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TMI Blog2014 (11) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was interested only to have healthy foundation seeds grown for the process of converting them to certified seeds and the entire income amounted to business income of the assessee. Unless the assessee has carried out the basic operations upon the land i.e., tilling of the land, sowing of the seeds planting, etc. requiring the expenditure of human skill and labour upon the land, it cannot be said that the income earned by the assessee is agricultural income - subsequent operations would also be agricultural operations if taken in conjunction with basic operations - if any income is earned by carrying out the subsequent operations without carrying out the basic operations then such income would not be considered as agricultural income - the plants have been grown on land owned by the assessee - The assessee during the course of growing and nurturing the plants on the land carried out certain functions such as tilling the soil, weeding, watering, manuring etc. and finally the plants are made ready for sale - It goes without saying that all this involves human skill and effort - When plants are established in the soil only then they are shifted in suitable containers or appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nursery in which case the return was filed in response to notice u/s. 148 issued by the ITO declaring nil income and stating that the income from the nursery activities belonged to the HUF and is exempt u/s 10(1) of the Act. The said income was again taxed in the assessment of the HUF on a protective basis. 2.2 The said order was challenged before CIT(A) by the assessee and the CIT(A) held that the income derived from the nursery would be considered in the assessment of the assessee HUF. It was also held that the income derived from nursery is agricultural income liable to exemption u/s 10(1) of the Act and that though the assessment is required to be made on a substantive basis in the hands of HUF , the entire income derived from the nursery as included in the assessment is to be excluded being exempt u/s 10(1) of the Act. 2.3 On appeal before the Tribunal, the Tribunal held that the income earned by the assessee is not agricultural income as defined in section 2(1) and 2(1A) of the Act and hence not exempt u/s 10(1) of the Act. 2.5 Similarly, in the case of Tax Appeal No. 24 of 2003, the Assessing Officer did not accept the assessee s contention that the income from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Another vs. Namdhari Seeds P. Ltd. reported in [2012] 341 ITR 342 (Karn); (b) Maharaja Vibhuti Narain Singh vs. State of Uttar Pradesh reported in [1967] 65 ITR 364. 6. Having heard learned advocates for both the sides and having gone through the materials on record, including the decisions on the subject cited by learned advocates for both the sides, we are of the opinion that the income derived from nursery is an agricultural income which is liable to exemption under section 10(1) of the I.T. Act, 1961. Section 2(1) of the Act defines agricultural income and states as under: (1) agricultural income means (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land- revenue in the taxable territories or subject to a local rate assessed and collected by officers of the Government as such : (b) any income derived from such land by: (i) agriculture, or (ii) the performance by a cultivator or receiver of rent-in- kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or (iii) the sale by a cul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c., especially with a cultivator, as to cultivate the corn; (2)to raise, or foster the growth of, by tillage or by labour and care; to produce by culture; as to cultivate roses; to cultivate oysters. ... Whether the narrower or the wider sense of the term agriculture should be adopted in a particular case depends not only upon the provisions of the various statutes in which the same occurs but also upon the facts and circumstances of each case. The definition of the term in one statute does not afford a guide to the construction of the same term in another statute and the sense in which the term has been understood in the several statutes does not necessarily throw any light on the manner in which the term should be understood generally. The decided cases disclose a variety of opinions in regard to the connotation of the terms agriculture and agricultural purposes. At one time agriculture was understood in its primary sense of cultivation of field and that too for production of food crops for human beings and beasts. This limited interpretation could not be adhered to even though tilling of the land, sowing of the seeds, planting or similar work on the land were the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce raised or received by the cultivator or receiver of rent-in-kind is thus made the subject- matter of cls. (ii) and (iii) in s. 2 (1)(b) of the Act, the term agriculture used in cl. (i) of s. 2(1)(b) must also be similarly restricted to the performance of the basic operations on the land and there is no scope for reading the term agriculture in the still wider sense indicated above. If the term agriculture is thus understood as comprising within its scope the basic as well as subsequent operations in the process of agriculture and the raising on the land of products which have some utility either for consumption or for trade and commerce, it will be seen that the term agriculture receives a wider interpretation both in regard to its operations as well as the results of the same'. Nevertheless there is present all throughout the basic idea that there must be at the bottom of it cultivation of 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... farming, horticulture, forestry, butter and cheese making, etc. Murray's Oxford Dictionary describes it as the science and art of cultivating the soil, including the allied pursuits