TMI Blog2018 (1) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the cultivator. We find support from this judgment also in favour of our findings. The assessee has filed the copies of the invoices and bills and agricultural activities as additional evidence before us and we have considered the same for giving relief to the assessee. However, since this additional evidence was not filed before the authorities below, we deem it fit and proper to admit the same and remand the same to the file of the AO for verification of the authenticity of the said documents and for computation of agricultural income. If it is found that these documents are genuine, then our findings stands. If it is otherwise, the AO is free to take a decision on the basis of only such documents which are found to be genuine. The assessee is directed to furnish the bifurcation of its income from CWG towards agricultural activity and non-agricultural activity before the AO on the basis of our finding that activity up to harvesting is agricultural activity. - Decided partly in favour of assessee - ITA No.1074/Hyd/2016 - - - Dated:- 29-12-2017 - Smt. P. Madhavi Devi, Judicial Member And Shri S.Rifaur Rahman, Accountant Member For The Assessee : Shri Kishore Phadk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jawaharlal Nehru Stadium in a record time of 21 hours and the applicable events were successfully conducted thereon. 4. The AO observed that the assessee participated in the bidding process with the support of M/s. Strayth Ayr an Australian Co. and finally laid down turf grass at the Jawaharlal Nehru Stadium with the extensive use of imported technology and technical personnel. He observed that these activities are different from the normal agricultural activities that are carried out by an agriculturist and therefore, the assessee was asked to explain the activities carried on by it in this regard, with insistence on usage of imported technology and role of Strayth Ayr.-Australia. In response, the assessee filed come coloured photographs of the process involved in growing of grass turf with imported machinery (from Strayth Ayr.) used in the process, their capacity to lay grass turf etc. A note was also submitted stating the purpose of the technical assistance technical personnel to be able to replant fresh turf of international sporting standards (90,000 sft approximately) within 24 hours, in a specialized manner with zero root damage as was required, which was provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the excess of receipts over payments admitted at ₹ 2,65,60,347 were brought to tax as business income of the assessee. Aggrieved, the assessee preferred an appeal before the CIT (A), who confirmed the order of the AO, and the assessee is in second appeal before us. 7. The learned Counsel for the assessee, Shri Kishore Phadke, advanced extensive oral arguments reiterating the submissions made by the assessee before the AO and the CIT (A) and has relied upon the following case law in support of his contentions that the entire activity is agricultural activity. a) CIT vs. Raja Binay Kumar Sahas Roy 32 ITR 466 (SC) b) CIT v. Soundarya Nursery, 241 ITR 530 (Mad.) c) CIT v. Woodland Estates Ltd, 58 ITR 612 (Ker.) d) DCIT v. Best Roses Biotech P Ltd 17 Taxman.com 56 (Ahd.) e) CIT v. Rana Gurjit Singh, 22 Taxman.com 93 (P H) f) CIT v. H.G.Date, 82 ITR 71 (Bom.) g) CIT v. Stanes Amalgamations Ltd 232 ITR 433 (Mad.) h) Five Star Shipping Co. Pvt. Ltd v. DCIT ITA No.2151/Mum/2012 i) ACIT v. P.Z. Estate (P) Ltd, 2 SOT 563 (Del.) 8. In the alternative, he also pleaded that since the AO has observed that the activity up to growing of turf grass in the far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld or granted in its absolute discretion. ( vi). Clause 25 mandates that the service provider must not sub-contract the whole or any part of the service without Delhi 2010 i.e. contractee s prior written consent. ( vii). Schedule-2 of the contract describes the scope of the services. It is seen that the service provider will be entirely responsible for the grass turf replacement on completion of the opening ceremony and maintain the grass turf upto the closure of all the Tract and Field events of the games. Sub-clause (C) of the schedule provides that the service provider agrees and undertakes that it would only use the below mentioned specifications/grass type/breed for the turf relaying. 1. Selection No.1. ( viii). Clause (F) of schedule 2 provides that the service provider also undertakes that the area where it will grow the rolled turf for the purpose of Games will be at the below mentioned address: Asoda Farma, Opp: to Asoda Mahal, Asoda Village, Hapur Tehsil, Ghaziabad Distt. U.P. India ( ix). Clause I provides that the soil shall be agricultural soil or any other media viz., coco peat/peat moss etc., including mesh. ( x). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Contract whichever is later. 02 25% of the total amount of the contract Within 15 days of the surveyor certifying that the work has started. 03 25% of the total amount of contract Within 15 days of the surveyor certifying that the ground is prepared for grassing including the grassing with seed/sold of specified grass stain 04 10% of the total amount of contract Within 15 days of the surveyor certifying that the grass is grown and is green and at least 3 mowing are carried out. 05 10% of the total amount of contract Within 15 days of the surveyor certifying that the rolls/grass are green and ready 06 10% of the total amount of contract Within 15 days of the surveyor certifying that laying work at site has been completed 07 10% of the total amount of contract Within 15 days of the execution of the closin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity. In support of his contention, the learned Counsel for the assessee has placed reliance upon various decisions which have been listed above. No doubt, the assessee has been awarded the contract to provide the service of relaying the grass turf in the Jawaharlal Nehru Stadium for the Commonwealth Games to be held at New Delhi in 2010 and as far as CWG is concerned, it is a contract for service and the payments are not towards salary or wages. Therefore, it made TDS from the payment. This factor alone does not determine the nature of the activity. This is one of the several factors which determine the nature of the activity. The contract involves certain activities