Division Bench of this Hon'ble Court in CIT vs. Soundarya Nursery (2000) (241 ITR 531) dated 5.8.1998, and at Paragraph 6 of the Judgment, this Court held as follows:- 6. Learned counsel for the Revenue contended before us that the plants are only grown in pots and no matter the period for which they are so grown, that activity can never be regarded as agricultural operations. In support of that submission, counsel referred to the decision of the Allahabad High Court in H.H.Maharaja Vibhuti Narain Singh v. State of U.P. ([1967] 65 ITR 364, wherein the Court made an observation which was clearly obiter that agriculture cannot be carried on in pots, as in that case, a large number of coconut plants were nurtured on land in the nursery. 18. In the explanation offered to the Assistant Commissioner of Income Tax, Business Circle II, Nungambakkam, Chennai, the assessee/respondent herein has submitted that he has been doing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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