of gathering in the crop and rearing livestock, tillage, husbandly, farming in the widest sense. In Bouviers' Law Dictionary quoting the Standard Dictionary agriculture is defined as the cultivation of soil for food products or any other useful or valuable growths of the field of garden, tillage, husbandry, also by extension, farming, including any industry practised by cultivator of the soil in connection with such cultivation as breeding and rearing of stock, dairying, etc. The science that treats of the cultivation of the soil. In Corpus juris Secundum the term agriculture has been understood to mean, art or science of cultivating the ground, especially in fields of large quantities, including the preparation of soil, the planting of seeds, the raising and harvesting of crops, and the rearing, feeding and management of livestock tillage, husbandry and farming. In its general sense, the word also includes gardening or horticulture. Century Dictionary and Anderson's Dictionary of Law : Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the revenue that for claiming the benefit of section 2(1)(b)(ii) the process employed by the assessee must be of such character as just to make the produce marketable. This interpretation ignores the words ordinarily employed . The interpretation put by the learned counsel for the revenue about the true scope of section 2(1)(b)(ii) appears to us extremely narrow. The true test, according to us, is what is the process ordinarily employed by the cultivators of any particular locality to render the produce raised by them fit for market. The process adopted in one locality may not necessarily be adopted in another locality. In some places paddy as such is sold; yet in other places usually it is converted into rice, before it is sold. In other words, the market referred to in the provision is a ready and willing market where the produce has to be dumped. 6. Now we may proceed to examine the decided cases read at the time of the hearing. The first case read to us is Killing Valley Tea Co. Ltd. v. Secretary of State. The assessee therein was a grower of tea. Tea grown was made ready for marketing by employing certain mechanical process. The extra income earned as a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Raja Benoy Rumor Sahas Roy [1957] 32 ITR 466, which is the leading case of agriculture . It was held therein that agriculture in its primary sense denotes the cultivation of the field and is restricted to cultivation of the land in the strict sense of the term, meaning thereby tilling of the land, sowing of the seeds, planting and similar operations on the land and these are basic operations, which require the expenditure of human skill and labour upon the land itself. The apex court further held that besides the basic operations, the subsequent operations would also be comprehended within the terms of agriculture, and such subsequent operations are illustrated as weeding, digging the soil around the growth, removal of undesirable undergrowth and all operations which foster the growth and preservation of the same not only from insects and pests, but also from depradation, from outside, tending, pruning, cutting, harvesting and rendering the produce fit for the market, which would all be agricultural operations, when taken in conjunction with the basic operations. All the products of the land, which have some utility either for consumption or for trade or commerce, if they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed as an agricultural operation or not, there is no need for use to go into this matter at length. It is true that there is no decision so far brought to our notice on the question whether the maintenance of a nursery is included within the scope of agriculture technically defined. It may be that applying the above-mentioned tests laid down by their Lordships of the Supreme Court, cases my arise in which a nursery may be maintained by a farmer as an aid or necessary adjunct to the primary process of agriculture carried on by him. But, usually nurseries are maintained and run as businesses quite independently of agriculture, and there may be no process carried on upon the land at all in running a nursery. There are, inter alia, two meanings of the term nursery given in the Oxford Dictionary which are relevant here. One of these is : A piece of ground in which young plants or trees are reared until fit for transplantation . Another meaning given, which is not so common, is : a collection of such plants . Any place where young plants are reared and kept is spoken of as a nursery . The keeping and running of a nursery as a business does not generally involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g but also products of utility for a trade and commerce. 9. In the present case, the plants have been grown on land owned by the assessee. The assessee during the course of growing and nurturing the plants on the land carried out certain functions such as tilling the soil, weeding, watering, manuring etc and finally the plants are made ready for sale. It goes without saying that all this involves human skill and effort. When plants are established in the soil only then they are shifted in suitable containers or appropriate place in land. 10. The Madras High Court judgment in the case of Soundarya Nursery (supra) wherein on similar facts it was held as under : All the products of the land which have some utility either for some consumption or for trade or commerce if they are based on land would be agricultural products. If the plants sold in pots were the result of basic operations on the land expending human skill and labour thereon and if after performance of the basic operations on land the resultant product grown or such part thereof was suitable for being nurtured in a pot with water or by placing them in the green house or in shade or after performing seve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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