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The Assistant Commissioner of Income Tax, Circle – 14, Pune, Versus KF Bioplant Pvt Ltd.,

2017 (8) TMI 445 - ITAT PUNE

Exemption u/s 10(1) - agricultural income - proof of agricultural operations - business of plant floriculture / tissue culture - Held that:- basic operations are carried out in the present case, which require human skill and labour, and subsequent operations, no matter how sophisticated, if that be used against the assessee, are only to foster the growth and to protect the produce, we find that the income from these operations can only be said to be agricultural income. - The authorities be .....

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e Revenue is emanating out of the order of Commissioner of Income Tax (A) - I, Pune dt.30.05.2014 for the assessment year 2010-11. 2. The relevant facts as culled out from the material on record are as under :- 2.1 Assessee is a company stated to be engaged in the business of plant floriculture / tissue culture. Assessee electronically filed its return of income for A.Y. 2010-11 on 01.10.2010 declaring total income at ₹ 3,53,273/-. The case was selected for scrutiny and thereafter the asse .....

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d in directing the Assessing Officer to treat the assessee s income as agricultural income u/s 2(1A)(b)(i) of the Income Tax Act, 1961 and to exclude the said income u/s 10(1) of the Income Tax Act,1961. 2. The Ld. Commissioner of Income Tax ( Appeals) erred in ignoring the facts that there is no basic place in a green house and tissue culture laboratory which cannot be termed as land or nursery for growing plants. 3. The Ld. Commissioner of Income Tax (Appeals) grossly erred in ignoring the fac .....

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ed by the assessee is exempt being agricultural income. 4. During the course of assessment proceedings, AO noticed that assessee had shown agricultural income of ₹ 10,04,85,506/- and it was claimed to be exempt u/s 10(1) of the Act being from agricultural activities. AO noted that in A.Y. 2004-05, the contention of the assessee of the income being agricultural income was not accepted and the income was held as business income and not from agricultural activities. He has noted that the orde .....

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of AO, assessee carried the matter before Ld. CIT(A), who decided the issue in favour of assessee by holding as under : 4.3.4 For rejecting the claim of agricultural income made by the appellant for the assessment year under appeal, the Assessing Officer has solely replied on the findings. Conclusions drawn in the assessment year 2004-05 which have been now reversed by the Hon ble Tribunal in their order as discussed above. On the same issue, the appeal filed by the revenue against the order of .....

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ne in appellant s own case for the A.Y.2004-05 and A.Y.2009-10, the Assessing Officer is directed to treat the income derived from floriculture and tissue culture as agricultural income and exclude the said income from total income under section 10(1) of the Act, for the assessment year under appeal. Ground No. 1 and 2 of appeal are allowed. Aggrieved by the order of Ld. CIT(A), Revenue is now in appeal before us. 5. Before us, Ld.D.R. supported the order of AO. Ld.A.R. on the other hand, reiter .....

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favour of the assessee. He pointed to the relevant findings of the order that are placed in paper book. He therefore submitted that in such circumstances the order of Ld. CIT(A) needs to be upheld. He thus supported the order of Ld. CIT(A). 6. We have heard the rival submissions and perused the material on record. The issue in the present case is whether the income derived from the business of plant floriculture / tissue culture is exempt u/s 10(1) of the Act. We find that identical issue arose .....

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Bench, Pune being ITA No. 146/PN/2008 order dated 26-03-2009. The said decision has been followed by the Tribunal in assessee s own case for the A.Y. 2007-08 in ITA No. 1110/PN/2011 order dated 25-09-2012. The operative part of the said decision on this issue is as under: 3. We find that the Tribunal has allowed the identical claim of the assessee on the identical set of facts in the A.Y. 2004-05. The said order of the Tribunal is followed in the other years also being A.Ys. 2001-02, 2003-04 an .....

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t in the case of CIT Vs. Raja Benoy Kumar Sahas Roy (Supra), Hon ble Madrash High Court in the case of CIT Vs. Soundarya Nursery, 241 ITR 530(Mad.) and of Hon ble Allahabad High Court in the case of Jugal Kishore Arora Vs. DCIT, 269 ITR 133 (Allhad.). The relevant para Nos. 33 to 40 of the decision of the Tribunal in the case of the assessee for A.Y. 2004-05 (supra) are being reproduced hereunder for a ready reference : 33. In our considered view, therefore, the operations carried out on the fac .....

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f the case were concerned, Their Lordships, inter alia, noted as follows: The Tribunal, after considering all the relevant facts, as also the applicable law, concluded that the assessee s activities are to prepare seedlings on scientific lines: that the other plants are grown on prepared beds on lands owned by it and the plants are then grafted or budded ; that the resulting grafts are transplanted in suitable containers and are reared in green houses or in shade and after they take root, they a .....

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on of human labour and energy was essential . These observations equally apply to assessee s case as well. 36. In Soundarya Nursery s case, Hon ble Madras High Court, after taking note of the law laid down by the Hon ble Supreme Court in the case of Raja Benoy Kumar Sahas Roy (supra) and the facts of the case, observed as follows: All the products of the land, which have some utility either for consumption or for trade or commerce, if they are based on land, would be agricultural products. Here, .....

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ot, 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 questions would be agricultural operations all this involves human skill and effort. 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 t .....

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g with a situation in which operations were carried on in a greenhouse. Therefore, merely because a greenhouse in involved, the nature of operations would not change. Learned CIT(A) has distinguished this precedent on the ground that in assessee s case, basic operations have not been carried out on land. That premises itself, for the detailed reasons set out earlier in this order, rests on a unsustainable legal foundation. The basic operations have been, and can only be, carried out on the land. .....

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of and analyzing the landmark Supreme Court judgment in the case of Raja Benoy Kumar Sahas Roy (supra), also observed that the nature of produce raised has no relevance to the character that the nature of produce raised has no relevance to the character of agricultural operation . It was noted that cultivation of flowers of artistic and decorative value would also be included in the scope of agricultural operations. This observation will also apply to the facts of the present case. 39. We may m .....

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ntended that this Explanation is retrospective in effect inasmuch as it is merely clarificatory in nature. We are taken through the budget speech by the Finance Minister, Explanatory Memorandum to the Finance Bill and other documents to support the contention that this amendment in law was merely clarificatory. Our attention was thus invited to several judicial precedents in which it is noted that even while an amendment is stated to be prospective in application, but held to be retrospective in .....

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mic in the present content. We leave it at that. 40. In view of the above discussions, and for the reasons set out above, we are of the considered view 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 .....

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