which may fall under the category of agricultural activity. As seen from the contract terms conditions, the contract payment is for the entire activity and is paid in instalments only to ensure that the assessee adheres to the timeframe and milestones and completes the process as per the requirement of the contractee and the payment schedule is fixed in proportion to the activities carried on by the assessee. Therefore, the payment for the agricultural activity has not been apportioned by the parties to the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and there is no bill for any purchase of the seeds nor is there any bill for fertilizers and chemicals. It is the case of the learned DR, that the assessee has sourced the grass from various cultivators and has only maintained the grass till it has grown to a particular length before harvesting and laying it in the field. Having gone through the invoices for purchase of the grass carpet, which has been purchased from 10.07.2010 to 23.09.2010 from various parties, we find that the grass carpet of nearly 90,000 sft was supposed to be relayed in the fields on 3.10.2010. The assessee s case is that it had to grow large extent of grass in order to meet the requirement of the good and high standard of grass required under the contract and some of the purchases are only to see that the assessee fulfills the conditions even if some of the grass grown by the assessee is damaged by the vagaries of the nature. However, as seen from the invoices, since there are no expenses towards purchase of seeds or the purchase towards the fertilizers and chemicals, it is not clear as to whether the assessee has grown the grass from the seeds or has purchased the grass which has been maintained on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding, digging the soil around the growth, removal of undesirable undergrowths and all operations which foster the growth and preserve the same not only from insects and pests but also from depredation from outside, tending, pruning, cutting, harvesting, and rendering the produce fit for the market. The latter would all be agricultural operations when taken in conjunction with the basic operations above described, and it would be futile to urge that they are not agricultural operations at all. However, the mere performance of these subsequent operations on the products of the land, where such products have not been raised on the land by the performance of the basic operations which have been described above would not be enough to characterize them as agricultural operations. In order to invest them with the character of agricultural operations, these subsequent operations must necessarily be in conjunction with and a continuation of the basic operations which are the effective cause of the products being raised from the land. It is only if the products are raised from the land by the performance of these basic operations that the subsequent operations attach themselves to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land in the sense of tilling of the land, sowing of the seeds, planting, and similar work done on the land itself. This basic conception is the essential sine qua non of any operation performed on the land constituting agricultural operation. If the basic operations are there, the rest of the operations found themselves upon the same. But if these basic operations are wanting the subsequent operations do not acquire the characteristic of agricultural operations . 14. Subsequent to this decision of the Hon'ble Supreme Court, the Hon'ble Madras High Court in the case of CIT vs. Soundarya Nursery reported in (2002) 241 ITR 530 (Mad.) has held as under: If the plants sold by the assessee in pots were the result of the basic operations on the land on expending human skill and labour thereon and it was 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 were made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. Therefore, the income in question was an agricultural income. It cannot be included in total income being within the ambits of the provisions of section 10(1) . 17. In the case of Asstt. CIT vs. P.Z. Estates (P) Ltd, reported in (2005) 2 SOT 563 (Del.) the Tribunal was considering the nature of the income derived by the assessee therein from growing special quality of grass required for creating golf course and has held it to be agricultural income. 18. In the decisions relied upon by the learned DR, we find that the judgment of the Hon'ble Supreme Court in the case of Thiru Arooran Sugars Ltd v. CIT (Supra) is not applicable to the facts of the case before us as it is distinguishable on facts. 19. In the case of CIT v Namdhari Seeds (P) Ltd (Supra), the Hon'ble Karnataka High Court was considering the case whether the hybrid seeds were grown by the farmers which were purchased and sold by the assessee and none of the other activities were undertaken by the assessee company therein. The Hon'ble High Court held that the seeds were purchased and sold by the assessee company after converting the same as certified seeds. The Hon'ble High Court held that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find support from this judgment also in favour of our findings. The assessee has filed the copies of the invoices and bills and agricultural activities as additional evidence before us and we have considered the same for giving relief to the assessee. However, since this additional evidence was not filed before the authorities below, we deem it fit and proper to admit the same and remand the same to the file of the AO for verification of the authenticity of the said documents and for computation of agricultural income. If it is found that these documents are genuine, then our findings stands. If it is otherwise, the AO is free to take a decision on the basis of only such documents which are found to be genuine. The assessee is directed to furnish the bifurcation of its income from CWG towards agricultural activity and non-agricultural activity before the AO on the basis of our finding that activity up to harvesting is agricultural activity. The alternate ground of appeal i.e. Ground of appeal No.5 is allowed and the other grounds 1 to 4 are rejected. 22. In the result, assessee s appeal is partly allowed. Order pronounced in the Open Court on 29th December, 2017. - - Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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