The Commissioner Of Income Tax vs M/S Namdhari Seeds Pvt Ltd on 24 October, 2011

[Cites 9, Cited by 7]

Karnataka High Court

The Commissioner Of Income Tax vs M/S Namdhari Seeds Pvt Ltd on 24 October, 2011

Bench: Manjula Chellur, Aravind Kumar

:\'\(  .  d  
togifw     -

Ex)

This Apepeat is ﬂied u/*5 260--A of the Income Tax" Act,
1961 praying ta set aside the erder passed by the LTAT;
Bangaiore in ETA No. 3102/Bang/'Z004 dated 14.£37V;»2f)tQ6

confirming the order of the Appeﬁate CommEss«%of:§3t__"_té'.§":d'

confirm the order passed by the Asst. Com:%§_t'ssic.dé§?"tG5' M

Income Tax, Circie-12(1), Bangalore"... 
L ?'.A.NO.76 or goo7  

BETWEEN

3.. The Commissioner of Incomeitax 
C. R. Buitdirag   * " 
Queens Road 
Bangaiore

1nC(:;'Vme;Ta'>€"v_., A 
CErc|'e--4'--(1). '

8aE'¥Q€:1'.3Qf'8'  APPELLANTS

(By SEE.  ,Se$ts'actsaiéL Advocate)

  :t§€d'e.V:éA';%ée_r§':.:a :1 Exports

'F-*7 E»%&0c§1<; ;1?.;s.y';;;h'agar

3§?%.§a§§E"~:L'   RE$§Q§"~é§3§E'éT

  ﬁatthawtathy, Advdcata}

 *  rd.-'"?E'§ég siaggeaé ési ﬂied mfg 2§®«~é $6 the magma Tax ﬁat;
 graying tr: get agide the 6E"§€§' grasgeé by the i"§"ﬁ.fEi,
ﬁaragaiere in ETA §'¥5o,:G40jBang/ZGGE dated §,4.§?.2886



Lu

conﬁrming the order of the Apgyeﬂate Commissioner and
confirm the order passed by the Deputy Cdmmissioner at
Income Tax, CEr<:Ie~4(1), Bangalore. V E'

I. T.A.NO.284 OF JZQQ7

BETWEEN

M/3. Namdhari Seeds Pvt. Ltd.,

119, 9"' Main, Arasappa Cemptex

Ideal Homes Township V
Rajarajeshwari Nagar  
Bangamre 
Represented by its Managing D.ireCtO¥r.,
Sri. Uday Singh '    
Aged about 49 years T . 'a_  }   

S/0 Sri. Maharaj Biz' Singh "   '   APPELLANT

(By Sri. A. 'andi_Sr"=.i.  tLa§za.t;E«,txdx?s.)

The Asst; CeaﬁnrhE'ssE{;.€z'ei;t3--fsV"4E 
In<:ome--tax",~ ..Cé':'c§e "V3, 23:-.:_1.)"~~-- "
14,/3;, 4"?.Fleer;»  '

 .._R. ::{,"~:a::;sae\::«:;n (Ops;---ee:)

 aa::gva;:t:r;ee Sea' em

';\§rt:;}ath;ir:ga"«._Road
 RESPQNDENT

(§3.{'S%'%. Sesiwachaiag edveeate}

Ttﬁs aeeeaé is feed as,/'s zaema of the Eeeeme Tax eat,

 ':j..1'*§1e7---in péayémg is set aside the etdet easseai ey the §""§e"'§}

  "?;._:§a'2:g:7a§es'e in ma. eat 3§ﬁ2;'§ae§f2@Qe dated zaamaae

:;tg""fa « E _

 _M_{_.i?m;nex:.a"e~;"%}.



I.T.A.NO.3 7 F2008
BETWEEN

1. The Commissioner of income-tax
C. R. Buéiding
Queens Road
Bangaiore

2. The Assistant Cemmissioner of   
In<.:0n*:e==~"Ta><, Grate» 12(1)
C. R. Buiiding
Queens Road      
Bangatore   ;.--....A§>P'E,LLAr\zTs

(By Sri. M. V. Seshachazéag Ad*,r<3€:aA.f&i'}'VV""s._.

M/s. N.amdh'a:-ésVs»seeé's Pvi;...Ltd.,--

UrtahaiivviiVi--H"age" " V   ' '

Bidadi Past"   V.  

aangasorei5_6:2_10'9  J   RESPCNDENT

 (B3:-§f§:;iV.L'2"x. S§'ié!?£"kaf__§ﬁG Sri. M. Lava, Advs)

  T.Ef_i's%zi§ ?pe_31 is ﬂied :2,/'s Z6£3--A of the Income Tax Act,

set aside the aréer gasses by the ETA3",

83;=:§a§c;».:*@_;'4j'.;¢§':: ETA @?9jEang;'2QG6 éatad ?.}.l.2.§Q?

'r__mﬁf%rméa:'":;§ the oiﬁer sf me Asgeiiate Cammésséaner sné

 "..js'..€?s$:§E.;rm $33 arse: gasssé by 'me assistant C%§?'§T"f'§§S$§§?'§&§" sf

  §._:*z:'s;;;»':%":s Tax; Graig-22(3); ﬁangaéereg



IN I.T.A.N .3 8017.2 0
BETWEEN

1. The Commissioner of Income--ta><
C. R. Bunéing
Queens Read
Bangatore

2. The Assistant Commissioner of   
Income~Ta><, Circisv 12(1)
C. R. Buitding
Queens Road s      
Barzgamre    . 9-'"'AA'PPE,LLANTS

(By Sri. M. V. Seshachaiaf Adv0Ca:ﬁe'}'VV"'~s...

Urtahaiivvi' Vi-siege' * 
Bidadi Post'  ' _  
Banga§o1'e45_462,109._  "   RESPONDENT

M/s. N.,§mdVh'a:~ss.5»se<e}:s  

  $hia't'1"1<.af___;_a_A:i':<".i $:*i. M. Lava; Acivsg}

  'ss§7f:jvés.%s?a;A§ "g'e_a§ is fiied as/s 269% of the Inmme Tax Act,

"'."L9?€.%3.;E_.,.13':a.*:i<g_s~E.:f;gwV.T'::'@" set aséée the srder passes éy the KAT,

sagzgmemszs ma §Z?8/'Bangj'2$Q§ dazeé m.:;,2@sf?

'r__ceﬁfErm§§':;g the srdsr sf the sgseiéatss Cemméssieﬁer ans

V' "..j'..sé§*:s§%.:m éhe sséer gasses? by iéée ﬁssisismt Csmmissémsr sf

  'E.;"éc:;:*%z@ Tax, €§:'{';ée~:2{:}f Earzgaéezs,



I.T.A N0.389[2.0G8:
BETWEEN

1. The Commissioner of Ir2c0:'r2e--tax
C. R. Buitding
Queens Road
Bangatore
2. The Assistant: Commissioner cf 
1racome--TaX, CEr(:!e-- 12(1)
C. R. Banding
Queens Road  .   
Bangeﬁore  ..._.'."ﬁ[PPEv§,LANTS
(By Sri. M. Vii Seshacha3a~~,&_Ad$JocaAte) 

M/s. Na'rt1'd'i;.,;a§":éi:'SeeEﬁs P7vtg"itd.} """ 
Urtahaﬂi Vi_£|age-",--~.__VV '   
Bidadé P'ast._ _    
8angaE0re~:=562 109  _  e  RESPONDENT
(e;;_s:+e:.e.A. Snan};'a'z am Sri. M. Lava, AQVS.)

  .$§§:;:;ea§ is ﬂied ujs 260% of the Erzceme Tax Act,

set aeéde the order passsed $3: the ETAT;

3a:r7g_{g'f?a:e:5e;"e?'i_;r~Ee:' we e??/sang/2&6 éated ?.1:'2ee:?

 Ca5:?%'z<§§§'nV§"§t"he Qféei' 3? {he Apgeéiate Cemnﬁssiener awe

 , '<:Af:E%§%:"§'§"%"t§":e awe: easseﬁ $3: the Asségtarsi Cemmiggéener §?
_  .§s2::£3_si:*ne "§"ax, C§{'{?;§€-§2{§}, Earegaisﬁve,

X»  ..
.'</



I.T.A.N .7 QOFZ
BETWEEN

1. The Commissioner of In<:0me--tax
C. R. Buiiding
Queens Road
Bangatore

2. The Assistant Commissiener of 
Income~Tax, CErcie-- 12(2)

C. R. Buéiding  _
Queens Road ' " ' V v_   "
Bangaiore "  APPE'3,LA§\JTS

(By Sri. M. V. Seshacha;:§'a*;._AdfQVs'ssAtEi§3._V 

M/s. Nam-ﬁ,h'ai:*~§_ séegs I-*»\;t.v.__Ltd; 
Uragahatti ViE!ia"g,e  " --
Bidadé Piost' V E'  %   
Bangaiortég-S62 3.99     RESPGNDENT

{By S:<ii,LA. '§hz§ini<::{r am  My Lava, Adxss}

 T3333 ﬁxgipeaf Ai3sWf§AEAeV:d ufs 266%. sf the Income Tax Act;

_i=*'3E6hi' set aside the arse?' gassed by the ETA?)

gsaggsa:ere'ssE3;;Em i243/sang/gas? gazes ssssggsss

c9ﬁfirr:1v%.'§;°s:g'v*t"Ese asréaer sf the Apgseéiaie Qomméssésnei" ass

V"*»:GnfE:"%:zV_é?:e arse? gasses by the Assistant Csmméssézmer sf

"f°§'sfj:s<'§'§:s:§3 Tax"; €i:°cEem£2{2}_, ﬁarzgaiare,

4v,
5.
.2".



I.T.A.NQ.Y4O OF ZQO8

BETWEEN

1. The Commissioner of Income-tax
C. R. Buitding
Queens Road   
Bangalore 1

2. The Assistant {Z0mmEssE0ne»r_0f
Income~"'E"ax, Circte-- 12(2)'  
C. R. Buiiding  
Queens Road   _   
Bangasore   _     APPELLANTS

(By Sri. M V. Seshachatg

&

Uragah:aI§i'--Vii3age  %  V'
Bidadi Post" _ '     "
Bangatore¥5_E§2..1D§_  "   RESPONDENT

M/S.   

 (By$fr:V.%"A.«kshé::k:<ar%%and Srie M. Lava, ﬁ\évs.}

  'F.¥i;E's%A;§be.aE is filed ufs 26G--A 0? the Income Tax Act,

 'lj9:5;_L §Vé'é§§~§..{§_gv:j'€{§.. SE'? aséée the eréer gasseé by the ZTKS,

Ba:**;~§a§0v;s'~a~':_;'4i'iw':'*i rm ?44,f%an§;'2G87 dateé %8«§2.2GG8

 ._<:@nf%:"r~:';§§2i:g zine Q§'C5€%"' $4' the ﬁpgeiiate Cammésgéaner am

V' '..ﬂ.:§é"':§%.;"m ma 0:59? wggaé by $9 zéggégiant §:i}§"ﬁf'€'1§SS§CrE":€i' sf

_  §.:":t*§':'é":e Yaxg €ir:§e--f§;2{2}, wrégaisreg



9

;.T.A.NQ.748 OF .2008
BETVVEEN
1. The Commissioner cf Inc0me-tax
C. R. Banding
Queens Road
Barzgaiore
. The Assistant Commissioner of  
In<:0me«Tax, C§rde~ 12(2)
c. R. Buiiding
Queens; Road  V    
Bangatore  . ..'.._A!?PE3..LANTS
(By Sri. M. v. seshacham. Ad\.e*6Caf{3')  M

Uragah:at!i'--Vii3agé  '  
Bidadi P031: " % '     V'
Banga!ore¥5__62_109_   

M/S. Na md'h'araL.5'$eéEJ.§ pyt...'%%L:a., 

 RESPONDENT

 (Bj;:'5'.:>f:4§._L"ﬁ!.'Shé:':'*i<a:f___anﬁ Sré. M. Lava, Advs-;.}

  'a*.bE's.A§:§be.ai is ﬂied u/5: 260% of the magma Tax Act,

 'i§€-.,L.%.A§':'é.i;~§.,:;_gwV.T'::<}" set asi§e iiie eréer gasseﬁ by %he :"E";=."§",

'.».<\\'f:_.%'& .  ;  V'   .

%a£;:;g_a:m:.%.j';%n ma :m.2../aangiwa? éaiaé GS.§2.2§G8

»c0nférmv§n..g the erégr cf the Aggeéiate Cerrzmﬁssésner arzé
véehfégm the mags" §&S§€§ by 333$ ésaégiani iammiagéanm 9?

":§é€:'€s?'--m€ "§"a><, £§:'c€a-12{Zf.:, Bangaisre.



I.T.A..N .1 2 8:

EETWEEN

M/5. Namdhari Seeds Pvt. Ltd.,

Uraiahalﬁ Vélkage

Bidadi Post

Banga!ore~S62 109  9
Represented by its Managing Director  '_ 
Sri. Uday Singh   
Aged about 53 years V '   =  
Son of Sré. Maharaj Bir SinghV  V..,TV.£;P:?§L1,gé§rx:3T
(By Sri. A. Shankar and Sri. M, La-xiva,-..AdvS'.'}«.._ 9

AN
The Asst. Commissioner-of... if V
Ir1come--ta>< " 3 

Circle ' < .4  _
14/3, 4.?" How, R;j*?_.'%a»h'aMya%n % %
{Gm}: REE?) 'Nrupa€hL§r1g'a..R0a~d

BangaIorei5'6A0,VOG1 '  RESPONDENT

 (By. 31%;. K1,, §e--s§3§;z§_ij;ala, Advocate)

2   '"sii}::_r;;{::i';;Ve_ai $3 med 3/3 25a-A Q? the magma Tax Act,
"1_9§;__i ;3;?é'3;%.§'§2gAV.T'Vv"{::§' get aside the arder gassed by the §"E'"A'"§}

%a3:»'>.s4;g5§af,:re_  zm Eémiaae E0 18§8!§a:*:g,52Q@5 aiateé

7._24,§,2Q:%§;? Em" the gﬁssessmerit '*;'ea:rs zggagg, zgggmgaea
' i ~.,a:":z:§-._2;%£§3-$4 xzéﬁe énﬁexuréwé,



IN 1".T'.A.N0.474 GP 2Q08
BETWEEN

M/s. Namdhari Seeds Pvt. Ltd.,
Uralahaiti Vitlage

Bidadi Post

Bangaiore-562 109

Represented by its Managing Directsr 
Sri. Uday Singh  '
Ageé about 50 years 

Son of Sri. Maharaj Bir Singh; _4

(By Sri. A. Shankar and Sri.  

AND

The Asst. CommissionerVpf'T'   '»
Income-tax    

Circle   _ . 
14/3, 4}" Hoc::rI,;;_R. Ff, Bhavasw
(Opp. RBI} Nr:Jpat:h.:;'rzg;a*-E§dad '
Bangalore;-56:0      RESPONDENT
(By Sri. M,  [email protected]"aiVéﬂ.Advocate)

 ﬁsppeai ':§'it'i's ec; uxs 25G~A of the meme "zax Act,

 £963, pra>gsmvg"~-kg set aside the arder gassed by the ETAT,
¥..B'a;7ngaEQ":4:~?; "

H V A §rs_j..£T.!x Nagﬁ §21-E>23;'Bang,/2887' dateé
{;*--7jx;'Z¥i:é,2{}§8._f'<:;r' the éssessmerat Yearg 2698-$881, ,?;S%2';-
23% & ;?;€§ §T§---'SS.

'Tﬁége Agiapeaig havimg been hearé am reseizzeﬁ fer

=,g?%L;z=%z;24_:"'s§e:'2%=, aémérzg 3:': §@:' gramagrécemeni 3'? Emégmeai éhig

 _A:§';3§_§g;_A"A§&a::_§:a§a %$§%&§§2,zr 3.2; éemzereé {ha §@§§§%f~;'§?°'E§,

. .. 1§.--'%'.5AE'LE:.A NT " = V



EUDGEVEENT

ITA 75/2007' and ITA 284/2007 arise out of 
order dated 14.7.2006 gassed by the 
No.3102/Bang/2004. Before the_T.::ib_g;na$;"3'Iﬁ§'g§§é£h"'IEA: " 
No.3102/Bang/2004, ITA No.104:0/B;;"fg;g}'ﬁ4C}Q~§ 

to M/s Indo American E><pdr:t_'s"-~.V.<.:aa"n--'eA'».tV§e> Vbe[v',:ﬁ§Ai¥3p@s§d.3 of. 

ITA M03102/Bang/20O__4 p@rta§_:§VV$'»Vi:_0'~.tuhe ..a'sss§--3:§srrf;;€3nt year
2001-02 in respect of a""ni taTssie'ss£§.f24«;3 ByLjV'n§'r~ne M/s Namdhari

Seeds Private L.i;"r';§ij.ed.  ~ If A

2. S<i fa_r""a$"iTA 47 .6j:2'G'Q'?,  t:,.he' Vassessee -~ M/s Indo
American TExp.: :'H_ts *f'iV§;ed_'r'e;t£;rn ofihcome ctaiming the entire
amountHass= agri;s;1V!tj_ju.r_4 a'3«..,_iTrz»::4o-me seeking exemption under

SectA§nn--1G ("i)V_:'of_t%*1e -.:;"ét:§me Tax A51: {'A=::t" far short) for

i;Ah§._."ég:5&3g.mer2t é,?é3'r'V i998-§9, "fhe Assessing Gffécer

 h:3§§dér{g§".i;:§*§eé4£AV::%é§2 entére amamt sf prefit: was iiabie to tax

:_;A§:.s:.j§ér *i:E'§. e ':g}{$\;i3E@ns af ihe Act; denied the céaim of the

 asses's,g_é ihat the arsiére éncgame wag agréscuitaszaé énemmg.

