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TMI Blog2015 (9) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... lved, the nature of operations would not change - Decided in favour of assessee. - ITA Nos.428 & 429/PN/2014 - - - Dated:- 28-8-2015 - SHRI R.K. PANDA AND SHRI VIKAS AWASTHY, JJ. Appellant by : Shri Dheeraj Jain and Shri B.C. Malakar Respondent by : Shri Pramod Shingte ORDER PER R.K. PANDA, AM : The above 2 appeals filed by the Revenue are directed against the common order dated 09-12-2013 of the CIT(A)-III, Pune relating to Assessment Years 2007-08 2008-09 respectively. Since identical grounds have been taken by the Revenue in both these appeals, therefore, these were heard together and are being disposed of by this common order. ITA No.428/PN/2014 (A.Y. 2007-08) : 2. Facts of the case, in brief, are that the assessee is a partnership firm and is engaged in the business of production of nursery plants and banana plants, tissue culture activities etc. The income derived from the said activity was claimed exempt u/s.10(1) of the IT. Act in the return of income filed for the Assessment Year under consideration, claiming the same to be agricultural income. However, the Assessing Officer was of the view that in view of the provisions of sec.2(1A) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Agricultural' as used in Sec.2(1A)(b)(i) has not been defined in the Act. The Hon'ble Supreme Court in its landmark judgment in the case of Raja Benoy Sahas Ray (32 ITR 466) has held that agricultural activities would involve two set of activities, the basic operations and subsequent operations. The basic operations would involve tilling of the land, sowing of the seeds, planting and similar operations on the land requiring expenditure of human skill and labour on the land itself. Thus, these are essentially activities which initiate: and facilitate the process of growth of agricultural produce. The subsequent operations are those which are to be performed after the produce sprouts from the land, e.g., weeding, digging the soil around the growth, removal of undesirable undergrowths and all operations which foster the growth and preserve the same till the produce is fit for the market/consumption. The Hon'ble Supreme Court held that such subsequent operations would also be agricultural operations when taken in conjunction with the basic operations above described. Thus, it would follow from the above decision that in order to be termed as agricultural activities; t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying out the basic operations are found to be contrary to the facts of the case. 5.3 At this stage, it is relevant to refer to the decision of the Hon'ble Madras High Court in the case of CIT vs. Soundarya Nursery (241 ITR 530). In the said case, while answering the question as to whether income from sale of plants grown in pots in a nursery can be said to be agricultural income, the Court held as under:- 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. 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 is 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 are made ready for sale as plants all these questions would be agricultural operations all this involves human ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant derived from sale of plants as agricultural income. The grounds raised by the appellant on this issue in both; the Assessment Years under consideration are decided in its favour. 4. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us with the following grounds : 1. The order of the Commissioner of Income-tax (Appeals) is contrary to law and to the facts and circumstances of the case. 2. The Commissioner of Income Tax (Appeals) grossly erred in directing the Assessing Officer to treat assessee's income as agriculture u/s 2(1A)(b)(i) of the Income Tax Act, 1961 and to exclude said income u/s 10(1) of the Act. 3. The Commissioner of Income Tax(Appeals) grossly 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. 4. The Commissioner of Income Tax(Appeals) has wrongly placed reliance on the ratio of decision in the case of K. F. Bioplant Private Limited, as the same has not been accepted by the department. 5. For these and such other reasons as may be urged at the time of the hearing, the order of the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... until and unless the same is reversed by a higher forum. He accordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the Revenue be dismissed. As regards the decision of the Tribunal in the case of M/s. Abhijit Subhas Gaikwad (Supra) is concerned he submitted that the same is distinguishable and not applicable to the facts of the present case. In that case, the issue was whether the land sold is agricultural land for claiming exemption u/s.54B. Here the issue is whether the income is agriculture income or not. Therefore, the said decision is not applicable to the facts of the case. He also relied on the following decisions : 1. ITO Vs. Dr. Seemantini S. Pathare ITA No.263/PN/2011 order dated 23-01-2013 2. Dy. CIT Vs. Best Roses Biotech Pvt. Ltd. -ITA No.1975/Ahd/2008 order dated 30-11-2011 7. We have considered the rival arguments made by both the sides, perused the order of the AO and Ld. CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case the assessee partnership firm is engaged in the business of production of nursery plants and banana plants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the ITAT Pune Bench in assessee's own case, allowed the claim of the assessee. 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 and 2005-06 and 2006-07 being ITA Nos. 1274 to 1278/PN/2010, common order dated 22.2.2012. The operative part of the order of the Tribunal in ITA Nos. 1274 to 1278/PN/2010 dated 22nd February 2012 is as under: 7. We find that the Tribunal in the case of assessee for the A.Y. 2004-05 has discussed an identical issue in detail before deciding the same in favour of the assessee. The Tribunal while deciding the issue has taken strength from several decisions including decision of Hon'ble Supreme Court 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 (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 is 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 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 the products of agriculture. 37. When we apply the above tests to the facts of the present case, and we bear in mind our findings 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 effect. On the basis of these elaborate arguments, it was submitted that, in any event, based on this clarificatory amendment in law, basic operations having been carried out on land is no longer sine qua non for treating income as agricultural income. This plea was clearly an alternative plea. Since we have allowed the basic plea of the assessee and we have held that the basic operations were carried out on land, it is not really necessary to deal with this alternative plea which is only academic 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 Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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