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TMI Blog2018 (1) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... magination can the silkworms and certainly not the silk cocoons be regarded as the agricultural produce 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 X X X X Extracts X X X X X X X X Extracts X X X X ..... as installed at the 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, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts and 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 fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (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). Clause (J) provides that not more than 01% of the root zone should be dam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 closing ceremony. (xiv). Schedule 4 - Milestones to be achieved by the assessee: "S.No Task Visit Date of OC designated Surveyor 1 Whether the work has started for the growing of the grass at the specified venue given by the Service Provider Within 30 days from the commencement date (21st June, 2010) 2 When the ground is prepared for grassing including the grassing with seed/sod of specified grass stain Within 60 days from the commencement date (21st July, 2010) 3 To check if the grass is fully grown and is green and at least 3 to 4 moving care carried out Within 90 days from the commencement date (21st August, 2010) 4 To check if the rolls/grass are ready and are green and are in proper state and fit for use. Within 120 days from the commencement date (21st September, 2010) 11. From the above clauses of the contract, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract. The payment is for the entire activity of growing the grass as well as laying and maintaining the grass turf at the prescribed venue. In such circumstances, can the income be bifurcated amongst the activities carried on by the assessee? and if yes, then on what basis? Before answering the above question, it is first required to be examined whether the assessee has carried on any agricultural activity. What is agricultural activity, the income from which is exempt from tax has been considered by the Courts in various cases. 13. In the decisions relied upon by the learned Counsel for the assessee, for calling any activity as agricultural activity, the basic and foremost requirement is that the area on which the assessee is carrying on the activity, must be agricultural land. As seen from the lease agreement with the Assoda Farm, the assessee has entered into a lease for carrying on agricultural activity on the agricultural land. As seen from the photos filed by the assessee, showing various activities carried on by the assessee, the assessee has tilled the land and levelled the land with tractors. Thereafter, it is the case of the assessee that it has grown the grass in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fields taken on lease by the assessee. As seen from the list of milestones at page 112 of the paper book, the officers from the CWG were required to visit the field on 21.07.2010 to examine whether the ground is prepared for grass including the grassing with seed/sod of specified grass stain. From the additional evidence filed by the assessee, it is seen that the assessee has incurred certain expenditure on 13.07.2010 for preparation of seeds and the amounts spent on such activity is ₹ 38,250. Therefore, it appears that the assessee has done some activity for growing the grass from seeds in the fields other than sourcing the grass carpet from various other nurseries. It is also not in doubt that the grass which has been grown and harvested by the assessee is from the agricultural land taken on lease by the assessee and its growth and harvesting has been supervised and inspected by the officials of the CWG team. Therefore, the activity carried on by the assessee, till the grass is grown and removed from the soil can be considered as the agricultural activity. The subsequent activity of transporting the grass and relaying it at the fields and maintaining the same till the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts of the land and acquire the characteristic of agricultural operations. The cultivation of the land does not comprise merely of raising the products of the land in the narrower sense of the term like tilling of the land, sowing of the seeds, planting, and similar work done on the land but also includes the subsequent operations set out above all of which operations, basic as well as subsequent, form one integrated activity of the agriculturist and the term 'agriculture' has got to be understood as connoting this integrated activity of the agriculturist. One cannot dissociate the basic operations from the subsequent operations and say that the subsequent operations, even though they are divorced from the basic operations can constitute agricultural operations by themselves. If this integrated activity which constitutes agriculture is undertaken and performed in regard to any land that land can be said to have been used for 'agricultural purposes' and the income derived therefrom can be said to be 'agricultural income' derived from the land by agriculture. The mere fact that an activity has some connection with or is in some way dependent on land is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plants, all these operations would be agricultural operations that involved 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 were clearly the products of agriculture. So far as the seeds are concerned, it is not possible for the seeds to exist without the mother plants, and the mother plant is grown on land. It was not the case of the revenue that the seeds were the result of the wild growth and not on account of cultivation by the assessee. The seeds were clearly a product of agriculture and the income derived from the sale of seeds, was agricultural income". 15. In the case of CIT vs. Woodland Estates Ltd reported in (1965) 58 ITR 612 (Kerala), the Hon'ble Kerala High Court has held as under: " Smoked sheets and sole crepe should be treated alike and that both have undergone only processes that are necessary to render the produce fit to be taken to market. That smoked sheets should be considered as having undergone only a process necessary for rendering the plantation produce fit to be taken to market is clear from Muhamed v. Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hybrid seeds should not be treated as agricultural income. The facts in the case before us are distinguishable and therefore, the said decision is not applicable. 20. In the case of Forest Development Corporation of Maharashtra Ltd vs. Add. CIT Nagpur (Supra), the Hon'ble Bombay High Court was dealing with a case where the assessee company was engaged in providing services of plantations, rock gardens etc., and initially the assessee developed plants on its own land till these plants were transplanted to lands of customers and maintained for a period till plants reached desired health and height and thereafter the maintenance was handed over to customers - whether the activities of sowing seeds and developing plants on assessee's own land and thereafter transplanting those plants on land of customer are different from operations carried out on land belonging to customers and whether the activity carried out at the initial stage was an agricultural activity and thus the income derived from it was agricultural income and the income received by the assessee from later part of contract was not derived from its own land but was derived from service which the assessee rendered to ..... 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