 _;"a.;f*: jfﬂazggefaé sgamﬁ :§ ﬁe féiaé befme the figs: aggaééaég

U __;%i.:tE*:@r&tsg and the f%:"s%; agpaiiate authority set asééé the



order of assessment and held that the entire income
shouid be treated as agricuitural Encome giving exemption

under Sect§on~10(I) ef the Act. As against .tt-..i_}:'§;,«._4»_t%f:Ve

Revenue went up in appea! before the 
Tribunal opined that 10% of th_e....:'3_et pr'¢f:tt'li[gh}5uI,::ttVbe 
treated as business income and the;'ba!:enE.:e"9Q'°/e{ 51'..«t'ti1e:

net profit as agréculturai incen'ie._.exen*z.;3tie-g the  -from 2 L'

tax.    
3. So far as ITA~._75/200?..and--.1TA 284/'Z007, the

assessee -- M/5 Namdh'a%r.i"S'e'Veeis' Pr:i_i¢--;%tee"'L_imiteci filed its

income" ai3'§esjS'nj'ent Qeavr 2001-02 dedaring an

Encome"--.o'f« taxable income and aise

eeciared 4"'Rs_}'?;2i?,25,13.0/- as agréeeéteraé income

»..aaaarg;eﬁié*ra2:rea~+:;y séa'e""esr" hybrie seeds said te be ebteérzee

 frerizf r.e:§':§_eeite_r7ar.§ eperetéene, "fee essessreerst eréer Came

 en 2et3,:2:aear treating a Sum ef

 Re£3;$<§;;;.3;288f- ae eerr-agriculture: éeeeme etetérze tee:

é:f:;;e%:*:e geeeretee frem the teeee tekerz er: ieeee fer etre

_,r' .

'4.mv>"€

if'

tirsreeee ef egréeeéturaé activity in the State ef Kamatake es



not eiigible to be treated as agréculturai income. So far as
iands taken on lease situated outside the State of

Kameteke, Assessing Authority has acce;3te~d.::"««..pﬂthe

contention of the appeilant that irvcomefee:i§Ve'fa.te'e. -

therefrom was agricuitural income,  

4. Aggrieved by the order elfeas-ses'sm2eet;.:e;': eVe;>.eei:'

came to be fiied before the"TC e~:r;miss'§.r>raer_ efv AIA'e_Ce-me;~Tax * L'

(Appeais), who by hisfotder Ad.at:e'd_ 'i.1_.8.2'O'G4_'AaU,t%wed the
ciaim of the assessee 'émid-i.n'gs__téietu.'atvV:t>.xfestVated income of

Rs.3,84,13,288',/j-' as a'g'fECeItuV:faIs.':'s.iecemzevend accordingiy

exempvtetimt'tuetV5san'{e;ee:de.:f Seet'teVh--1O(1) of the Act. So far
as treaVtin'g4-the-En'c.t§}ne"f§€:%:%:~~"agr:cutture in respect of lands

situeted eLj}':'si§£eVtt:eAE3tete ef Kareateka by the Assessing

 «_Qff'$e'e:g_'...sg2sevenue' &?§"e'é"'eot ﬂied any appeai. It ceretested

ttgeby tee essessee before the first eeeeléate

eat ritgsz'  "  '

";Z?5_A'3~'%;"e'%:e§2 the first eeeeéiete eetheséiy eeeeetee the

,./,4'_A'::E.a,_;:§: e?" the aeeetieet: essessee =~«~ M/s txéezeeheri Seees

hﬂeirivete Lieéétee that ever: tthe egréseitereé meeme ef the



assessee within the state of Kerahtake Es exempted under
Section 10(1) of the Act, Revenue preferred epeea! before

the Tribune: and the same is numbered '.aVé»-[ETA

3102/Bang/2oo4. As similar issues were also rr§i's'edr'_';:-rs: _

No.1o4o/Bang/2oo2, both matters ceme to'b'e----:ei~eij'bed~Aae.td 'v 

decided on 14.12006. The Tr§i';un::s%d}J*rh'is!e.'-diepfoegng

both the appeals, held that .the_.~fouh"d-etxiiorfr  

seeds produced by the appeiie'i'1t:'--exaseésefeenfedicontraci:
farming is on accoLz;*o_t:s" oft:  operations and
therefore profit  be treated as
agricultural_iﬁ;eo§§f:'e__,'  these seeds
as certiAfiea;i' be treated wéth insecticides and
chemiceéie at  the income from such
amiss es' e'gr§et:%t:;v:r'aE ieeerrre, it gheeéd satisfy the
  Sectioe-2(1A){b}{Ei} df the Act. As the
 ereeesveé:'{i_tfv»»§.ee~ti'x;rVert§:'2g hyertd seeds te certified seeds E3 est
en""'erd§--e'er%§'§% empieyed ptdceee tags eettivater er receiver et
 r*e:2.jt_:«:réV4"§r;§rrd, erefét etieéeg east ef eeetr eetévéty eerrrret ee
fesfeefted ee eerteeiterei ieeerrze. rieeretrer, Eeekéng te the

'"e><perises debited reéatirrg te such ectévitxgf the Tréburreé



of the income derived by the assessee as agriculture!

income for the above mentioned years.

8. in respect ef the abovemerztiened 

years, the assessee has atse ﬂied ETA  ._antf"

474/2008 apart from ITA 284/233$;

9. As simiiar questionseazfe az?is_iVng in eeaiiettie abgovye 

appeais, we are disposing of  aVppea"!--s¢_u:b§ aitommon
judgment. V A
10. In the a_ppeals;_fi.l,eCi..bﬁttitge "#ze§éV%;eé except in ITA

No.75/:.;V2GQ?'_gfgiVA}§%w~i.tjg~~..$ui:>s_tantia! question of iaw came
to be fo%'m_u'iatedV.bév~--ti2i§"a:ie'L: Ft:
. A. *'§A!iw.et'he'"r t'i*se.:AppeiEate Authorities were
V-frC'C¢;;'r.re€t. in §'§foE"tE'E'r'ig that the activity carried an
 ».Tb';f_'t~he«e'ssessee by trading in precessed seeds
"t...__Aeé7et.§'§~g:§.§_a~%:fr':ez.sn%: ta egriceéturei activity 0:: lane
 te;__E:e:f{.?"~"e:: iease eeé ﬁe éteetrect farming
itetéieideree ae egréetséturai énceme exempt
 Sectéetz :%{:f; :2?' the Emeeme tex ﬁg:
A" iiﬂﬁtf for Shett} ms feiéeeéng the View

exereesed in eeréier eases ?



11. This Court admitted ETA No.75/2007 en the

following substantial questions of law:

"1. Whether the Tribune! was right in  .;. 

that the income derived by the asseSS_Ef_é'~--»fro§§j~ 

manufacturing of seeds and"§'a§'e«.Q_f'..the. s§a'.%r_seV  L.

wouid amount to agriczjttulmi 1'i_'nf:'en'ie.

wouid be exempt under-..$ectie:1_ 'ViQV(1}'v:'ef}*:h_VeVV 
Act :2     V' 

2. Whether the T:«'§.t;_una1..twaémgji-;::._in :{o't*t-Aat<{ng
into consideratiozéei?*;.h'e__f§§e?: t'h'e't.t'h'e_Vassessee

could not have har:3»..é_g»riCt;:IAturei"'!afiti».'*ih View 01'

 of Karnataka
Lam: 4F{efQ:*ndVs;Ae.ACt4V:':" t
12.  ap7;«eé'i.$  by Mfg Esiamdiiaré Seees Private

_ %.im»i1_§&ed z~ a§s"'eS..;3VeVe fer tee assefsment yeare §;§§8~§§,

'.}.'~;?}.9§é--{)};{}r:A..a.2§vA€§«~..VEQQE-Q4 in rm §'~ée,:9;'2§G8 Came :3 ea
 :t§e"%'eE§ew§ng gueatentéeé gaseetéeﬁ ef Eew:
hgiiééether the "?s'éeeﬁa§ ékazzéeg image that

A.  iwbirée geeﬁs gredzseee ey the eepeﬁﬁeai: wag

 agrécazéturai preeiuce awe Eneeme therefrem £3



I9

agriculture income, was right in law in holding 

the process of certification of hybrid seet.1£s_:~..4_"t~.

predated by the appellant: to 

marketable could not be held to be a pr'e(:ZessV.:

ordinarily employed by the v.:-:eit§\zatG_§' avtiti./ﬁltoll" 4'

that extent the income derévéedjCe0t£ld'hh».?5G€:""be"'X. 

treated as agriculture ir}e:0;ne es._d'efEned.~*i3e.d'et Q' .
section 2{1A) ef the Act  V V' V 

13. rm N0.4?4/2t§U8;'whVtt:hiv p.er:t_aiVhS_t0 assessment
years 2000-01, .2j00.2--0§3'l'é§:e::00'4i;0V_5  to be admitted
on the folloyal':ﬁg.st§.b--sVtent§--.3_l1'Que-stlbnsof law:

  -1':V:r§~bV;3:2al_--Vbl'as right in law in
Vt'-lhoidlng VthetV_:t'h.e"~pbacess of certificatien of
hybfid. seeds._v0ro}3uced by the apbellant: was

by '~E"'§G1I eTA~..;0%eeess ereinarity employed by e

E""'l:AClJ§§'t~i.'*gatC}¥'  reeeer the preduee raises by

 .;f§t"--§:e be taken te market ?

'W§;_eVt%'§er the "frébtéeet having beie that
 hégblrée seees bmeueee by the ebeeiieet was
teeréeutteteé breeeee eee lemme teerefrene

ée egeceétetet éeeemeg sees tight ée tee; ti':
hetemg the feteeess ea? eettifieetiee at egeee
seeﬁs by the eebeltaet te make it

_=\\'%

 



20

marketable could not be held to be 23
the_...__
cultivator and to that extent the income-».._'i~.

precess ordinarily employed by
derived, could not be treated as agri<:i._£:i"ttiraVVl~.._'__:  
inceme as defined under Section 2{'''3._A)»jofVl' %
the Income Tax Act ?      it  .,
14. ETA M284/2007 for tiier4as:;erss;m'az~;ri~:{'e'aE 2aQ'r:t+r
()2, came to be admitted 'er':-.._V..the"'f.0l'l0wiri{;j"A ls*;;b.sVte:htiai 

question of law:

Whether ihe7ri~lbur;;_al held that
hybrid seeds prQd11€:_e-d byiittievv'a';;§.pe§'lant was

ag ricult1::ra'!«.j_V V;:5--resd§a;ce ahd"«.iiiC--dme_jtherefrom is

agricuitdrre.'iwr}:C0rﬁe_;"w_a:3 -right: in law in holding
the,VV_;jr;>c:es,s'--bf :_Ce_f:tifi°catioz2 of hybrid seeds
V_g;:rodz.3"{:e;:l' ,bff-5; l'=_l:he" appellant ts make it

njzéari<Veta:bife'Ari::2i,.:Hl.t£ not be heid te be a gnrdcess

it  Qvrdt§.::_a:r§~l_y employed by the cultivator and lie

"i:~x$:e'r'it the meme derived Ceeid net be
_ Vt treatelririas agrieuitere lneeme as defined tinder
  .SéCt§{}§'i zrze} ef the act tr

"  iﬁéﬂ eefere the assessing Gffieer; the eiairri ef the

 lldabrrpeliarzts assessees -« M/s fxlarrédhari Seeds Private



Limiteé and We Ifidt} American Experts was the':-ethe

assessees were cuitivaténg the tends which V.
either on Eease or as per the 'contract farmingtegreVe§h:e'he;.:'_4' M
The Assessing Gfficer heid that:-iﬁtome 
assessees under the agreement  tO>"§:ho~;_.re. 

agricuiturai income and shouIe:f_'b~e»treeted'as"i_nrfohi'e' from V

business. As aIrea§3':'»§.'stat.e<i' the&"T~r§imEr:a£ has
treated 99% of the  as income
from agricuItu :fe-:.:;eand  SectEon»~10(1)
of the Act   3.0% of the income, it

was tree-i:ed_Aies. i'n.€ié§:m'e  iéu's'ine"es.
16. So fa%g3.s_ th%e'a+p"pe_e|.s.'fiied by the Revenue and to

the appéawié fiiedAbe'th'e--..:%e$'eessees, feamed seuesei Mn

MN'.5'Seghaeheleeppeeréng fer Revenue eeeteeds that

' §Wé':3§i{;Eé' e§"§f:':e:'%'e4;_t%v§i§es married en by the esseesee zeeeéé faii

1h'=ee§*£:E":_é%'§;1 ef the Q§"C>'=§§$§QE°§S 0'? Se€.:E§en~«2{£§} ef the

eeﬁee téee eieie eetézséty e? we eeeeeeee cemeeey ée tzeeéeg

  ggreeeeeeﬁ eeeds. Eﬁeee sf ihe terme ef {he agreement

e,é'eVeC»e;r{$én§ is him weuié indicate the character 9;' the



assessees as agricuiturist er a cuitnzater who wouid derive

any rent or revenue from the tend which is: sit:;jetTe";_.*1V:"Eh

India. According to him, none of the 
agreement wouid indicate that ass.es'se.es 'Au
agriculture} actévity as a fixed price'   

grown by the cuitivator er the--_féi;<;}2erAdr.th'eVVewh'ef"ef' iend. " V

Therefore at the end cafthe dce-yd;ht-he--~..5.eeds'grovxzh by the
farmer are soid at a   the test
that has to be.Ve_zfh;)_£'oye7c'!V' the cuitivator
and such  'dd  the process of
testing,.emv:'dV§3%ed»V':'1§.}'-tr;é'esees:tee"§wii£ not he returned to
the  the land, but the assessee--

company uE'teeEf. wVe:;id._v%r:e';?1ket the said rejected seeds en

 behasf efthme fé'r'rne__:%___ava7d pays onhg the saie erice ef such

'  e';: an eezieeiteréstc

  Therefore according to Mii Seshechate,

ne:aneVefV'At'-féetfectivities carried en hy the eeeeiéeet -~

'.Veseee:':.;e7ee.,eeeEd ee described es activities reieténg te

..jh've§;*§e.eEtere ec cetzéeetéen as is nerezeéiy eene egz ceitiazeter

ﬁe ceéies mean the decieéec: ef the

m%%hen'bEe Apex com in the case ef MALABAR meesmxm



Ex.)
Lu

COMPANY LIMITED .\fS. COMMISSIONER OF INCOME TAX

reperted in (2000) 243 rm 83 (SC) to contencifthat

amount received by the assesses': from purchaSe.r..of 

estate in consideration for modification egf__Or'e.iVaxa:t%<):ra "oft

payment coukd not be treated as a§}ricO£i!'tu.vra.3_ 

17. According to Mr. Sesi"iaci*§aOEa'O, 

Section--37 of the Act c3eaOr_::y--...V_baré"' a_ny_Obgriéff'i't'~~Uéing " O

extended to an assessee if theithcierfaaatéont"oﬁthé income

concerneti is on accCiu'nt--- <);fV§';~xf§oEa't§pnVVO'of any iaw or

contra\1er'*stEr.3tTj:}'fOafwpra§si'%SEo'ri;"'-%¢*%e'§relées upon the decision
in the7--._c;a$e' t)Vf':v:'V"iV1:ABu_{O)'1'.._iEf_tEi§iKATARAMAN & COMPANY

PRIVATE uLIi\{iO1TEV:D'~__.V'J:-3;"COMMISSIONER OF' INCOME TAX

 repo§::e§af%';n__(19§8«f;,.t_2t29 rm 534 {SC} ta canteaci that the

 'n::»£':*pc:Tse:~>_V4£':*e§;;';t"'b.53 tawfué purpose.

