TMI Blog2022 (12) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... der the category of contract. We do not know the basis for reaching this conclusion by the learned Assessing Officer. There is no dispute that the assessee took the agricultural lands on lease and conducting normal agricultural operations to produce the hybrid variety of foundation seeds in order to sell them in the open market to the seed industries, and in that pursuit they engaged the labour, supervisors etc. Assessee produced voluminous record to show the engagement of labour and the payment of salaries to the supervisors apart from producing the agreements with the landowners. We have already referred to the contents of the agreements with the landowners which the learned Assessing Officer failed to appreciate in proper perspective. Merely because the assessee took the land on lease for conducting their research operations to produce the foundation seeds of the hybrid varieties, such a lease cannot ipso facto make the operations of the assessee as contract farming. Contract farming in the context of this case would be that if the assessee outsources the agricultural operations which they are doing for themselves now, to some other third party. As could be seen from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and, therefore, does not warrant any interference. - ITA Nos. : 1314/Hyd/2017 And 1436/Hyd/2017 - - - Dated:- 26-10-2022 - Shri Rama Kanta Panda, Accountant Member And Shri K.Narasimha Chary, Judicial Member For the Assessee : Shri Kumar Pal Tated, AR For the Revenue : Shri KPRR Murthy, DR ORDER PER K. NARASIMHA CHARY, JM: Aggrieved by the orders passed by the learned Commissioner of Income Tax(Appeals)-4, Hyderabad ( Ld.CIT(A) ) in the case of M/s. Profarm Seed India Private Limited ( the assessee ) for the assessment year 2014-15, both the assessee and Revenue preferred these appeals. Since both the appeals emanate from the very same order of the learned CIT(A) for the assessment year 2014-15, it would be just and convenient to dispose them of by way of this common order. 2. Brief facts of the case are that according to the assessee, they are engaged in the business of producing foundation seeds, by conducting agricultural operations on agricultural lands and have been selling the same which are sold to various seed Companies like Godrej Seeds, Nath Seeds, Super Agri Seeds etc. According to the learned Assessing Officer, however, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a sum of Rs. 24 lakhs towards Directors remuneration and another sum of Rs. 1.75 lakhs towards audit fee, beyond the due date and therefore, the expenditure of Rs. 25.75 lakhs was disallowed and added back to the income of the assessee. Learned Assessing Officer thereby concluded the assessment by order dated 8/11/2016 determining the income of the assessee at Rs. 2,87,72,736/-. 5. Aggrieved by such an action of the learned Assessing Officer, assessee preferred an appeal before the Ld. CIT(A) and by order dated 24/5/2017 the Ld. CIT(A) confirmed the addition of Rs. 25.75 lakhs disallowed under section 40(a)(ia) of the Act by following the decision of the Hon ble High Court of AP in the case of CIT vs. M/s. Merilyn Shipping Transports; while deleting the addition of Rs. 2,39,14,201/- towards income exempt under section 10(1) of the Act, and directed the learned Assessing Officer to verify the details in respect of the addition of Rs. 4, 33, 892/- towards delay in payment of provident fund while directing the learned Assessing Officer to verify the same and to allow. 6. Challenging the deletion of Rs. 2,39,14,201/- claimed under section 10(1) of the Act, Revenue preferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf in its research forms over the years of time and different product and breeder seeds are developed. The assessee further explained before the learned Assessing Officer that the assessee develops breeder seeds in their research firm by conducting the sowing operations and by planting a vast variety of seeds individually, the crop so sowed harvested and thereafter the seeds are so harvested were again re-cultivated or replanted after the two seeds having different traits are crossed over a number of generations of crops until a desired result is obtained after a considerable time. Assessee further explained that from the several research breeder seeds, the breeders which are best identified or developed into hybrids and shown to various seed companies like Godrej seeds and Genetics Ltd, Super Agri Seeds Pvt. Ltd, Nath Biogen Ltd etc., by displaying the same in the form and thereafter the foundation seeds of that particular hybrid variety were produced and supplied. 10. Assessee, therefore, explained before the learned Assessing Officer that basing on the selection and requirement of different Companies they produce the foundation seeds of a particular hybrid variety in volumes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to the dominant and primary object and intention of the assessee to conduct R D extensively for the development of new hybrid seeds for commercial exploitation he describes the academic part of the production of hybrid seeds. Ultimately the learned Assessing Officer without bringing any material on record jumps to the conclusion that the operations conducted by the assessee on the leasehold land do not answer the description of agriculture as contemplated in section 2 (1A) of the Act and therefore the assessee is not entitled to claim the exemption under section 10(1) of the Act. 13. Before the Ld. CIT(A) also assessee reiterated their stand to say that they are in the business of production/cultivation of foundation seeds and the same was proved by producing relevant records and the learned Assessing Officer erred in ignoring the production of foundation seeds and the production of hybrid seeds inasmuch as the production of hybrid seeds require a seed production from foundation seeds and processing it at a processing plant to market hybrid seeds, which activity the assessee has not been performing. 14. On a careful consideration of the assessment order in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations which they are doing for themselves now, to some other third party. 17. Apart from this, it could be seen from the record that vide letter dated 30/3/2016 the assessee, while explaining the modus operandi of their agricultural operations, invited the learned Assessing Officer to visit their farm and look at their activities so that the learned Assessing Officer can get the clarity on the issue and differentiate the operations conducted by the assessee with those conducted by other seed companies in the industry. Learned Assessing Officer does not think it fit to accept this request of the assessee to get the things clarified. However, the assessment order in its entirety is an academic exercise, without any material on record to connect such things with the operations conducted by the assessee on the lands took by them on lease. 18. Having regard to the circumstances in their entirety and appreciating the facts in the light of the decision of the Hon ble High Court in assessee s own case for the assessment year 2008-09, relied upon by the Ld. CIT(A), we do not find anything illegality or irregularity in the conclusions reached by the Ld. CIT(A) and accordingly upho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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