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TMI Blog2021 (3) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... term. Therefore, hold that the income derived by the assessee by activities other than sale of plants raised in its own nursery is not in the nature of agricultural income falling within the definition of section 2(1A) of the I.T.Act. The judicial pronouncement relied on by the assessee is distinguishable on facts for the reason that in those case, both primary and secondary agricultural operations as enumerated by the Hon ble Apex Court in the case of CIT v. Raja Benoy Kumar Sahas Roy[ 1957 (5) TMI 6 - SUPREME COURT] was carried out in assessee s land, whereas, in the instant case, only growing of saplings and seedlings is undertaken in assessee s nursery and the other activities such as preparation of land, supply of soil, supply of fertilizer, engaging Horticulturists, insuring etc. even assuming it as secondary operation to the primary operation was never carried out in assessee s nursery but in client s site. - Decided against assessee. - ITA No. 36/Bang/2020 - - - Dated:- 4-3-2021 - Shri George George K, Judicial Member Appellant by : Sri.Varun S., CA Respondent by : Sri.Ganesh R.Ghale, Standing Counsel ORDER This appeal at the instance of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income was filed on 06.03.2018 declaring `NIL income. The assessment was selected for scrutiny by issuance of notice u/s 143(2) of the I.T.Act. The assessee had claimed exempted agricultural income amounting to ₹ 20,11,009. To examine the correctness of the same, notice u/s 142 of the I.T.Act was issued. The details called for were electronically uploaded by the assessee-firm. On verification of the records, the A.O. was of the view that the entire income credited to the profit and loss account cannot be termed as agricultural in nature. According to the A.O., the assessee had undertaken composite contracts whereby the assessee has not only sold plants but also undertaken work for softscape, landscaping etc. Therefore, the A.O. held that the portion relating to other than supply of plants and saplings cannot be characterized as agricultural income and such portion of income cannot be entitled to exemption u/s 10(1) of the I.T.Act. The A.O. further noticed that certain plant and saplings are not sold by the assessee from its own nursery, but are purchased from other suppliers. Taking into consideration the totality of facts, the A.O. concluded that 50% of ₹ 20,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y operations also form an integral activity of agricultural operation. In this context, the learned AR submitted that the assessee-firm is not only supplying plants and seeds but also undertaking softscape in the premises of its clients. Therefore, softscape undertaken by the assessee is nothing but an agricultural operation as enumerated in the judgment of the Hon ble Apex Court in the case of CIT v. Raja Benoy Kumar Sahas Roy (supra). 6. The learned Departmental Representative, on the other hand, submitted that income derived from sale of saplings and seedlings grown in the nursery alone shall be deemed as agricultural income. The assessee in this case had not only sold saplings and seedlings grown in the nursery but also undertaken softscape in the premises of its clients, which by no stretch of imagination can be termed as agricultural operations. The learned DR submitted that in the given facts and circumstances of the case, the Income-tax Authorities is justified in estimating the non-agricultural income at the rate of 50% of the total net income shown as exempted u/s 10(1) of the I.T.Act. 7. I have heard rival submissions and perused the material on record. Section 2(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re than one lakh but not exceeding ten lakh ; or(III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten lakh. Explanation 1.- For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section ; Explanation 2.- For the removal of doubts, it is hereby declared that income derived from any building or land referred to in sub-clause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under sub-clause (a) or subclause (b) shall not be agricultural income. Explanation 3.- For the purposes of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income ; Explanation 4.- For the purposes of clause (ii) of the proviso to subclause (c), population me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d performed in regard to any land can that land be said to have been used for 'agricultural purposes' and the income derived therefrom be said to be 'agricultural income' derived from the land by agriculture, under section 2(i) of the Indian Income-tax Act, 1922. Agriculture comprises within its scope the basic as well as the subsequent operations described above regardless of the nature of the products raised on the land. These products may be grain or vegetable or fruits which are necessary for the sustenance of human beings, including plantations and groves, or grass or pasture for the consumption of beasts or articles of luxury such as betel, coffee, tea, spices, tobacco, or commercial crops like cotton, flax, jute, hemp, indigo. All these are products raised from the land but the term agriculture cannot be confined merely to the production of grain and food products for human beings and beasts; it must be understood as comprising all the products of the land which have some utility either for consumption or for trade and commerce and would also include forest products such as timber and sal, and piyasal trees, casuarina plantations, tendu leaves and horra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aging manpower including Senior Horticulturists, insurance, making pits, planting and other related works besides the supply of plants. 7.4 As mentioned earlier, by virtue of Explanation 3 to section 2(1A) of the I.T.Act, income derived from sale of saplings and seedlings grown in assessee s nursery alone is deemed to be agricultural income. The Hon ble Apex Court in the case of CIT v. Raja Benoy Kumar Sahas Roy (supra) had held that the basic operation plus the secondary operation which is in conjunction or separately would constitute agricultural operation. The basis operation is upon land, i.e., tilling open land, sowing of the seeds, planting etc. The subsequent operations are those which have to be resorted to after produce sprouts from the land, e.g.., weeding, digging the soil around the growth, removal of undesirable undergrowth, and all operations which foster the growth and preserve the same not only from insects and pests but also from depredation from outside, tending, pruning, cutting, harvesting, and rendering the produce fit for the market. 7.5 In the instant case, the primary operation is done in assessee s nursery will confine only with regard to growing of p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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