'-§a:?=s:r°:.:3:'s gatscarrzaé watsié

 :$',',?;%;€:t0ra§r:g ta the teameé €€3t}§":S€§ $0: the

._ :"Rgﬁ:;@r:za:~a,:' téae ﬁﬁiéfe activity at agrémitara aafréaa an $3: the

arziy éavaézza reaaaréts 313$

~...,_$é§a:';t§§Ec methaa GE greasing Quaiity hybrié seaéa far



trading business of the appelianbassessee and_..___thés

assistance of research and scientific method ade;5i:e{"£«_V'{;y'

the staff of the appeiiant -assessee WEN not-'4"§'nai<;e:§sL:eh'--t"

assistance done on the iand ef the »famf:er."or V§f:'ueE--té'f~.:a'i0_if'&.ar':._ 2

activity of agriculture. An activi'ty "agtic:§it.i.i_reVV 

from basic cuktivation right"f_:}b%:;i ciAe"an__in~gu 1the5.__}'an~d "and " '

making the land readyfor sow§--.raj"uvth'e~..seesis'arid is done
oniy by a farmer anci  appeikant --
assess-ee entetiénig   case of non-
cooperatior}.  in terms of the
agreenfient  the assessee a status
of  to the Revenue, neither the

basic acti~i}ist},{%Vn.0rV'€:hei.sé;h_siequent activity Carried on at the

 Eanfsi'-i--eit§j§e=jén tei*ms___Qf Sectice 2{i£x}(b)(i) er (ii) is carried

 'oh*by theiassessee. Yherefere questien 9% any incense by

ayiiescti:;::~::sea seeés derived by the assessee wééi net

 attraei exematéens eenternpéatea eases Sectéerzwme

V' '..ji=.a§t;ice.§a§a§ ta the Revenge; when ee basis activity sf

 aigyisuiture is eerie an the Eaha En auestieh, suaseaaest: so

wsaiiea activity ef the appeiiaret -- assessee by sanvertieg



E J
an

the feundation seeds to certiféeai saecfs cannot form part

and parcei of agricuiturai activity of the 
According to him, by the precess of coizveriing
either manualiy or mechanicaiiy, Et_io.o,s_es  "
of the product and the process of 

agricuiture activity so: far ":i:i.§=..;he Aappe.ii'aié.::"§§_'bugiriess 

trading in seeds. He pifaces r§3i.Eaui}ice 'an th.é"de,CH§sVi§;?n in the
case of ASPINWALL & 'CCE,-.L;TDV§-,';.V'§; f:C'CMMISSIONER OF

INCOME TAX repbrted i::3"'(2{}i{§1V)"'Eg:7Q'CTR:.'V'E§C' 68.

19. Learﬁed. z'fer.i~ti*:.e"'RevenLae aiso places

reiiangé o:é'=?;§3e iQlio_igiéiij_g deéiéions in supper': of his;

€0riterzti::=ifis--:

'  "{-'£:§i§'?'}3'i2_ﬁ"R;_H%'E§$ (SC) --- €Q§vm:SS:0§\iER Q?' ENCQME
  j'fa*A.><:-.i§i;i%v;'-VR{A3A BENOY KUMAR SAHAS RS'?
27'§.i.9?9§'::i2:;i:;":m 342 (ALL) ~«~ "?iiiaRAE SE¥!EL$$i'«'§E§xi"§'

"'ii"§@Pa.3?{'3*:'?.'iii£T§iC}1\§ 39$. §G§\'§i'~*'§§§SEQ?':EER Q? E§'3€§§'¥§E TAX

 3, ggégiésizgg ETR 2:33 {mm} »« £ﬁ%ViMESS'£$i's§ER 8?
  §"?§§C€%§i%E m>< sass: gm, §;sia$;*-5 ggiégm §_.§¥'»*'§§?E5§



4. (2000)246 ETR 156 (BOEVE) ~ COMMISSIONER OF
INCOME TAX .VS, JALNA SEEDS PROCESSING 81
REFREGERATON CO. LTD.  »

20. According to the Seamed coun§e§£i_"'--«_¥:'?i'?,3

Rarthasarathy appearirag for Mfs Endo Amerigiém 
and Mr. Shankar appearing fo:d.~M,/_'s 
Private Limited, the reievant proviééon§§_'of"th}g._ACt."toé.VVQ§ai.§ié:4.i.

the reai question of controi2'e2_V:."'s;x,zV aré"Sect§Q':1,s~'2_('i:3..}'and " V

10(1) of the Income Tax Act:V;....VVV:§<;s_Ie'5;_;7,  8 AND

Rules 1 and 2 of Part~i\}' At'?-*.=L_<-._':f§F§}:1éhVti:§:.hart'. According to

him, th'eh"Tri:h'ljj'na'I':'§.§':'as"ha-r9tEy'«"Cc;ﬁf§rmed the order of the
Commiiésiéher f'r1'c:<jvr;1.é;%'h*'.T:é:1§g_.'(Appeais) by désaiiowing 10%

of the nef'L'p.ré'fitV'as Aa.Vgsric{}Iturai income. According to the

-'W,_V_Eea._:ff§"§«3d._¢o;;;'éseE xa';3vp.a~.3'r§ng far the agpeiiants M assesseegf

.V'--V.L':3.a'§}'--a=:f"a§'h¥?'é';'§Namdharé Saws Private Liméteé, they are

%fer:'é'g:2E$e§3'L?'j__a:é growers ané cuitévaters Q? fruits and

axegetabttsgv am the Eegarﬁment éf Qarmmercéaé Taxes;

Ssiferamemi 9%' Er<amataE<a has aim ;?"€€{}§§'E§Z€2C§ the gamsg ag

 gtfawerg ané SEEEEES 0? fmétg, vegetaﬁes aad seeég am 3:}



 

far as {We Indo American Exeerts, they are aiso recognized

as growers of plants and seeds. Even the agricuimrai

banking division 0'? the bank has ient: loan t0 the as:-se:§$'e:e"':4

comearzy as agriculturist considering the actiy'itiesséT"0f"th:e*'--s "

com pa ny.

performing agricuiture activity of';  ewﬁeci 

company or {ands taken on iea_se..Qr oii" |;:-_1:":{'i_si't=e1<'e_fi"'ii'3a,- "way " t

of agreement is §i'3dtJigi§'¥9 Ai.i.n:"'va;ctiyEty bf...'tag..i3icu|ture.
According to them, maih' 'C0nte'ni::.iVcV~nzfe'§_sed-- by the Revenue
was that entire4aVctivity'6'?Vthéf: a'SS.teSseessV:E's' in the nature of
business and*rf}_ot....a.gr'ic_;;.tAt£;--se,--.:'b:;tVt however the Revenue
itseif has-accejﬁte-ci 'a,_'§)'ai't'--.of'the income as agriculturai

income ir§'sQ_far_as' the iricbme derived from the agriculturai

 eperetieizs eéit's.i.eﬁe the State of Kareataka for the

 »Aa:se.essme.ettie-ear 2893-G1.

According 'is the Eearried

"'ceVé£.s1eeV§ S't§'ee§<er,. when ceneerrerst féeeéeg ef me; the

--V eQeei§.e:*:eV eetheeiies eeiet east the activity ef the essesseee

 "V3,,eeiiegréeeéteaeg is': iiee eeseeee ef eeeeééieg tee eeeees ef the

 egpiteeiiete eetheeties en the greurze ef eerversieg by the

ﬂee 

Therefore the assesssees --$'cQ"m*;iIanEes_'_}_by'._ it



x?'


Revenue, this Court cannot entertain the controversy gas it

wouid be nothing but finding of fact.

21. According to the iearned c<)L_1"n__s 'eL!.._ 
assessee, Section 2(1A) of the Aci;.;doe:f3'r§e't_je':jvE.§a-gVe,_:t'f§§t"1

in order to derive income from Ia'nd's~. by Ta.s'1,.'éésSesi:eekV

assessee should own the  !oVr':gV_ '$13- -1i;%"zai'e]E eetévity
performed by the asé:e$see_"A %{:a'§;Ve':':.§'-§'.f':'cegitu%eV"Airis' nature,
income derived from  iands
qualifies as  1:0 him, the
three partsgfhe Act ctarifées the
 te ownership and

positiozfi aesee
the wardeé'V'ewner$h§Ip?»?is~~.eAbse'nt in Sectiens 2{}.A)(b)(E) am

2{1A:.}-{..b}(i§}§" Aeeoée-ieé.' is mm, when pmduetécm sf

 "'~pr07éié<:i:.lS= ii§«::.e juie'; """ 'hemp trees ete» are COE"tS§d€i"'€:f€i as

~..egr'?%e:;'2E.%:.€§L%":f.");e"i%:"e-ﬁsiureg seeﬁs w§1%e§: are age grewn an iazaﬁ

ér%e$eec%:§~v_e4j'..--::éf whether $3 $3 ﬁt fer eeneumetien 0:" ea:

:aen":euE2?;§;é:' te egréeeitere preéuce, Yéée Exeiaﬁetéee ﬁe

 ¥,S=e¢;::E--ier2 251%} e? the es: eeeeeeizzg :3 him; éeeéaseee the

 .,,__€:E;§:§vet§en ef eaeééng em eeedéing ae egg-éeaeséture aetéaréty



and the income from said activity when consequently

qualifies as agriculture énceme, the seeds prodL:cerjj"a.z:'1j««..th--e

agricultural land deserves te be 'created 
groduce 233 in the case of seedling»..__4AcCe%d'E"e%:tjVfe' 
ExpIana'tEon-3 of Section-2(1A) :6,'-.L&lgii_'tl'~'lvt<>

clarificatory as it only explaitlasvnﬁqe exiﬂqing _p'eVsitl._¢3n.of'jlaw = '

and generally such explanatlen.§:A'hav=e_relef0sp.eActAE§e effect
clarifying the existing  the decision of
the Apex couljtlrl lghe ease   léieeﬁoee CEMENTS
reported in§.«.}',i§:'ﬁ__ reiterated by the
Bombay ....     of GLEN MARK
PHARr¥llAceu"::fiC;s';:'é jLlelélﬁeeereported in 324 Im :99.

22.""%.*l;f§*liE.e  that a eerson whe offers the

 agr.:c§:;,:itu'l"al §neeme_____:}eed not be absolute ewrter er tenant

 e{f'-€%:lle..E_a?::;ci«é.,%V3:§*"2,e learned eezmsel fer the asseeeee further

'.§;arjVe§i;eeV e'«s*i'Lj.ih$ :§e§et ae Eeeg as axe activity ee tee ianﬁ is

g reee'e:j:i':§.;e§5'"as agréceiiure azze that eetéviiy is es': the lane

K" ' .

 "'V.f».,e:ee_§:i vjfier the eereeee ef egrécelture awe E? a eereen has

2e§e%i€§a:éve intereeée la the iaee and he acieaiéy eeltieates



30

the iand, then the income earned wouid attra-::t___ the

definition of agrécnitnral incense.

23. According to the learned cdggheiet 'fen

assessee, the agreement is not in c'dr".tVraveInti.dn--_of"'€he7

Land Reforms Act and the ¢eiauseé¥3.A8,11 ant§.t1':'S"of*.

agreement definiteiy indEcate"t«e..V:VVt'ne agf§.e_uitdVa*a§l*Eateduce
raised on the lands u.n:d~e.r th'e""VaV'd--:tee'tfweht béeitinéys to the
assessee and entire   the assessee
and the farn1er':r%1Vets   tent or revenue
from the  faibi within the ambit of
58350F§V9'2't1'f'\};t,5i§..)  aiternativeiy contends
that even of Land Referrns Act, as

contended ByV_:%n'e..v"Re%;fehE::e, the character :35' the ineorne

"V..4.der'§:\gedi.,,"tby"the aeee-'efeyee from the agrfeuiturai operations

 eée eentends if at aii there is any

eenf;;°aasent§ff'e;n} it ie fer the anenetéey eeneerned to decéee as

"ate sz=;n7e:__t%e§* there zeee any centraxzentéen of the iene
"*'§+{efe_§n"ne an ene ene eeneeeneneee ef seen eentgreeeneen,

 _f{§§.enCeg aeceeding to him eeseseéng Qfféeer cannei: traveé



3]

beyond the ambit of the Income Tax Act and decide

regarding the contravention of other Acts. In the ab.s.erice

of any authorised authority opirairig that there hes.'
vioiation of some other law, Income Tax  M
inherent jurisdiction to decide 
reliance or: the decision in the 

COMOPERATIVE SOCIETY LIeti'iiE:) ..'\;s3.viyi/:~._1R'i'i{E'Li;iéiIAH 

reported in AIT 2006 (Ker) 27«'V3;'  
24. White repeaiirsgh  of the ieamed

counsei for the.i{evenuf:e  E§;Ap~i.éga_etioe to Section~3"? of

the   wavy'/Wof the assessee because
the incoijrie d'e.rived_i"'froii'i'*" the Se caileci agrictiiturai

eperetions  eivrehihvbitéd  iaw; fvir. Sharaker submits that

' 'i--._§:iAeci:iori%+f37"refers te"'e$<penditure in gerierai which is riot in

."ereee-'et ceee, it ie riei: e

'rieii€gi'r.;_e'et"i~ce..pitai exeeiidittrre or eerseiiai expenditure

efitééiie 'eeeieeelee ewe reieverit eectier: is 28 ex? tiie Ace

3"-'«.__V'-Sectiei'i:f§'? eeeie riiitii eiieizrerice er expeeeee, Zr: the

etieetiee er' eieirriirig err}:

  $_>':§€§'iﬁ§'Ei£i"@i but the Revenue treetirzg the iriceree eerriee



under SectEon--28 as non--agricuitura£ income. Hence,

Expianation to Se<:tiond37 cannot be read into-gthe

provisions of Section--28 of the income "fax Act. 

to the decision in the case of DR, TA. QUERES}}iI  

reported in 287 ITR 547 (SC),   

25. Learned counsei for the'»Ai4eesgee.é'ee'iieieo"reieve "tn

the decision in the caseV*£39..__w1L'z;-:x$;'t~1<3on;[\_g;p.iA;sJC:1At

SERVICES .\/S. CIT reported  njn 17 tn_'_t':ontend that
agricultural income isVot.:.t'si_de_Ltisi_e;.;:$£:.if'triAe'w' of totei income

uniike other exemptioristiti.ntteé"~(;i3ai§t'eztf'i},i;' of the Act and

the aboveiVS:iE*ici,f*{jeoi:eVion:jéieo protiioses that contravention of
any otheru Jew cotiiti'i.ho't:fbei*"invoked as the constitutional

rnand-:--i.te is"to._:treia.t the definition of agrictsittatai income as

. ."-:3éeE't--:{nce':*ne'i*7§fa>< Aetffoir ail ptizroeses.

   7'2.5i§'vﬁ§:§i':§.€'iViiﬁﬁmiﬁg to {him §$St,i€,. whether the ecéivity

of it-{fie ee'eee:~:ee in making the nybzzfoi eeeds as merizzetebfe

"ig: en "e::i"iei:*;x orﬁsneriigx oemee' on ie rneee the gyrnnetre
' -.zne.r3»'%§etee§e in erﬁer in trees' 5535?? income 53' ineeme from

..,,_e§ricuftete, ieeined cotinsei for the epeeiient -~ aseessee



33

contends that income frem an integrated activity to make

the produce grown on the land marketabie, :'zecessaT*:'E€3,{ it

has to be treated as agricuitorat income. 
him, the process of making the produce 
manuaily or mechanicaiiy is imr§iatVefi'ei'_v  
process is necessary for markeetabidtityZlofzthedprpdeced 

further contends by advanced"--vs.tec.hnotogy; 'the  of V

cuitévation itseif has un'de§'gotute"'ci{e.a}"atje.'andAhefxceyé medem
method used either  fohrl' ht '"vc'i§5f'¢i:vC1.i'.§"'?:;'\§_A.;*':;.;'EI.:':.m'.QD€!"ati0nS or
W0 Cessiﬁg the  h   avsl__V:V;f"nVarketabie goods,
cannot be   izotd that portion of the
incomevv.Aas'--netaQ  He refers to the case of
P. sureslaxm 4' V

 2?; 83; pufacing reiiance on the decision ﬁe the case of

 .Ac}e.§«§rv:E,ss.:e.V%§¢ee. es ENCOME "mx 'vs. RAM SENSE' KKEMAR

Q p\§".\  M * 

 §§{3§f"_v»¥ie'§';z.e§;ted in 32 {TR 466; teamed eeuesei for the
--V ass'e'sse?'eAV "contends that as Sectien Zﬂis} ef the ﬁe:
;vs».,%%e<;:E2;.eeVs" eeétéeetéee of seediésgs sod sepéiees as part p?

hdejghéﬁceéterai aetévéty, the aeiéeity ef the assessee ée



34

cuttivating the tend for the purpose of abtaéraing seeds for

saie in the market is aiso a agricuiterat activity_4va.rjd..4'_thVe

income generated by seliérzg the said 

market is nothing but income fromVa;gricu1t_:;:'re;'~-.:}{iveri'ce;'.Vthe "'

same deserves ta be exempted from t:§'x...~r'

28. Learned courage!  a.v.sS<'3.;5q1'S'ee:".= aV'§V3a'%%'V\V'§'3E'aces
refiance on the cieci si0;éwrt""'   Aff.
PARTHASARATHIAH Awe Beets? rgl.ér;_:'V:CQEr1'fdISSIONER or
INCOME TAX    in the Case
of K. i."A}<S§i'44i"VJir§._f'*£./>iA\"¥'~1'€F&i;§E5--{§§i§§".--  - 239 ITR 597 (SC)
to conteiwd  the present case has
to be vV t:*ela~teVd' ,:ae.dAI,djV'a§§4.._§'rdé~hary activity either due to

acqeamtarree a_§jy'..t'he"'-rrrassess or by mandate of iaw.

' V"'v.AcCardi::K3 tethe aéééssee, a smatl section ef the growers

 t._;a'rea_er2;::;a'g_ed ér:e_erecees of eemrertieg the area re be said as

seede §e,.trre§'..-rréarket arzd the ereceee eeeertaken by them

__"-is :**;err*ls:.a_.!'3~§receee carried or: Err agriceiteraé activity, What
"'é_eVr3_efr:;*eaE erre ereérrargr ii": eee gar: Se? tee eeurztry may be a

Wreire erecess er net erdénery in the etizer eart. This aéeee



33

wiii not change the character of the income earned by
employing process to convert agrécuiturat §:3roduce""'*é-rate

marketabie produce.

