2019 (7) TMI 82 - AT - Income Tax

Agricultural income - total receipt is taxable or income - treatment of activity of growing of hybrid seeds - exemption claimed u/s 10(1) - HELD THAT Admittedly, the assessee himself had reported the receipts at ₹ 5.54 crores and claimed the same to be exempt u/s 10(1) but had also enclosed audited Profit and Loss Account, in which it had declared loss of ₹ 1.22 crores. In this regard, the CIT(A) has correctly held that there is no merit in the order of AO in assessing total receipts in the hands of assessee and at best, the AO could have determined the loss / income assessable in the hands of assessee The CIT(A) while deciding the issue in the present case had in turn, relied on the decision of ACIT Vs. Ajeet Seeds Ltd. 2013 (11) TMI 894 - ITAT PUNE which has been confirmed by Bombay High Court 2015 (6) TMI 1187 - BOMBAY HIGH COURT . Consequently, we hold that growing of hybrid seeds in the case of assessee can never be held to be non-agricultural activity. Hence, the assessee is entitled to claim deduction under section 10(1) of the Act. - Decided in favour of assessee.

Summary

Issues:
Treatment of activity of growing hybrid seeds as agricultural activity or not.

Analysis:
1. The appeals by Revenue were against orders of CIT(A) for assessment years 2012-13 and 2013-14 under section 143(3) / 250 of the Income-tax Act, 1961.
2. The Revenue raised grounds of appeal questioning the treatment of the assessee's income as agricultural income and the application of relevant sections.
3. The main issue was whether the activity of growing hybrid seeds constituted agricultural activity.
4. The assessee claimed that growing hybrid seeds involved agricultural operations jointly with landowners.
5. The Assessing Officer disputed this claim, treating the receipts as non-agricultural income and denying exemption under section 10(1) of the Act.
6. The CIT(A) noted discrepancies in the Assessing Officer's approach, highlighting the loss incurred by the assessee in the operations.
7. CIT(A) also referred to previous Tribunal decisions supporting the assessee's position on the nature of the activity.
8. The Revenue contended that the activity of growing hybrid seeds should not be considered agricultural.
9. The Authorized Representative for the assessee cited relevant High Court and Tribunal judgments supporting the agricultural classification of the activity.
10. The Tribunal found the Assessing Officer's assessment flawed as it taxed total receipts instead of determining the actual income.
11. Referring to the High Court judgment, the Tribunal upheld that growing hybrid seeds constituted agricultural activity, entitling the assessee to claim deduction under section 10(1) of the Act.
12. The decision was based on the understanding that growing seeds involved agricultural operations and did not amount to non-agricultural activity.
13. Following the precedent set by the High Court, the Tribunal dismissed the Revenue's appeal and allowed the assessee's claim for deduction.
14. The decision in one appeal applied mutatis mutandis to another similar appeal, resulting in the dismissal of both Revenue appeals.

This comprehensive analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the Tribunal's decision based on relevant legal precedents and interpretations of the Income-tax Act.