29. Learned counsel for the assessee pieces"ﬁe-§i'§a-sfétcje.-_T' ~
on Section»? of the Seeds Act whithc feferehce-cite Vtteftaérev 
prohibitions for safe of seeds tee coretend»._t'ha't 'Ce?'-ta'E'réI_:

activity has to be done by antV__a':-aessee  .ma'i:§'eAv..it'i3.,.,e."seeds 

marketabie in accordance wEtF?.:VVV§aw'».to h.a've_:v;e;j1:§§fEcatEon.
The Tribune! ought to 'iuaye 'mafde 'e'hcjqeyE':c'y_to know exact
activity of the assessee.~fo"r.g;p:§ve}=s_io§é'_ the hybrid seeds

or fou'hda'tionVdSe:e-dyjsto~y.c:.c'ert§'f'Ecation seeds' It had to

understand.._4wi1.etVherV 't.h'eVr.e"' was necessity for the assessee

 to a»d:eett"i:i':is pn§'e::es_s___tye convert the seeds predecee by him

 »a}S*;3.er 'nd7+ae_date of Eaw under tee Seede Act. in the

e*,~<At'r'ee'§e§'i§'§"tue::§ee aise the erecese centemeiated under

 Seetieeivﬁiieij ef titze Ac: eegétt te ee eeeéeee keeesérsg in

i

 ':f..t:":%'¥r:$n tee zee; eeeer §eeee Aet, §*"%2ere§e:e the Teéeeeeé
  ﬁe izeve remanded the éesee te the fee ef tee

 H";-'ﬁssessing Qffécer fer detereaénatioe,



I" 'V

. esseeeeeté eieczng

30. Aitemativeiy, ieamed counsei for the aVsee'Ss_ee

centends that without prejudice to his cententie;ri"th'e~t.'._ftt')??:t;"« _
of the income is aiso agricuiturat.V---it§_:¢ouh1'e; .Ath_:e"  
apportionment made by the Tribune! 'éﬁ

the taw iaid down in 195 ITR' 3111, 6éO._IhT'R 11t,»e;:rj.c{_V_2:97Ii': 19h: if.

17. Learned counsel to subetée.tvE'at_e hts'-t'ha'!vEen'1ge to the
arguments ef the  theRevenue
contends that fer 2001-02, the
Assesséng   insofar as the
land ctassifted  outside Kamataka.
     the 
cannot of the order which has

attaéiffeci fi:*{e"§iiSf'iré"' vE'ete"':ef the decision in the case of

 V'  --MCt:*§P3.--Gi.G3AL ~--- '3'Ci9'VIte 434.

 2A ha.Bi,'x3;?';f'.%t'§::.ttzeee arguments; ieemee €{11t..§§"§S€§ fer the

teizence er; severaé ether eeeéeéene

V'V?"44':--.:e:;t?§te§éeVé féretée that the eeeeeé ﬁiee by the Reeeeee
 éiheiiehgieg the ereers ef the Yrébueeé treetmg §Q% ef

'' "'?:hCeme as agréczsiturai income is net justified, Aeceréing



37

to him, there is no contravention of Land Reforms Act and

even if such centraventien is indicateé, Income Ta.x'~.Qffic';er

has he jurisdiction to import other Eaws 
assessment. He contends that SQ....f<3_i" as]'e'ii)"pee3s'"of_'the 
assessee, according to him, the;":.acij';"\z§stiy Or the 

done by the assessee for cr:?3ve;*t§nei'vthe  by = L'

cuitivating the iand as marketfﬁie ';3\_:v'odiJ.'<:e,t.:V:t'>Ae§;rf5r";'1es an
integrated part of the 'se7me'é--_eg.:rie1§ité3':r.e'i'gctivity done by
assessees. Theefefo zje"    1   both activities
contempiated  and so aiso
2(1A)(bV)(_ii):   appeais and seeks
for  fiied by the Revenue whiie
seeking i'e'isiaiVi£owV§ing.'4Vth_Ve e::_'t3;';34eais fiied by the assessee.

  3.i,'«.3"h.e"'*terms ef the agreement are FEQLEEFQQ te be

 te examine whether Seetéoe 251A) aepiies
'V te §e;et.s4'.ef the present ease er est. Agreement and

'' ''V.'s»..§t'eé";e;><:,:%e~1 ef the agreement reees es easier:



'L Tiafe.  

 »i

"AGREEMENT

This agreement entered into between NAMDBARI
SEEDS PVT. LTD., hereinafter referred to as the cgmlgiaiiy

and Sri Mahadevappa Mallappa Chikkalli s/<;i...._l¥{1'aiia:4f;;~{}ai
Chikkalii aged about 30 years residing   "

hereinafter referred to as farmer.

WHEREAS the company is in the bkugin=essifcitt:i,iii;g;5ti¢}i;1_

preductien and marketing of i;~.p.en--i'1\,tbxr'i:lV seVetiws'v.l:1Qth3 fer 

domestic and international maﬁaet and i:le.si'reVs tee take up
the production of ope:i«~i3ybriid"";t_Q£f;a_t;d;;._&seeds"'fo'i* its own
benefit or/on behalf of its'%eve:'se:e:s piisnepals.

WHEREAS' 'E!TlL€.:i3f.fE:1'i:!:'iii':E'l'"'l'3!'fh€ h_'e'r'sen owning land suitable
for cuitiva'ti'on div'hyjbi<i»ei"l'te'r'nato seeds for and on behalf of
the cernp.any or the ,.C:'e1ftl';:$en~,/'s overseas principals by

sewing: theléeteck/i'oe%'ida.t.ien seeds to be supeiied by the

   .....

iiiife-er' t.nerefe"re___tnis deed witnessenth, the '€€i'i'i'iS end "':::en_g§%i.iie:'§i's~..,fveefﬁeee ite between the eerties fer their ieuteei eesee nteg~e_{ A ;i=TL"ii'iev..i?eri"nei* eerees ie eieee ei: igiie teiei eiseesei ei' tee '~"_ei:n"n'i_'eii%g in eerins ef this agreement ene eeie ef ieee; 5e;en"nei"*i<ee fer the eieeese ea? eeitieeiien ei hyeee tenzete seeds, out of the land belonging to him and more particularly described in the schedule herebelow for the period from }L:ne--2G0O to 2601 . During the saiciggglperirod the farmer shall have only the right: to enter earmarked for fulfilling his obligations in "

agreement and for none cther.

2. The Farmer agrees that he will«VtahdVe'rtal{e'..%'for behalf of the company, cu'i'tE_\}a.tionA'ofV t!']'e:b..QAp'$:F1"~~h','bE'ld torhato seeds in the land 39% earma':'E<eld" uhgder the guidance, specifications aha s:i;lbe'rv'l:sEo.h'..of theeohopahy.

3. The farmer assures the land, more particularly described iaj:-"thejisch-ado?e."l:e:reéh'below, belongs to thegfalrm---eaf':L:lgh his"-ov&:'hgV":+lgl1t"'as* 'CwnerfTerh1 Lessee and is in his possesséofr.-»sand'"c:,z.l'tiv'ation.

4. The farhder fu rtl';_erA~.a»'ss.un'res the company that the land is sulvta:blel'for cuVltis?.ﬂt.§.???.»0f opeh~hyb§'éd mmm seeds. V"-_'S,"'7l?Ths.__'§ah3*ée-:_ agrees ta observe? ali the eshditéshs Etaeghagrs§'r:g"_~v_t.he~:jciééthzatésh and sther Ehclsehtaé matters, as set'-«.._sz;§_:v"isﬁthese §%"'€3S€¥'§tS Ehctltgdthg Ahhsxase hereto, ebhhestes with the presaratéah of iahd, sswihg sf mate A V.ff»fe%r"'::s§e seesfsf §&?'%Z%§§§&§' assiésattshf weesérzg, érrigstésh, }:%s§'E;'hatEsh, harvestéhgf sees exttactish, seed steaming and ..._sther agrictsfturai oseratioss csnnested with apes poitinated/hybrid seed production. The farmer agrees to attow the perscmnei of the company to operate orpthe above iand, machinery, impiementts and accesseries towards the achievement of better results envésa'g'edVV'~u'_hc§et this agreement and aiso agrees to use such ma'c_hir2jer.yt; % Impiements, accessories etc. w:i1aen.4épr-%u3viVd¢edVI.'<by-_jthe.. company on such land seIe<:teci'~_fo:f"ctt'1e'=pr'ed'i:c't§5eébf' seeds, The farmer agrees to' abide"byt'otherV»'ecVhti'itioz;§;s or advice which the Company a*r':vaV§=.give f'r.e':*n-_"f:mVe; ta' time directty or through the ,<:ompa:n'y' séteffef fa rrhsupetvisors.

6. The Farmer agrees tha_t"§f'theoieperatien of this agreement the co--mpany"ES satsisfieatf the manner in which the f:armi~:r'_V cc;--nd€1;cts4_"ht_mseif~"or conducts the cuItiva,tVienH, izewat iéberty at any stage to enter Eqgjon' .ttae';s«.V'TIa_.r_2'T{§,,:' so set apart for open poiEinated2'h_ybr,id" seed ﬁcuitivatien and take ever the agt»igje¥'te.raE e'1;;e_Efat§oes;, with feii right even to exclude .""~e:":t'ry7 efthe..Farme%"'hiémseEf into the said area. 1%: Tee_e'e.ie*'£.,'arjether iéeehcee en siméiar terms 8: eendetieee e-ate'-Ieet§'E".'f--.t§f:IeV' eartéceiar eeeratieee ere feéfiiéed and ee§:*e§ea_tetiv.""' The grewer sheié es: exereiee em; right in 2jejsee§<';'ao__e'f that Eeeea ""§{"§es§eg the eeeee stéeeiatee in eara eee eeeee er em:

__e§:<tees%ee teereef, the cemeaey see: have aéi réghie te possession, cuftivatiorr and harvesting of hybrid seeds an the land earmarked in terms of this agreement, as}-f___the company is a Lessee aithough aii parties agree _.t~h_:at.._h.Q lease is created in terms of this agreerneratt this contract to the extent that is not cer2sE.s_t'e'at With.' the..t_' Kamataka Land Reforms Act shaft"be~«c0risid_.ered_aws-{;~u!Vt§v«.A V and void.

9. The farmer whiie agreeihg-.,:vt'o.v_%abide._by.jthe 'ter'ﬁ'rs":and ° V Conditions contained sin the___VV':;'&aja1re»xure «h:eret}:> mere particuiariy, assures cc.§Vmparw..V_etVh'a.t the feuredation seeds suppfied by the wo_u:§iq.d".§a.q§§""Eu£!y sowed for crﬂtivation and ntjaee »~z:eu?{dV_'be :v.:<"eiV's:.:sed, or parted with to others:..no§§j:§nti~t!'ed12:9 it_.__.-- Vvi.::h"--;13tiEESecE foundation seeds §r»\i:dL:'id_x!§]:: r--he'dV,«te thé_"'c'ar{1pany.

18, The-A_fa'r§12erv:'Vfe:V§t.h:erv4ass£rres'that he wotsid band ever to the comparfye at"'su't:§'§ as may be specified an the hybrﬁvseeds ciJAA§t%sraie:i him aed rzat set} er ear: with or fer Ea%Ar1'2seV'%'§f"a.;«\§.;§;' gertéen Q? the seeds ctzitivateé by "

~- e»;e_rsee~s' erérrséeeést i'1r"?eurédai:§<§a§*: seeds/stack seeds; and seeds derived as':

Q?' 4§:'h%s"--VA«Va'ref the eregeety ef the eemsahyfcemeaays ﬁre farmer G%"§§'§ ssdertakes "'._rmg_Et§.--g3§%eatiert ef this materiai esiag ms ierzd aed Eaeeur. 'the §'i'¥E.E§t§p§§€a'§Z§0!"i is dehe under the teshnésai sueersrisierg of the company at the mutuaiiy agreed price and wit; ciefiver the Seeds to the Specified person at Specified mace. 12, The farmer further agrees that at! information to the foundation seeds/stock seeds, a§Vsox" V' cultivation of open paEtinated/hybrid~»s»ee'ds.' are'"Ce,r;fE.t§ehtiat'§., V' in nature and he wooid not part with agw.oféth_ew;:itotje§*ty "cm information reiatirag to the: __Comf3'a._hy toeV.o-t:;tS:id'er§; or competitors. The farmer'"-va.a%2o'ertake.e,Hto such V damages as may be;..detero.2-i-nVe'o."by the'~!:r3m..;3any for breach of these covenahté. _ I

13. The company agree$"'to:"pay._the compensation at the rate kg',/ao"ih'ta*!""for hybrid tomato seeds whiifh _:-ar_1:=§i./tier".:tefgttu'e:.t--sg;:eC'if§cations reiating to moisture e9rAtt ev:'*ats_,_::'Bh¥spi:ta.i__ au":*Ety, germination, hybrédity, quaiity et:."as Setho-tit 'mznexures :4. "Fhe~__t'a.rme?*.a'g~r.e'es that the amoent due as coaf1§3e'h3.atEen"a3 oe:" eiause 1: shah be determined by the .""':«o§§s:o.afiy affézer theméeees are duty testee by the eomoany at, 3;5h.%_3'a.%a_oo'--: asset or by the overseas orioeéoaia ea e:h.o'$e he?€'a3i§'ethe oroeaetion éa oaéertakeat the farmer fert'het*--.a§§ve§ee that to?' the ourooae of eheaitéeg aeaééty aee §o;€t'y;-..the eoaéoaey may aoageot the aeeos to fzséthet "':"_oiea'h%og aha processing' the Sea? oeaééty of seeee so airréved at; after seeh oieanéog, processing, aha testing 43 shat! be deemed to be the produce for which the farmer wotaid be entitied for cempensatéon. The farmer hereby Specéﬁcaify agrees and accepts ue<:enditEonaii.Ytfthe judgment as to quality and measurement as to e§.g.ht.:df-4't'he produce, arrived at by the company or ifis" w,9v.e"reeaéi'_'t M principais.

payment, the registration fee, a:=dven.céefi€s"th'e'~':'e_thet.' inputs if any, paid to him.

15. The farmer further agreeg».._¢:f§t:at thVe'fa'rew.:3é§, hot, 'V during validity of this a:g.reemVe=+s.t;'"creme ah'; righté by way of tease er Iicense, Ft'1'O_f;:1f'g_<';¥§;;ES;,:_ odr""sa!e"~tt_p others. The company shaif have un§VhVte:rVue'ted and'-:_ii_':f:q3estioneci right to enter upenttheu i'_andi;wit§h'CS.t3t ~axn3}'_j'%eVt'0}f' hindrance and he shaii !"3v'A;'}'?:"'V'i'i"i--.<'§.:!i'f3,y' qi;eVstio:":'"t'h'e"tight of the company for cuitivat-ion ofVovtyeift-~.hy'»1)VPid__:mrt:ato seeds during the vafidity of the agr~eLement--, " V

16. "the Lcehttezévts of this éésgreemeet have been explained te in §<fT'a'he~e:ia and I have ftsiiy enderstceed the tterttes andt cdofiﬂitiens of this agreement.

"Lend tzfseeee §"§é"'&§ '*«.iVi§Etegte--%~'i%re?ée§§é SCHEBULE ?r:}_e§'erty eeegtézerkee fer {me acre Ctsitivatiee, §t:bw§Ezz§s§en §ESt§'%C'{ §¥;.§?'t»'€";f téeiﬁ The Company may.....wEthh;3id""'ftt}»n5i'Vs:.;ch_ t:>;§é'a.p6.£4f'§'n§t:rsﬂ§ﬂhybr§d 44 Bounded on the 4 sides as under:

East: - Ma!ashappa--HuiEhaI!i West Maiarayappa Kassambi Southwlaralangappa Govorapur North«~Suresh Vasanada For VNamﬁlhalri.V_§3eed.s_*v?vtv. 3;_t'fZi=.' " V' ;'s."s;;BRA'M,A.:\3'm) CBIKKALLI) » V 'V of the Farmer)

1) '

2) _ ;3.N!\iE3I><URE~E ,.._;C%r'§:éf"E:tE{.ms §1:3§r:*':=*zir'1Vg1"'§'a'§9t of the agreement far cuitivatian cf seeds.

a~}V"'§.7.%f:eVfa%é:*;*1e?~;}:2%k'§.§E carry out ai§ imstrustésns 9? the mmﬁany Ea i¥':;«_=;:' §'::::%isr 3% hybrid S8€§ mitévatéen, Whether izerein :;:s:**':"E:a§E-geé sy semseyeﬁfcommuniaated sagaraieéy Eran':

'swag is time 3*; the asmmng gr t%'::'§;:g?: its Eﬁréssntativefs araiéy ar are '\ﬁ§fE¢§'t%§V§g2

5) C)

d) 1') He wifl ensure that there is sufficient water for raising the crops.

He wit! ensure that the iand shouid have not for Tomato craps cultivation during the g3revE__r:§'t}s« Preferabfy the iand should have beeh~..VV.us_edt'4 %for-.' cuitivation of previous season.

He wit! ensure that V.wa;thén"'._Va"' radVi{£'sA,»:'o.f mts./ --ft. there wéuh§t.hot be.ar'ry:.eth'e4rV§Variety of ---- Cr0ps,. raESe,d*"* e1i_:th'e'::_ for seed'§ or for commerciai productiohﬂT_' _ _ '4 _ He wit! ensure that Athe'_%aatd_V for sowing by appiying S§v1O«E§_art izeadsef tmanure per acre and thei-t.hVo'%ot;§ghV;y, He undertakes to apoty iike-'tithe, gypsum, et(:., as per the torepa'r:y's~.}?eeomﬁ:.ea.dation.

He wE§i"sE.hfo,afm' the._Cof?1pany offieiais the Eocations and if2§;s"reqaErem_eats "sf feuedatiee seeds ehe day in "a--chIaf;<:e't' of sewéfé"g"'.A Es;«h_at§%"'e.h'sz;re that the foeeeatien seees seeeéied by '-- %'::-Ease {::€;'%*r';g3'afe§»* are sown for eeétévatiee in the seeciﬁee %"E--eEe;féetthe presence of the reoreseetatéxfe of the eeeiveahy and aene ex? teem aee misusee es? partea wttt:

. %:'e_.e':t:e:s eat entétiea te it; Any enetééésee feeeeatéee tseees shah be retemee te the {'.ZSE'é"'%Q§E"E"y2 crops or 46

h) From the time ef sewing the seeds to the time of

3) harvesting the crop, the farmer undertakes to tzetti-zgztete the farm as per the instructions cf the Compe'ra'y'..'e~:3eJ representative.

Fina! payment: The hybrid seedStwh«ich_" V' and conferm to the foliowirzg quaiityj"petra«metets \'i':zf.';~.,._

a) Moisture content iess than 8%'._

b) Germinatiera 90% and V.

c) Hybridity 98% any; ab0ve~--- e cl) Physical eurity 98%V:t"a_n(i_ .9 Wiii entitie the farmegj .reee§xE:e at the rate of Rs.3,2OO/--:.petV '<_::.uin§_a} ptfpre.eetSjs.e(i___V§§eeds of such rate as may E:_y"'th_e___te_mpa%iVy.__ Normaiiy testing and processihgefe Ewitigelyt 4 to 5 months time. Any,' tihtiherefigzetjeli.geetjsﬂvvahiehw pass through the sieve whifej ;itocesei%{g«.%V gremain as property of the compaf§y._e,!th,exeeh'1e be sold in the market after due precess a:1é*.t_VEfLeV'erriet.:r:t if any realised Witt be paid to A the fEEi€F"ﬁVE,'5f in éuemeeureef' " 33, .I;te:'§:::}t:sefu§ te refer Seetéeeﬁ? ef the ixet wee its \\ _ 'l I. ' \_ 2; y ; _ ' , K; 'at Z -.

73?.

"._"E><e§er:aftIee aee it teaes ee meet:

{3} exeeeeétere at the netere desczéeee in eeetteee Any exeeeeétere {net being .'\;*"%; . n ' 47 30 to 36 and not being in the nature of caoital_..___ expenditure or personal expenses of assessee), laid out or expended whel§y;""'ee.ig:.'._j__l:

exclusively for the purposes of the profession shall be aliowedm' income chargeable under thehead.9"PAr'ofits:"ariCi aims of business or rofession"'.

Q E3 . . .

Explanation: For the ref'_ho~.Iei--..of doublts, is hereby declared' ajiy :eA>{';§«en,t§l'itt;re ineofred by an assessee is an offence or_:'whlchgEs";3'ro:l:it§i'tedV_ by shall not be de_ei§weé§j'tl"'r.,;1:-g¢;il"ar§;:t3':¥m for the purposeovrll' ptofessioo and no clvledLl'clt.E;c§i:il toiiij"al'l'a§§iar3ce_"""sh4all be made in respect of expehditare.

_ {,2} oroitted V. ..t_Notln§§tE2-s--ta'noing anything cootaéneé in sovblrtsetlétéyon (1), no allowance shall be made in "-".__VeresﬁeletVAV.§vE""exoenﬁ%tore incurred by an essessee oa.~~a_of¢'ert§semeet in any souvenérg. orochore, t"zjeki:t; oamohlet or the §l§<e ouioiéshed ea; 3 AA oofléiileeé eetty,"

48

34. Section-2(1A) of the Act is relevant for the purpose of understanding and anaiyzing whethefnthe income derived by the assessee ~ company.":_s».'__i'r::rr1._ agriciiiture operations and it amounts tot"~-a.g'ri¢'ui'ti.;rat._»* income. Se<:tion~2(1A) reads as un'der'_: ' "

"Agricn%tnraI income" means

(a) any rent or ieven{:@._v'%derivéd~friniiﬁ taiiid which is siVt'ia~:~;ted .iinm1'nVd§a and is Eivsegt/or agricultura!""piirpd's_e§.;:ii V (ta) any incom¢.ide§:~g-ed-sfrcné"su¢hi,i;"a'nd by -

4(i'),3'grié-nitéiré; c5'r_ = by a cuftivater or rent-m--kind of any Vi ,pr0{:n:-',_s"i.§.';'dinari!y empioyed by a .<:_V;,éIt'EvaVtoi" 0%' receiver sf r&nt-En--~i<iné tniwrénéer the nrcsduce itsised as .:"';-jfeceéveé by him fit tn be taken its vf:=.'%xnari<st; ar {iii} the safe by 3 auitnrater or receiver nf rsntwénwkénn at the nrnéagcs raissé nr receives by nénz in rssnect ni' ninicn nn nrnasss nss been nerfermsd nine: than a process sf zit} the nature described in paragraph (ii) of this sub~<:Iause;

(C) xxx xxx Ex;:3|anatien--1 xxx xxx xxx E><pfanation-2 xxx xxx xxx E><DIanatEon-3 For the Dt.:r£3{3'se§.'_'Of'TVth--ijS-¢'|'z«'ig3V5<e:

any inceme derived frc?m'«-..$apIi'nwgsV' or see:e'd.{in.g§ grown in a nursery shéii_ §;:e_ dee'mee"':toﬂEbe agricultural income: K _ 'V

35. So far as the 'a_box}'rev it is exhaustive and it refers to4th":'e_e k§_'z§dSef ir3 <:e{me: V' 'V V '-Secti e'ri[f-2e:(V.L;§j'{.e§)"~refers to any rent or revenue deriveé .agjwrierj§fu"a'e:i'..'e'Sand which is situated in India angﬁ'-%'.:$'V;;Lsedj f0j'r"aVgr_i_eu¥Vturai eureeses. Sectien 2(1A}{b)(E) *2{;e'f*e.rs ..§e".:'e..:;:f{:r1ft_e eeréved from gem land by egriceéture.

Seeiitiiorév';*§{:.A'}{'b}(Ei} refers in any irseerrze eerivee frerr:

eueéri §.a"r:.»i.§ the eerfereseeee ef e euitivetee er reeeéver cf :;e'§':?*;.:'%:":§§:<é:':e er' ereg ereceee ereéneréeg em§€e:x"ee ey e 'A<';;:!:té'éseter er receiver ef rentuEe~§<§r2e ﬁe render the ereeeee mraiseé er reeeivee ey hire fit is be taken ﬁe market. We are not concerned with the third type of income as the same is attributable to a buiidéng and the facts ef"--.the present case do not warrant consideration as such income is a agricuiturai income er not.

37. An income can becomeg'agrEc'u5tu"r_a!'¥';r;c.en'}a_ énEjyi' if such income is derived frem iand which 5.ita£'atej:£."én India and when such Sand is agricLj§~tu"r'a%V-Ztjsés; when a land is used for agvr§:Ca._fture' pé}:r;$g3s'é',~--_dEfferentx types of eperations can be carried t;r_aV Ianti".§§'_nQ'.'--:tw0 Operations which are releﬁztint' are biasic "og;>:ef.étio.n§s and subsequent oi3erat:,ij(V3nsv."'7.:'3a_f5§E t;.p:£éi<~§gtiQr3s:VHi'nvolve Cuitivation of the iand iiké' Wing'eVf"t.hekV§'a.;f;é',"sowing of the seeds, piaraténg and ,:i.mEiar4"<:apera'ti0ns 'which can be termed as basic ""A<3p=és:'aV.té?c5t:'as"uszarranttitng and éemanding human iabeur ané Eané étseifg which Es 5 stiirect ﬁnk ice make the:-..4__cmV_;ﬁ '€;§%:~etut from the Eané. After the may sweets item tE*:;<«:.~é:'Ea:':é, sateseqaéerst eseratéens have te be resertee

-,.%<:;...?::_§;;s' the egrécuitassésts fer the efﬁﬁeni gsseéuctéee :3? csee .,_:ssl;c§": as remeving the weees, céeassing arse ieesenéng seéi amend croe, prevention of crops from insects and pests etc. Therefore both the basic and subsequent oQetet§e~ns together form the integrated activity of an In order to Cali basic and subsequent activity!"as.::i_ncte'§te.tedi "' it activity of a Farmer, the subsequeint ?_'EIC'f§i:'V'ii'I'§,'._'SE7.1't')"1}E..C§Vii}-S33}:

conjunction with or in conttz:'t:a«tion (E)"17._t'i'i£'.V ba'SEA{i.i:O.pV§;Vfa:'EEOFT -, * Le. preparation ef iand' and ti?:'e«-Vseﬁedsvfier such siméiar activity. It is Ftt_e:1"E _seVttEed:vi'.that.A:'preparation of the suit and sowing sof the:A.seed.s "notInecessariiy be by tiiiing of uiitcouid be by use of mechanicaiya.pﬁ-aV;:'§;tus btésic operation should be on the Vivanci ':tseVi't'éje%.ci'iitvécanéioit be outside the iand. GeeVnihatsvvtgzzeﬁetstand why agricttitutai itzceme "!\tB'E_V;<€.§t'.N{}«£,tVfSv§£§8 the eerview at incerne text Sectien~ tetaiiy exempts 3Qi"ECt3§ii.§§'a§ Eeceme tram gncetne tteweveiﬁ, ne egrécuiturai ttzceme stseseqzsent 'Lite Q-§?§;§§'?§ has te ee mesa te tee totei nenwegttceétuteé tat the etsreese at determitténg the tax are new ~«,V Vesgriceiturai Enctzrne et" an éedivéduai aittzeugh the km M agricuiturai income wiii remain fuiiy exempted. _.Whiie Se<:tE0n--1G(1) of the Act exempts agricuiturai ihce«rf;e.f'?rg5€r} income tax, one has to see why it is so. CQ"fistitijtEvc3':3 ' India gives exciuséve powers to _r_he._Stat.e Legri-é;€ature~&,te_V u make Eaws with reference to text'-Qh1'_'eg'ricL£itLj't'rat Erztr',/«S2 of i_ist-I of 7"" Sttt:1'e~dv_uleA"furthertv-vcie..r§fi'e~3"this" L' position by empowerieg theAe£?.axfEEa_meht te"Eeagyy§axes on inceme other than "'agjer%ei5--Eetgifrai ."ies*jcc§r:=ze, Centrai Government is n'ot,_.em;3e"wer:ed .te,V:'taVx "source of income under 3'8/'~\§ one has ta see what exactly hatwtppeerxvs -tI1Ae.VeCt'invity of the nature ciaimed by the asse§;%see' i3__Carri'ee....,r.,>e«'§n the Eaees ef the eweer/farmer in 'thVe's--e_ ei::aT'tter:{é'--«¥3y virtue ef the agreement: entered inte bfetezeeeétA§:ieV.7eertéee, in ereer Se eederetteee eéffereet eerie efteeeiéeemzitée); eee hes Se eneereteee tee terms ea?' '{tf'*eA§%e'eéeﬁee': ie knew wee geee wee: "? §s_.:e~eeei%er": {e}{§}~ ' eefere te rent ez' revenue derived free": the we eee such Kwtfand sheuicf be situated in Imdia am the fame must have 53 been used for agricuiturai purpose. The rent could be eaid either in cash or in kind or in money or moh--ey'$ werth. To know the nature of any income e.r__'4i'e}Je:r;eaJe4V. received as rent which is payabie either in cashier in ' » § definiteiy ﬁsheuid be with refere'h<:e"tQ lanciiord and tenant or iessozr and iessee i:_;_eft'we'enK.'the'- parties. if Cash is paid f'Q.;:.v:V"carryie'g..Veut".=aefieijitural V operations, it wouid .a"m_0uhtti"t"o'tVt.:reh'ii,;fecei\ke'd."VOh crop share basis, if crop prodiuf;-ed 'f'wi'ri the"-E.}3;nd'_'_Fs given to the Eahdlord in i<in:d<,':§..t Therefore either way it wouicieiﬁztreétesaeé¥5=-VS.eCti~O%i-- 0': 59930" ZUA)» T58 wordsﬂan-V' :'eVr£'tv'{jr.AL:fe\fe--:}_i3"e"used under Section 2(1A)(a) do not refer_4tc,Vae\,r iirigenjie which has no cohneetien re the iahvzifa*Theref'c--reV_____tir:iesS the immediate ene effective »:~:;;cv3UsrfV<j:e.__:et=.ie':2d, such income earmet be termee as agé;m§i::ar:§'_é»Lj..gimme. 1: is we; eettiee peecieée that e 'V iete4é4e$t"'ehe.?$5'.Vte ee gage en erreere e?" we gent peyebéeé. xv":f..the'e..e%:the rent eeyehie is egréeeiterai ieeemei ea: tee E'2}tetes7t ztehnet ee agrieuiturei ieeetee, §§f":"§§§a?"§'*_§ by Megreereeet if e p€i'S(}i'"E euys the standing arses, the profit Kr"e1:atE§da§.s%1ii3" " of'.

earned from the safe ef standing crops Cannot be ciaimed as agrécuiturai income. Therefore every amount aceftied to a person in whose hands the agrécuiterai prodti~ee_j;;'a__ss'es through cannot become agricuiturai income,.,__IV_t"~-wottiti teed" to concéusion that enéy the owneig. Ia_;34di~o:';¥ o'r'Vf:at'-me'? persons having derivative éntVe_restsA"in"such [Ea-r;=dv"reCe'§ve:s income from the above persot£s';~V.:t:he;a thVe~.i.n'Coé*ne':'2from the Eand by the performa's"§:ee._ off'eg_tVi<:e}i_t:.ii*a.i operatiens on it can be termed as agricuiVtt.i:'re_iV clwallehigitzgéi Revenue regarding the opinion oi'>-the. T%i.bon_aE'..:_t'i1at 90% of the incerne of the essesizsee is ag"r't=:t;__i_t;s.rviaE income refers ta the feiiowirag ,%».a;%A% an % 'gte"c:sio:a_s'~o::':ViV§'§Efetent aspects of the matter iike nature ef Enet:u1's'V°tie,V it:t7e_re1st in {and end nature of ereeece. 7,_:;i) » *a::::" Vs. eagéa sew; Sahes em; 32 {re eee {se} " eta" 'egg stmdere Meﬁaiiat 18 ETR ese {teem} I it _ I_EEE';: CIT es. Asseeietee Metais Ce :7? rte 428

- __;j§v) Eugei Kishete Areere vs, USE? 269 we :33 {ALL} i'§&iLi2E'1E {res g"3§"Q§L%{iES raises 9:': the iarras. .J'$ Li} (2!) CIT Vs. Somdarya Nursery 241 ITR S30

(vi) Consoiidated Coffee estates §_td., CAGIT ?6--.__ETR 29 T *

(vii) Wiiiiamson Financiai Services Vs. CIT

(viii) CIT Vs. Greer: Geid Tree Farmers P 262

(ix) A. S. Karachi vs. Comr:~rii»ssii"0'r*:er*«.of',fx§jrigii(iiir;ir;;iVi« Income Tax reported in 11.5 I'.ffR~62§._ A .

(x) 13.9. Krishé utpaaar~r'iV(A:.r.;fainiy%-irri' re_p:§.r'ré{1_"<'vE-n..3:0O4 = "

(13)1m 1144 at page-ijor:163"~ M -r

(xi) Havai<kaE Estaﬁe~..Co. Ciiizj, E99 1TiiVv§9"x(Mad)

(xii) Commissioner 4'c')i9"_r_Ii*.c--ii3.r*rae-3)' ﬁ!V:Eéd\FaS .vs. Maddi \/enkat3*'3L!bbay)k'E3»-finﬁi' 20 ETR 151 The' gviistﬂof:ithiéM"a_i5'o3re' citations is as under:

In VVV'cQris.idVs:<E_ng._VS connotation Q? the term (_ !"a§F_'E"§'§*.«T§i.Ei:'l_",_fE_'iE'€V"'y'_, 2/r'é"%1a_v_evse far theught of cuirivatiorr of iancf 'i::i't§'2;e wii:ir2:r«vi,sTen_se as sorrsgriséng wétrsirr its scape rise basis as. séarieii 3s:--V'sj*_§f%'2;::ar sabsequeni sssraiiarzs, regarsiess 3? the Erzese ' ..f»gsTr§r§«.:;c:s rrrsgr ba grair: {arr arsgerabiss 9:' fruéés zrriréésh am .' ¥'§§3C€$S3§''';,! far %§'°'s€ susrsnarzﬁe sf human beings irzcirséing plantations Eiﬁd groves, or grass er pasture for consumption of beasts (Eivesteck) er artictes of i:_:xur%',?¥'st:.ch as betet, coffee, tea, spices, tobacce etc, or crops Eike cotton, ﬂax jute, hemp, indigo products COUEG be raised from! thej%a":"1d;'_'tide--..'vteV:*Vt;ja,i' agricuéture cannot be confined _mereiy_ ta thedV.pé"e.d'uCtid';ra "of grain and food preducts f0r"V'iit:Tft:ah beasts. Therefore the term, uhldetstood as comptising of at} pi'0d1;VVr_cts"..cV>fthvd_tIV"»1:e_:V have some utiiity either and commerce and would t>'re'd»§u'c':ts such as timber, sai piyasa!*~.trees,V Casi;-r.i4£1a.péeritehtidrz, tendu Eeaves, horra nuts etc. If the_ %terrti.eVg:f£t;t;:tture is understeed as above, the base; aVS"wVe!§ a's'--'sL1_b_sequent operations in the precess of »ggvgrictgitereiv'ehd___the raising on the teed ef ereeucirs which ﬁiihﬁ? fer eeesemptien er fer tsade ene ::er"'2:2":"r1;e5'§ec;.e._;£§t wéﬁ be seen that the term; agréeeétere tecteesee a wider Entergeeetetéee eeth ii'? regatd te its hiiqeesetiees as wet? as the reseits ef the same, The Vme;3er'at%ehs putferth en the %and ceuid be divided mte two, 5?

the initiai one is ali the operations carried on by the agricuiturist which are absoiuteiy necessary fen'-.the purpose of effectéveiy raising the produce There are certain other eperations to be petf'effrra'edVi'after.'i the produce spreuts from the iar?=;t1iAA'iiiif{e' eE'e_ané:aQ_.: 'tij;e_iiéin_d"« around the piants, weeding and préoteﬁtmg game pests and insects. Sometime's:it»may ':'::.i_s<j>'*eveeétivtitiending, pruning, cutting, i1arve'st.ing ptoduce fit for market. In such thei'£etet'.'eperations aiso it i' V As tong as can be termed"es'--agé=icugétu~%al"~Q'pe"i'a.t_i_Qfns. integrated i'act;5§}'i't\}"is---- operations, it wouid mean the 'izzscdrne-~._Ci-erE\;e€:i'- from the land is agrécuituraf income. V"*T§"inis, between basic and subsequent 0pez'5ati0'i*:s §s"'ns:>i:_ ____ __s«:: impertant in cases where the iegsﬁtgui.tm<ist._iperf0r;ns these oeeratiens as a part 9? his i2'at.eg'retes§'.'g3etihﬁkiity En etéitivatéen ef the Eanés, "]iv:i§f§'espe¢:tixze ef the nature 0%' the §§"Gdi§C& es' eteéuet V --.A{§if--._i§':§€ Eeeé, egtseteeer is gtewn en the me with tee ..,,+.?€sststaeee ei' hemen éeeeer ens effertf whatever does net 'L \Fi;.'?"\ _ s it 'Q grow wiid or spontaneousiy en the soii without i'i.';'--{Tian iabour and effort wouid be an agrécuituraé pr0duct":Va:'r::tiL:'--t:he process of producing it would be 'agricuituref:"w§t!iVVif:-ii' "

meaning of the expression in Section"-'2{.1A}'_4'of_i;'hA€:v Agricuiture wouié ,::':Eso Vi"n_cl'ude --V"i"'.t,v7r37':L"i_C£,£Ei'Z:§,_iT'€°.3; fiericuiture, arboricuiture and s'§iQi§c:i_EVturé;-- '_VV:iC'i3EtE§;atEoh of fiora and fauna which 'h:gis%«.art.iVsti;:.Aér:.§i.¢¥e«:Qrative value can be termed as agricultu raVi_Va:Ct.Evit%_§1. i The se'etis_ i}5:.ei*_e"c«E;ea_%E'iy'a7p--:5{:sdtrct of agricuiture and the inc9m.e_""'aiérii.;--:;g3di 'ffoim 't'i*-s--ei...s§aie of seeds can be agricuitura--i 'iricdimié-...s4'i '' ,--:'K,grica:i9:u..rai'Viheomeihat eniy exempted from taxabie ."'*%i";<:ésrri'e*:bs:t""aim fréihi the totai izzcame of the assessee. ~7.E"h<.;:$é' éi§isg}:*s*éefs.:_]are ﬁifferent fmm the ta:s<-f:'ee ihcsmes Ui'm--;Ff__i' CVhag§t%:?iV§~ﬁi. "iha ﬁefinétéah sf aghcaitzsrai §¥"iCGE'§"§$ it &§ti{:§;e?36§{:j inﬁisates that it is {}§;Zr€i'"é to the §€iC$i"é"E€~€3X ."i:+":;zr'igi.s;<:_th*:&§':':s éz/2 farce '§%'OE":""§ étims ts; ééma is éefihs _,a_:_;§rEcu§t;2ra% Ehmme in 3:33; sartiiiuiar E"¥"é§E"'Ei'%€¥" and that wouid be the meaning not eniy for tax enactments but---_also for the Constitution. Role 8(1) of the Ineeme states that composite integrated income shaii M as if it was income derived from b3;-ns'i"ne5S§ income had an efernent of agtiiirglititjgfel incomes which need to be sepaketged 'by,a'p-ggtygnugtvvthe 'Vtule 'V of apbortionment under 'V"'-»t...Tr1at""is V-otsecause agriculturat income any of the enumerated heao|'sv.._in aect though the non-'agriceItu're{._e'§.en=;_erst:_Vh:_ae_et2"cht_:Iink.a'ge. When income is derive.d«~.fro'm such income shat! be chargeabEe-- fie ghuhséness income. Here iega! fiction corne,s_V into' .piay"end chargeahility is assigned oniy '_ to nonegrEt:i:--ftu:e§.patt ef the composite énceme which bee"E.iVni<age"e,eEt'h_ene of the enumerated heads En Section- 3_'<-Esszé-zp, hee';jneee §%'EC3§'E'?€.

n g §*§?'§e.:n'e ;¥eet that eorne ef the eeeretiene reeuéree fer " the eten in etseetien nee heen eernee en he the " feerner Eeesee me te eertein oete ene subeeeeenthr eernee 6%} on by the assessee wouid not make the income derived by the assessee by seiiing the produce a nonwagrico§t'ueraE income because without continuing the ag.riet;'iteo'V;~a'£'._ operations stopped by the farmer, the asses;$e'e.V:w'oAoEd4 not»:

have got the income in question.

The definition of seed§_ecEude:;"'seedEe§n'gs..daé i.?;e"I'it. Therefore the Seeds Act and Atj":<E..t:e!tu raIV"Prodotie have to be construed I1armovni_eot_usE\j] ._ V . When a person takes estate' on lease for a period of tenvye'evts of fivegi yea.§Es.__ano« during the said period,"1.._ne'-Cas<riVe::ffo.,tjt».n'ot§'i'eg of the piantation for proper growth of"tea E,eavee',e._ uitimateiy manufactured into teathe Comn"*terc;_i_e§é'v:sense, such pereoos wit! be entmeo »f<::f~thVe ..ove«oeftt'*o_f RoEe~8 of the Income Tax Rates, '. <. "-3 .~ earned ogs the eseeseee oy tee sate of R'"~.__'"etano£o§__«trop és different En its eeereetet froze éeeome T."<;¥e:%_x:fee oy 'way of teet o? {eeeeee §§' fog? the oeefoeeence _M;o_§f>% eoréttettorei ooetatéons by e oeesoe eeeieg en éetereet paérchaser 9?

M therein as owner, tenant or mortgagee with pessessieh etc. The prefit in such a zase is derived by entering' centract cf purchase of a commodity and by "

commodity at a higher price an.d'"'it-..iAs 5hot. .uégéticisévtzzrayhiv-.' §f1COIT}€.

41. As against: this, thVé'v~.._VPe'arned"'-Cﬁiuthézseifor the Revenue reéies upon th;--;§"f.oi¥o'_é}§.rirjrj]"c",§e;c.E_éi'eAns to Hshow when an income from iarzd __cVQ:h'uE_g;i t£*éa§fédjVV..'és agricuitural income and grizhhé-p:'VEt':i+\.fo£;i<§'; e§V'r?':'e-uwht E0 agricuiturai income.

1' E9v¥ALABAvRv':V"'T1'-~.:iVN»I§'U$:T'R1AL CG. LTD, .\/S. ccjm1hss:'aN':%'R,%cj:rJVmcome TAX w (2<;>0e)243 ITR _--83 (s'<:}.% h h _2<; CC@'h:j~*;r~é':.s_s:0rsiMEé'Q?" ENCOME mx svs. RAM sway V f_ h.;§Ls%;;'§2..T_$;%:HA§ R0'? «- {:95?)32 rm 456 {gm "fhe gist of ihe abmze s::état§3§2$ is as anger: V' a","§7"%"*;e ammm': reaeizzm' $3; 'aha agseggee z':1.f%;'E§Q§':} §r@h:: mbéer agiais in agngiéeraiéer; far modification/reiaxation ef payment schedule which was not fixed or quantified as toss of agrécuiturei iQC0fTi€V-fjf"_}E£§d not be treated as agricultural income. Therefore".

be an income frem other seurces.

The term 'agriculture' cannot'«t>e--«_c}:mfin'ed 'n<1e.reé-3/"~tVt$". production of grain and fooe~.,5ife.ducte ~fQ'r.u;jr;mﬁVe:§i'V"'b'e'i'ngs if and beasts. It needs fer-rt.her ac'tiv<ity W-vh_ich 'U'Sr€?ij4f for the iand. Therefore certa§n"aJc_tév§'t-E--e§3;:wh'iChf_»aLr'e-necessary and are in c0nnecti.e:ri'---vvitfliif thehia:fiVd'~.i.i't=tQu'id':reome within the term, 'agrir;u3t'i'»;':re';-""1V'_The:refere_"hth,e:1.operati0ns which are absoiuteiy: agricuiturist for effective Faisiﬁg 0f'*.._t|*uev VV§;rdud.i;Ce:--_"_.'f'or: the iand are also caiied .. _ agri.:.i;itei':*eE eeeretiensf.

_VV"?.Efive«.eeetsx:_e decisions reiieﬁ L%§G¥"§ by the ieemee eeeeeei fe.t*L~th'e'V'eeeeeeee ee Wei: es Revenge reeeie shew,

-V eheére etcerﬁe ef e eertieeier rietete eeeereee egrtceizetei i.'e».,%t'et;i<3-tff:j':e,.V' eeeereirag te the ieeteee eetmeei tee the eeeeeeeeg the egreemeei: eetween the eertéee {eeetreet €23 farming) not ooiy indicates the assessee having _some derivative interest from the iand, but also interest in growing the foundation seeds According to him, by virtue of te::*i*ns..of assessee having some interest after empioying a particulate -o'fooessi."e:_di'nei*i.i:y"".en'iiployed " i by a cuitivator mai<es;_.t.he iieisedi "orv..reoeived by him fit to be taken to fo.{:o'rcis, according to Mr. Shaokar, gssesisefe foundation seeds by land uodezj the agreem.eo.t,__"A"bti't f'1aiA:s.o foundation seeds to certified sofas to make the foundations seeds ma3*igeitabiVe.._'4V'ii_"hence according to the ieamed eoi;..n.§§eiV for the "e-ssessee, the totai activity of the assessee io;f~ir--riVed.,Ve'n by"'i*..a_ieing the foundation seeds and eiso making the'--feeVnd'é'ﬁooi:h'seeds reerketaoie is eo integrated activity casfiegi "oi; them by virtue of terms of eontreci:-«farming .. e?g*ie.;eii'iei"iti 64 43, Learned courisei for the assessee reiées upon the feliewéng decisions as weli to substantiate his argtjment that the activity carried on by the assessee__-:§ehiApeh'3z.f activity erdénariiy carried on ten»make""ti1-e'_"iﬂodtzcev marketable:

1. K. LAKSHMANAN AND cc .vS.., C1T -213$"ETRt'S9'I?h'=.t (SC) i_ _ x

2. A.T. PARTHASARATHIAH :1/:x«ni:L>.,V5Rc'>is~ ..~} ;48 Vim 830 (W8) __ 1 1' a

3. DOOARS TEA C0.H'E_"'i;$. :».44 ITR 6

4. cit .vs. 5;::uREsH~ 1:3 33 .1f'jr%t_ i'4<,i:(é<i:) St COMMI§$i{3{€\i%E'i?_C3~%{I'i*.ECO'ME TAX, BOMBAY cm' .vs. M;aHA4RAs19i:*;2._g2.._st2§;':»iAe MILLS LTD. - 1982 em 4521 <sc>i * A A '*

64.;T'E!tIRU.VARQ§OF1{Ai\3e seems rm, EVER Ceewitsstemee t'/;.OEE_v'1?L£,EC@MEV 22:2 ETR 432 {SC} . fee, "fftge est: Q?' the above ctétatiees ie as under:

'-féeie eéekjizseevhmeet teteée éte §§"§§§!"i3§ {Z§"§§§"§£'€€E'" éeeeéte ef g the ereeeeeg eeieee there is he market fer setting it in that ".j..e?eete._§'téee. if there Es; ee market to seié the ereeeee; thee V: \k'.' any process which is ordinariiy employed to render it fit to reach the market, where it can be sold wouid be ceiéered by the ﬁeﬁriitiort. The process ordihariiy empie§;.ex{_;E.V'V cuitévators of any particuiar iocaiity to rend.e_r""t._hevip're'di_!:ce: V' raised by them fit for market haste"be'~«ide::ideti.._V. "TheT process adapted in one Iecaiity e1ayi"--h0t another iecaiity. In same piéstes, padctliy a'st..%5ue;'h is sold, but in other pieces usaseity it intevfice before it is said. In other words,-1the'i*ri'ari<.etnf;'eferred to in the provision is ag.vrea§i*y aééjd ;Ni£§En'g}h.ark_e_tVVf'and not a market where the §j4rotf'uc.e'. étcij'.--be' For *the a produce marketabie or fit for saEe,s«--s0me';3_re<i_e's:ss;_"..i'r"zay have to be undertaken, The se{:t§imi:__iidr3es V'e"o~t..§Q_ntempiate the saie of an item er a *ee:':"2me,Ae'rtyV«.,At}§'%zi_Ch is eiffereet free': what is eeitivetee eee HE3*f:e'eessves§'§"ej-1'étiivitmeiberyy ieeves are sebjeetee te S§§'E'E8 ere.u<§e$§'VA.:;aa;iti seée in the market as sect}, thee eertaéeiy gncmeii eerissed there frem eseeie be eeeeafeee es egrée.eiterei ieeeeizet biéséhc--:ti (X3 Section~2(1b) inciisdes instances of income ;:§e.iji'ved from performance of some process. The proces's"'izius.t 5b;_:'f':4 one which is usiiaily empioyed by the cLiitiva$esr_:"orVi*e:Ce_ive;' of rent in kind; it may be simple mama' iifeseess'--oi?'~Ei:~..{nay f invoive the use and assista:j1::e_ of rf':.achir1ei1;;'V'%~ g,The jifirsi: requirement is the process miiust_'%be_ Oiié'~*ei_i'iiC':h is usuaiiy empioyed by the cuiti\;'eto.r and requirement is said process must have__b"e'ewn ei§noEo'5k'eVti'*ig;;v;i§V"': the object of making the prodii-;;e'Vm.é:ri<eteEo£e.}" Tb.e...sb_eVsiere:;:.:.Erenjeottho?-is.etftion 80 HHC is earning in foreign'-- exwchVaé"§'g.,ei»ia4i'id_:""i*e'tention of profit for export business. V"E.ai'i:.iVng;' of'inCofi'|e depends on saie of goods and sergzi:i:es.i" Tn.e"'--d.iffe'ifeiice Between the two is getting »bii:i"=.riex.f.._is;it:h_«'giobaiization eiod cross boreer tiaesectioni Vi:--it.E*:--.i:e=;ﬁ?iit%.{f;=--ieAi3iCeE eevericemeiit; one has to {mange em 'V tnirii{ii";§""V.i%e.g4ei'sing seiicepi: iike geoés, rnereiieiieise arse e RTE iiiess (1?

The cuitivatien of sugarcane and the maeufacteye of sugar by the assessee constituted one singji'e.::'fe'r:-d irtdivisibie business. The question was whether the managing agency commissioneaid bethatt/fg:e'n1;j_aVr2y'._V couéd be déseiiowed on the greund:"that'_'_'th'at management of sugarcane Ce-3ti'vation} inceniev fr~{;:>'r'1*:v..w'h§ch * V was exempted from tax as ag;fVé_ce}t:,:_r'c'sl._.§ncc>'m«e;__ entire managing agency c0mni'%ssTi-oe expended for the purpose of the _busi::3'e'ss assessee and was the Act.

When"t'qAuestie:n~~.._'areg.e for eonsideratéon what exactiy i2vas"t%he':narjk'et"x,ra'I'ee" of agricuiturai produce wouid {'f'i€3E31i'3_;..i'CL was ttei'dV.v'that the vaiue of a property wit? be the 'hV'"~A;:1;*i€:'e{é»v§?fé'ti'«:h"t'é.i; wiii fetett if seid in the eeen market. It is a s..;a}VeaEa!VV§<:i::}:;»-eraMwteethee of vaieatien adepted as the %a:'*ge eLér=:3_be:.-ef_statutes at Engtaee aee aise én Eeeée. "there .__Vef2a=;,s' e}1.Eé:e§z net he an aetuai market where eeyess aee " eeéigéts eeegregaie tie euretéese aee see eeeest ftéerefere .V _._tE:e were, "market' weetd net mean aetaeé market wtsere \%gj\"x (38 there would be sellers and buyers to sell and buy the goods. It would mean if the agricultural produce is ft-aeken to a market after making it as a marketable would also be Considered as agricultural produce'; '

45. Learned counsel for the Revenue_--:~el§e:$~.,o'pon«.the following decisions to sazbstantiatelhls :a.rgfumef:t'tba't'e3ge~r§,sf activity in relation to land and-.the ilocolfne froth-_'VVts,;;Vch lanyd cannot be an activity Carrledvlélloo to rrlal:el'theV}produce marketable.

.AsP1lm}él'i;:;l-gt§:'o_["~LTD-; .vs. COMMISSIQNER or:

INC.€Ql«lE TAX CTR (SC) 68 .«tARA:° 'ovE'vE.LoéMENT CQRPQRATIGN ,'\fSe .1'~c;o.;-!l;»?i:sSto'l\:'e-R"oe ENCGME TAX - (:9:?9}12o ma " ~ 3l442.l(A:l';l ~;e*l1?a}lf'lf3f="'oE ;R;3.}ﬁa§"l"l~£A§'xl Axe, RAJASTHAR ~ At:e:t:':;ttueE ENPGT §EALERSl 5'3lSS@CIA"FI®l'*é «» {:s:a'%;;§ see we to Jeotvtirvljtestotxlee oe IE\EC§l'v*lE mx 35$. em, ?;%RR.'t' iolotzfxy ijfﬁ. »« (f1996}2§8ETR 3.3 {Maei} ..l§:;.

'I    h 

()9

5. MADDI VENKATARAMAN 8: (:0. (P) me. .vs.
COMMISSIONER op mceme TAX _ (199e)229 mz
534 (SC) *

46. The gist of the above decisions is as un'derj:;..__'__t' The aesessee after plucking or reCe.év.EV_urj'g.Vv ._raw"

coffee berries; makes it undergo n»ine'_;§?fQ.cess'eS'-to'~.g@.§~2e..,i.t the Shape of coffee beans. The net'pfctfuceevie:ebéoIi§3te.i'yVi', different and separate from thvégénpet. huharige made in the artécie resuits in ;e"'~:aew_'VAVar}.<'j di._ffe%e.nt artéeie which is recognized in the trade'VV_aV$'T' a_nvehwiar'iti"d'E§Sjti.h'ct commodity. The coffee_Ai3'e'g,..;3$x'"3hVave:"eV;j3 mdependent identity distinct from raw..V_ri:ateI'%VaE"--4€{otfn--«.__§:iJt1'i.ch it was manufactured. If t:emr;terg:ia|i;} a wfferehynt Tarticie or cemmedéty tesuits after Ah'"erVe'C'es2§'E'%:§,V'A'then it weuid be a manufacturing activity; é1"§'E*é4e=._ _eésessee eisttébutee feamdetéen seees ta §a:'é"eete.,_;' 2»;-h«:e are twee ether thee the ehareheieete in the L "<,"I.ﬁEV,"§""E§&§'V'é";'»".:' efter the geeee are eewe ey the stsazeééeiéeref ':"V§_9:e« sieee ereeufetéerz assistants of the cemeeny ieseeet the

-»-ﬁeeids and eévise the farmers regarciéeg the mechanéceé use, 70 3 ef pesticides etc. After the preduce is harvested, seed sempies are coiiected by the officers of the companygiaeed tested for purity, viabiiity and moisture conte~i:--t'_é'VVih'__i'the iaboratory of the University. On the samp|_eS,'_toeet.ihd4_ the required standard, the farmers are produce. The seeds supp|»iie_d are---_a"g--ain testedfah;d'°ifV'*a found suitable, approved foz""ie:<:c:.>.'{:essinQ"'.,'_ The are then graded and ciearied ptoeesyses, and sorted out in three catego'r"ies.i."_'V'» on the saie of these see'e's"«A;.Vo:deri.\iediiihccirhe'-:."'i':'i.h___.T?espect of which deduction LihdeE'_S.ectioo"'*i3ia3.A"has been claimed. In such situatidﬂ, the process.voﬁcoafivertiiig foundation seeds to certified seeds..aiii.ou«:3_te..._t'o manufacture or production of , «_ theetticie soieni by .ti_':_e asssessee. of coating and eppiyiiig insecticides;

ethiei" eh.ee%Vi{:'eis eee oeiseeees seesteeees tie the ioeégrein __ '=rheeet" -*;:_i:.?' ee etiiisee ee eeees; oee eif its basic eeerecter " eoesereotiee es ieoci by §"§i.§i°i"i3€"i eeiees er eeimeis *3? ., _M;f;*:5i' extreetiee fer the iike eereese, gets ieeteeaseeiy iesi: V A .. .' and such processed seeds became a commodity distinct from foecigrains as commeniy understood.

The raw seeds after precessing the converted into seeds for cuittvatien. Such pr.3cé'sséd:::seed$"

wcmid not be fit far human cens£;Amp:t_i{$;§ 'tat ':e§ii--b£e;vv.._Thef new articie is differérst from raw faatiaariai 5u'S:§<fi:.4_ Tgheyrz assesses: is entitied for reiief uh5'e_a'SeCtic$r1~8G4}. 2 Processing sf raw seeds-..tjE:.r0ugh mt;ivt.EpE.e stages resuitirag in a different c.':t>'rh_tr'no'd§Vt§Qjwt{i'cVhvtt.iV:$"no ionger edible and caém l_jtAeT'ﬂ:,as,eCiV Qfrii~y__ E0; cuitivation amounts to manufac't:;Vre_ oz;'g.Ece:€£.i':::t'Et:.«r1'" emitting éeduction under Seciigm SC? ?~§}~§ A abovﬁ gage iaws anﬁ §E'§E3i'T'i€§"§f:S; me §'2aS~»..jt;$ 39$ ,t!%5é=étterm§ at the agteamaszt between E?°:€ gaftéeg "ésfj eré5é§<..t;'Q tgnéerstaaé whethar the 3% Caiéaé twa aﬁiixiétiﬁﬁ 7%?'-ttaé aS:'~§€§§8$ 2222:; S§,E§3s§§'g§§"§§ §$§.:§'§§&E§§E"% geadg §§:§ E21 ...jt.s§m gettéreg ttza fmmﬁatétm saws ?¥'G§E"§ tézé farmer and Eater on making it as a marketabie commodity ameurzts; ice integrated activity of agriculture.

48. The terms 01' agreement §ndicatQ.?V.:A..'th'é-5'"I:§:§3+2.._'". company is; in the business of cuttiyation,:pred:ijc»t'i'ee'--ar:::§'4 'V marketing of apeh--hybréd seeds:'».:bot_»r-re.fi3r"=.droArﬁeét'irj'-rt.__ermA' internatiorrai market and it eziters into_tE":eVagreeAm.e3';t Smith the farmer for production of seeds for its own benefit or/e'ﬂﬂbe'h'eLifget?"i--t_sHeve>rseas principais. The farmer is the suitable for cuitivatéon to cultivate the Vassessee cempeny. The foundatrerjg seed's:._.er5e--§:_Lj;:r_:r§'t'ié.ci by the Company. By virtue 01' this egreerrgehrt', tértevfarreer egyees te demarcate a A'"eaVArE'ie1sf'er ézrreage ﬁend eermarkee fer the purpose ef AL'-~~:;ju§.:§v&ez§err.V ef,";2.ertEceﬁer seeesg The eeeﬁe ere green in the Eehe. ee,E_e§:g:§e5g ﬁe the farmer euréee the ﬁxee eeriee. ~e;§';; Qurme tee term, the fesreee izes Se ﬁe eEE eete ee ":tf"_:he""E«ene in ereer ie fuifﬁ his oeiigeiéeee ée tesme ef the agreement. The farmer agrees that he WEI? carry on the Cuitivation of opewhybréd seeds in the Eand so earn:e%Ea.ed under the guidance, specifications and supervi<;i~e--h_é'V~0_f'the company. The farmer assures the companv..tv_het '_|arid't t beiongs to the farmer in his ow-tn fiigehii:

iessee and is in his possessicn and 'tjuEtivati<m7;.A He Ehttst assure the assessee compa'r{y.VV:._'tf1at Vtfnit for cuitivation of o;3en--h'\,/iitjﬁd tlfhte farmer undertakes to 0VbserveAvV_evt'}"._th.eVV1feorid:§VtIAtj'r;s--'--~regarding the cuitivatéon set out in the agreementiwitijt'cehfefeneeiﬁs"pr.ep3s:ation of iand, sewing of maie and 'fematé-»..seeVd's,__Tertiiiser appiication, weeding, irrégetiorafp.Q%E§i.natieh;_hafraesting or seed extracticsn, seed ctee:1a§ngtA'3nd o't'E*:e.rf____a.r;,;ricuﬁttiret eperatiens necessary for ..Cu§.tVE*e*3té.§:A{f%._Qf hybrédvseecis. The farmer agrees to '.e?E§V§<§e='theéV't%'e:'rsev%;nei ef the eempeny ta eeerete oh the iaecé, maeteE.eeti:e;4é.t":'1p§ett2er"a%:s and eecesseties in meet te eetzéeve e%ve'st.,§*eVs"e§ts emzésegee sneer the egteettrzent, tee farmer 'Ae?§s»e egtees that E? detérgg the eeetatéen a? tee egteement, the cempeny is eat satisﬁed wéttz the meme; is weigh the 74 farmer cenducts himseif or conducts the cultivation, the assessee company is ehtitied te enter upon the Ea:'té.:<:'i",'»e.<.3r:J set apart for epen poliénated/hybrid seed cuEtéfe*a--t'i.§;yr§_'__!'é;h_ti take over the agricuiturai operations. Co.:1f1';§_:a.:3uy:.A_t.§:sn_e¥éo'r entitied to appoint another iécencfee oh'sirrriieér't.e'rrr;s ehd:' conditions.

50. According to the agreehﬁeht, term of the agreement, Con-,~yi:e':;.y tehjatessession, cuitivation and Aeharvestvihg:.Votv'V_§Vh*;rbrE'dv ' on the land earmarked €n%_'ter'}:;n'sVofjthela§3reerheVht~,..aS if the company is a Lessee alttthenuqh eiti p:ert.ive$_a.gree that no iease is created in termis reef the It specificaiiy says the terms of izhe. ;31gre4er'n,ent~ .'WOt3id'..'é3Eﬂd both the parties; exceyt such termhs arevvtéeeehsistent with the Kernetaka Lend such terms shaié be C%E'%';3E§€E'€G as huif ere-.:%._ ve;§d..VtA.i'.~"?he farmer eheertakee te we the feeheatiee geede er-t.t,::';ep§ied erg the aseeesee ~ eemeangs fer ezgitizretierz «' -..vee.€%...'A"fertE:er eeeeyee that %"'2§E"E§ e'? there ewe ﬁe ezieesee V. .,_..:.:sr eertee wéth te eihere net eetitéeé te 2: are fertheé"

K" _ .-

x., w - .-

/I3 undertakes te return to the assessee enmutiiésed fotmdatien seeds. The farmer further undertakes to hand ever ail the hybrEd~seeds cultivated by hém and not ﬁe seti er eart with or retain for himself any portion of the seeds. It fisrrther makes dear ail the seeds derived out of the«V.rfe4dedej;idn. seeds by cuitivation beiongs to the conj_pé~s3:yfenVd 'Vth-e V' farmer has to undertake cmly mtiittiddpbiicatiteiz ~:ofdefb"z:vr}d'aVtie:*i. seeds using his iand and Eat";-r.3LJ'r,_ t§_*::v%ret«'er--:.ﬂAt{<x.§S'--.. muitipiication of seeds is""'d:<§ne amd.erWt.'heV"'.;tetthhicai'V supervision of the co;hp,_any_."de't the h"d,:Atua££yV"ag'teed price and the farmer has to d'eEi€ie'r:' to the person specified at ..Fa:9mer aiso undertakes to keep ail the 'itr%'fte4rahVet'i'::::e".re%et':_eeitto the foundation sseedsfsteck seeded are a:EsV'5e'r../_;tV:¥'vIVve editivetiee ef epetz peéiéeeted/hybrid s'e,eVd$_v;»et;.eeefidentiai ane wiii net teveai it te any person: ,T§'fa2.:'..EfE'«'sAe§:'"'4:e_%'_ee'AV~tfé'r%'eerte§<eS to eey damages: E? he xséeéetee any efthe '?;*Ee'V.r'§';'t:e' SE. "tee eereeeegx eeteee te eat: the fermet .' "3<V:eTr?ieeneetéee at the rate ef Re,3_,2C3G;'~ eer etsérstei fer . V' NE?" , 1% hybrid tomate seeds which answer to the specifice't.E_Qns reiatéhg to moisture contents, physicai purity, ge«aj§%§i':§fs"e.tt.:;h'v,. hybridity, cgueiity etc. The farmer agrees thatlthe, due as compensation wiii be deterhﬁEr:'edA_ by after the seeds; are duty tested <:ci'r§f:'e:§ahy< Bangalore unit. Farmer aiso agkees thaijthee can V subject the seeds tofugthetiee"C:eeei'é§g_._andé'Abrtoeegssing to ensure quaiity and be entities} for ;§fet:ess of cleaning, processing;'é'he"---te'3t3E..@ the seeds produced by him, §"::'::'etDt uncohditionaifv the jt:dgme'nt'a'_s and as to weight of the p_rodLt'c'e,% 'eEti\g'_ed-._"a't~.«'7by the company. Cempehy is "V..,_en:ji_t'§et§.tAV:te.,e_w&thhev§e--..«fa*e:n each eeyment; the regéstretien §ee,"Vetiva§_ee,te;e.'and the ether inmate; E? any eeie to him. ?e:'fh«er .fe.§'§e{__:;§'ndertei<es no: te create any thére eertg; ﬁght eeréesg tee sebsistenee of the eereemeet.

'ﬂu \ 2».

%tﬁa_reeghEy.

52. Apart from the above agreement, farmer____aiso executes Anne><ure~i and it centains conditions part of the agreement and they are as under: ' That the farmer wet: Carry eutealié 3ns1t%;j'§;tia1:z's""cf'_the, 'AV' Company in the matter of hybrid Se'edS:':CUivti\}tati_en'.'_ wouid ensure that there is $§.sffi'eiV_entAiNa_ter_'te,rf ta'i'svi'ag"jthe " ' crops. He would ais0;_.ensure«-ttiat 'iafjd .She:,a_Ed have been used for tomato the previous season and ¥1.vetwi__I_I ttradius of 800 meters/feeft:;' --..i:ge:.'V'a':}V_\r:"eVther variety craps raised :':eEthetAVVfe'rV-seed» 'ot"'f.Q_r--Céommerciai praduction. He wiii ens1.':ére t§<zat i'at1':1..'Ai::,. for aewieg by applyirag 5%.. 13 ﬂ<:.ga§"t eéoadts "o.fV_V_Vfa'reaV'yard manure eer acre aeé the iaed He undertakes te apeiy seéé "'amer:e'te:e_e'tef.EV:é;<e Eémef gyesue': eta: He aéee eaeertakes to §r:t§'?mat:=:"§:tzfe Cemaany efféeiaés the iecatéees aeé hie r.e;ag;_;§re7meei:e at feurseatiee eeeee eee aay Er: aaeaeee et 'aVe'es§*egt tie ezéii erzaure that the feeeéatiee aeeea eeeeééee "*'s35y tine eemeaey are geese far eeétévatéee in the seeeéﬁed fieie, in the presence ef representative of the company. He further undertakes to cuitieate the farm 3:; per the instructions ef the eemeany right from sowing the set':-f.§{I»s to the time of harvesting the crop. He underta3<es.~t~e to the quaiity parameters mentioned in the.V;a"i*i'i<2e><¥§i.i'et.,' i?~1ei undertakes to receive payment at bf"

per qeietai of processed seeds or at such re,t"e.es 'may/"neV"~wt fixed by the cempany. i'xierii"i'aVj.E'y testing' teed eifeeessirag woziid take 4 to S menths. _'Vnwﬁe-':f_u.:¥ther uneitertakes that any undersized seeds whiten' sieve while processing sr;."a'Ei'"s;~[Fe'ma§=.n es--~.7ereveei*:ty=»..ef.§Athe company and the sa"me._wi!IVVEie':'se§d. in.:t'he 'market after due precess and the am<;~u'ei_:_ if eriyfeeiiiseti eriii be paid te the farmer in dire COL§E_{'3éi present ease; the ergtsmeet ef the eseiessee ienet eriiy ieitiei eeeretieesg em': eise subsequent eeetetiyees iieeing riexee esitti tee ieitiei §$€§"§?§§i"'iS; ere Wzjeéiiiee en by iiie essessee en the ieiiee eeieegiee ée tee "ffermer er ethe? G"€¥f¥"iE¥°Sw What: exactiy means, eerieiiiture, 7') agriculture! OD€'%'E3tiOi'1S, basic operations & subsecwent operations, agricuiturai purposes, agricultural incctéttef"L'et'Cvv... came up for consideration before the Apex C--=}:t::"rtV "

back as in 1957 in Raja Benoy §<-arena: V' Important paragraphs ef the relevant for appreciating theV'fa:Cts% of the__ preS'eh'i;.._:éz§s'e''jare '' ' necessarify to be mentioned an-d~ t..he\,?"atre asttuavidertj The4. 'term;_'Aw 1-eannot be confin.ed§'--..méfe.§_y p:jedjtJ.etiVt§'t§"'Vbf grain and food €;;>_V;jocﬁ;4_'z};;;ts.'VTor.::"tt'é,;-matte' beirigs and beasts. T:i1'e"'t'r'ne}fie affi""at:tivEty has some "some way dependent onttazﬁdt is ";wot".saffi--;t:"é:§t E0 bring it within the 5:.{2'?§ettbfittsehvt'tettt:A."artd such extension at the ff V.T';ag:'iet.EEtts--:"e' is unwarranted. the term ._"'aVg's'=Et<:t:§tare" Cannot be disseciateci frem the "7'.__etété:t_asV_rj§§:'$~t"§tttfieatzce ttsereet wtzéctt is that at etgéttvettett -at the tend am ever; thetggh it can t:*e t.e><ter:Ge$ in the manner we ttave atateé "2_§€Vt:§2?§'i_:'«§ beta in regazﬁ ta the gjteeegg at "agrtetsEtts:°e atzszé the ereéaetg which ate éeéseé t,tQGi"'t the tam; there ie rte warrant at at fer \""'x:"'~--t " I ,-EM-0' he eveﬁermee es the ieee ga:3s'ri's.;%:s:ezf, 86 extending it te all activities which have relation____ to the land car are in any way cermected wéthh-.a_'l~. the land. The use of the were agriculture..'l_e..__'__s"'.j' regard to such activities would certaénlgrﬁeja ' distortion of the term. ..

If the term "agri{:'_ultLlre"_'j.

understood as comprising witivmé"-i_ts sce;.;e:th'e " «' basic as well as subseq-assent opél*eti0.es".:ir"§"~--:the"

process of agriculture a_r}_df'»tlf:e._V_»rais§rrgen the land of products'*;eg.l'§%%ch --_ha\;eVl"sQm;e'«utility either for consumption or a;73.:l(Vj'.A{j:;3,i;{§_'iT1eFCe, it:

will be.' .:§ee..n "§?e'griCulture"

receiv€.é--..a {\N i(§€l* ':lrjt'erpreiatE.dr: iljeth in regard te itse;5e':.'a'ti»6es"'raswell-l as the results of the same;' _ Nsev-er<theless"' there is present all _t_hreulghe'utVl:'§3eA'-basis idea that there must be ~5;,a;t;_*e:e b'o't'tom____cr" it Cultivation on' land in the s_;er.lse "ef tilling of the land; sewing ef the Vl'seVer;i.SQ;2le]rrt§eg, eee similar ezerk eene er: the This basic: eeeeeeilee is the a gessteetéaé sine qea nee ef any eeeretlen eeestiseténg, fagrieeiturei eeesetéee, if the "ease: esereeees are there; tee rest ef the eeeretiens foams themselves upen the same. 81st if these basic operations are wanting the subsequent operations do not acquire the characteristic agricuiturai operations.

11. The terms "agri<:uiture" _ar1d__f'ag.3*§éik'i't!;:re'§ purpose" not having been dé:fEne_dtizr3. thee' I.h'dia':*g::~.tt,.__ f IT Act, we must r2ecessa_r§fy fed: back vtﬁe '. general understood in common VA;).e:irA'i~a;':t:e_V. ".<'--'\.'g"ré=<:uHit;t5:§'e"

in its root sen'$-effnjeitansgwtag-er,_,""a_» fietd and Cuiture, cuftivation, which of ceursve.-itmpiieﬁjs' éf":t{uman skiié and T*?;'e:ite':'rriwHtas, however, acquE:r'edi.aV;"yvidVer «sitgnizviiffeaédceg and that is to be f'Q_un.d-- V£n'*¥;th4et_?u'afi'ous -'dictionary meanings aé<::t§b'ed t0.._it.'-12*":_é*a=1§§ybe permissibie to took to _t_he t¥'E€tVi'cm,aVéiyA';ir1e2§ning of the term in the ~'5*.,a§:>__e;eef7c:e A'<'3f«...__s2.:"¥";f definition thereaf in the re?iefva;§'t..Vstata.2tes. As was ebserveé by we 'V 'C€§'§'etEetVg.t@,t'§~n £22. ass. Petets (wee; 2e Q59 e35. a'~3Q;:. We have, ttzereferef ta eazzséﬁer when it ""-.._ca§n ea sage tea: the Eaeé ée éiﬁﬁﬁ fer ' agréeasitzsrai §ii§'§€}$$S er agr§c§..:§t§§re§ Geeratéens are eerfermeé 0:': Et, ﬁgrieuitute is sense an whi--:t'f§'~~..t»theg} h'avef_:

K Vé'*--.*tEéie".".'[§;:e?«§;iei,,:ee {rem the ieee, ; fthe Seii the basic "agricultural purposes" and agricultureie'.. "*._V operations and it is pertinent therefoije.._'44";i.V3':"*K.7 enquire what is the connotation of "agri<:uiture". As we haveeoted ab'Ove:,i'_';vth'e primary sense in which the termstag:9Ece':Ete'r=e4'is:-.c__ f understoed is cuitivation, ie, the cuitix{:eti_en oi the if the term is 1sr}derstoVQ_c:jV":-Q_niy_ in .tIietV_se_nise agriculture oniyi to cuitivation of the iencilini'thest.:i_ct.AASg'§;'se of the term m.e;»i:::'ii:f:g 7 the land! sowing [Qt ., simiiai' 0perza€tViv.orié.i_.§§';»"_t).n'2"thex"':i':a'nd';W' wouid be the .-- Viziiouid require the ekpendiVtu.a?§gf)§;':f.ihiuirnehiskiii and iabour upon the ianc§'*t,,.4.iitseii'i.._ 'fhiere are however other 'Ci{)f'.3FatEQF:SV_V_i}*{iV§'3iC§'i: have get to be resertee te by tithe eg'ricuiti,it§ét and which are abseieteiy c.n'eice::'§ia£i*Vyi--.fer the eereese of effectiveiy raising They are ee'e'reti'ene te he eerfermee eftet the ereeuce eeiéeete free': the ieee, egg weeeéngf. eigeing eteeee the gteiett; §"€?E'2%3'%é'ﬁ§ e?

H imeesiteeie eeefeterewths arse eii eeeretieee which faster the growth and eteserxze the same idea Lmderiying the e><ptesséons__ agerj-----fEeid'7.. end " A' 5:

'£252 83 not oniy from insects and pests but afso from depredation from outside, tending, pruhing,~y'V""'-.y cutting, harvesting, and rendering the pro.dM.u"..oe"-of-.'." fit for the market. The iatter wouicf i"

agriculturai operations when ' conjunction with the bas£c:;JoAoe:t'at.io"ns'1'Aa*t§_ox:.e~._|"V:J A described, and it woutdy be fu;eI:e_T%td dégd 'th'd.t" they are not agricu!i£:_fa.§ operations"._vat«:._'av!«.i... But even though these so"tss'eoVoent"ooefatiogns may be assimE|at:fedy_ to operations, when they are in4"co_;}ju}:ct'ion basic operations'-couid,'it"'be":éaidfttuat though they are: dtsjrdoftevti'-yfﬁonﬁ operations they \s.v*§';"::{taV'£V.c'J:"'~-- . :'héj't<e'tth,eie'ss"'V enjoy the ehara'eTt'et.§-stie:of a;:g"r'..Ev§:u_lt--:1V:Vtai operations? Can one elirnénate':_t'thTese"ba.sEC operations aktogether andu"s«a_y that._eyei'3'«i.:f't'these basic operations are not eer'fo:i:fned So a given case the mere .pEéf'fo}*m_at2ce of these subsequent operations H'V's.Vtf:'i?ﬁ§é"iT§§":..'€a¥":t,3§'£"i{'Jt§i"i'§I to the eerformante of "'Vt'agri7é:jtnt§:=Lirai operations on the Eane so as to Constétute the éneome éenved by the assessee tixéretrorn agrietsittsrai income within the oeténétéott of that term?

84 We are of the opinion that the mere.----_ performance bf these subsequent {)pE3i'3tiCii'iS.::.'«« ~w. on the products of the iand, where__;"s:;c'h_'--...:F products have not been raised cm b the performance ef the basic"ab-eratibns.'i5J'iVﬁ'i.chV we have described above wdL:idf_hot' be'.e'hoi'ug:h to characterise the*m__ as'..v '3grEr;»1z'i'i;:.rxjaI operations. In order te""r«i.hS'est the.m"'vr§-th character of agriu<:ult;;iraE.."L_:0b'eratiohs;'V-these subsequent opera'tiVr)ns'--_mtist '4r:eVca>ss.a_ri§y be in con3'ur"icti0h_ with of the basic og.e':*at{_r'>ns ,e_I3%f-active cause of 'be_;h__g:j=:fai'§et§,_'frcrin-the iand. It is_ehiy=~ifti*i'e__pVro»d'ucfa areraiised from the iand theieii"ﬁerfgr9ma*n,ce..__of. these basic bperations that «. operations attach therrtseivesiito tijeparoducts of the iarid acquire Verjtiha. char7a'<;terEst§{: bf agriculturai bperatiarzs. cLs~itivatEar: 0f the iarid debs mat cambrise "r.{;§f'_:..ra§sir:g the bradczcts at the iahd ﬁr"; "Vibe "ricarrriéaser sense af the term Ska tiiééhg at tr:-e§'a'h§; sawing at the seeasy, biaceténg and sz';<ré%§ar werk done an the iaaa but aése ihcéaées it ftbe saibseauaht eaeratéaas sec at}: abazia aii at which bperatieas, basic as we§E as subseauerztf farm arse iategratea activity at the agricuiturist ,, 'X 85 and the term "agricuiture" has got to be understeod as contacting this activity of the agrécuiterist, dissociate the basic operations froth subsequent operations and". say .--thati]'..the ' subsequerzt operations, even th_o ugh"__they--__a':*e.___A"' divorced from the basEc"'.__opetatEohvstA"ca~nn*--." constitute themseives. If this inte4i§':ta:te--d_ act'is'«it§f.whéch constitutes agr!eL£s!tureAt i_s":.§.énd'ertaken'A and performed in regard.t_to"az<;y:"ia__od-.i:hot_~__¥and can be said t4o*"h_ave;"'bee'rt¥'heghhricultural purposes" vdetrévéd therefrom can toe .;:.4sai'"dw"""te income"

ti erived" trio m :nt.he~ by fag ricu Itu re.

_81. L":-tn}:o;i,sEderE%e§ the connotation of the u"agfr'i't:u.¥.iii3t¥".e" we have so far thought of i:_:}Etiy,~.atE«on ex' [and in the wider sense as wéthée éts scope the basic as weéi as 'ttzfe;p1sé§§.1'ot:seetsent eperatioes described ebezie, ht §e§,;e§'d:Eess e?" the nature ef the pteduets raised he oé*§".t%"se med. Eeese §§"$§%.§C?Z§ may be greée es ..5azege:'eb§es er fruits wézéeéz ere eeeesseseg fer the susteeanee ef hemar: eeings éeeéeeéng péaetatioes and groves; or grass or pasture tor EntegratedT'»s One ' caép_:'éoVt'-e:"~t.

agr§cuitu»re""~...V_ op'erVetEvQhs~,_ 86 censumption of beasts or artides of iuxury such as betei, Ceffee, tea, spices tabacco etc.,V.~-._ or commerciai crops iéke cetton, ﬂax, hemp, indigo, etc. AH these are procitict-s»"~..1__iff raised from the and and the term ''agr.VE_c't'.'iiteV1.,srej_f'~. " % cannot be confined merely te<the--.preLjuctEt5r§'4QfV' grain and feed products for F:.L;rr;;an5be'ira_g's beasts as was sought to' be d0Vr'1e_5;r Ayyangar, 3.? in :»%Lm§g.esa "Cih'ettif ;Chihnathambi vGQ.Ud€f}u""&'i_:'(jtS._ (satpra)./Eor Sadasiva Ayyar, Rhaja;at"-VX(e'ﬁtk.atagéri vs. Ayyappa Reddi be z.:ndersto'0d;.ja"s c<:::_m;)n*é:.se§EngV'alt-if'*th_e:T'products of the Vutiiiy either for c;0nsu'm'§t_i,o_niniotr .ftj':<.._'tra<:ie and commerce and w"e_u}'d_ aése'«.ir:t:E"ue:ie=»,sfc;_.rest preducts such as timb"e..r,%t sale 'a_ricE¥.'s'piyasa| trees, casuarina _; tgéﬁa.ntatia'h..s_;'tends ieaves, have nuts, etc. "the term "agr§<:,a§':a:*e" same: ﬁe titsfifﬁesséateé from the garimary sigeifiserztte AA tééeseef eshésh is that sf eaétivatéee ef the ma 'arse eves themgé: it see he exteeéed is the meme: we have states eefere eeth is regaré to the process of agricuitore and the products which are raised upon the iand, there is nod"-.e warrant at em for extending it to atl activities."..:'""--,."' which have refatéon to the tend or are ""

way connected with the land. The use» «.

word agricuitore in regard ;to su'c.h7._ac:?:iv.£i:a£,=.s.,_V"' wouid certain he a distortion of tiheternﬁ'. d, V'

84. A criticai examénet.i.o'h~._of the__def§h%'tEo'r§VV'o'f"

"agricultural ineome" in.S«._2(:)_f§of the Indian IT Act the reA¥Vetr.;§r1.f "iJr_ovisEons of the severe} Agri,IT States aiso Iends.:sDu;)por;':tVv't'C:i't'h:s.:g)os-i.tEoV'n;z« the first instan_r.:e--,.4 if_i--s defihed .__«as; . rent" or revenue c:?:eri\red"ri.f',,fr_or:hV-- yfvhdiﬂch is used for aQ.riCuitu.rV§a'3f';;3o"rp.o'ses,;- and it is next defined as V°:"ne0Vme._ de'ri~\{'éd from such iand by 'a'griceEte":e,__VVdr oi'; the activities described in 'cE'é;r(§i}..end (who? s.2(:)(b) of the Act These ""'oa:et;§z§ti'e.s'"are gdostuiated to be gderformed by «titheu-}:oEt§=ééetor or received ef rehtvénwkind of s:;.:.'eh=§end ﬁe regard to the products raised or reeeéved by him which necesserééy means tee '°§oroe':;z:e raised er: tee éend eéteer erg %2%mseE§ or by the aetuai euﬁtévatogr of the Eeed who oeys such rer:i»§rr~%<End to hémg if ereduee raised or "Y 88 received by the cuitivater or receiver of ren.ti----.»j in-kind is thus made the subject matteif"'e:ff._:"'._ <:is.(ii) and (me) in s. 2(1)(b) ef the A.:i£;"t%ig:ei._f' term "agricuiture"' used in c§.(I) must aiso be siméiariy g'r"estri.<:ted performance of the basEs;"=Qpe'_é}a"tiiorts. land and there is no s.£e;:>_e fat'aieedihg=th'e§.tem} "agr§cuiture" in the stiii"i'e»*e}Edet se%:ee'V"i:§'diee§ted above.

54. From. diffe':"e.z.':':::: conditions of agreement_,_. it supplying the foundation'. advice from time to time, sowing or poiiination or harvestie'g,:_"4races»,%f".the'::'h_eth1ai activities of agriculture are unc§e:9t'a3<.en by' ithiey eeeeseee Company. Except sowing the ,'f'ou_'rida.t'écit:eeeds beionging te the assessee, farmer is not i"'e_r25tii.1;VEed'€§f}~v_..gre:§e'feey steer seees is": the ﬁend earmarked fer the""eer;§:es'e"':ef grewéng hybzée seeds and E3 net aéiewed te ,.'V'g;.e:"%;4:A:i%h the eeeee eeeeiiee te him ﬁe enyeee eiee and Se _ i§';»§r"a<§§ tmusee seeesf he had ze give beak: the game te tee "<:'c}meeey: Eiermer cerieucts; the cuiiivatien and essessee ~ 89 company oniy ailets machinery and personnel fo_r...__the purpose of achievement of better results in Dr{§{jE;5'(:]3.§'3V:CL;.""ﬂ;'l'Ev9u quaiity hybrid seeds. Preparation of bed, s(34i;»{rinvgfs:VOTf"

seeds! cuitivation and harvesting .':)fmhybrEd"

by the farmer. He is entitied fci'i*.Vth'ei";j:ric:?€i- assessee per quéntai for at sVL§c:ifi""&;_eedé;":A;_hivc.t::v~{0'ti;3'd"'qa"aiify " it the specification indicated The seeds which do not qualify the 'eiso not soid by the farmer, 'V the sake c0nsEderati1on,:""_i.fV 't't>::.'the_ itavtmer. The farmer white uses his tand and iaiaourij ttiie assessee is oniy technical supervisédirzefV,the._eomp.a'.f:y. Whatever seeds grown by thev"terhfi'erVvwhett:ef____q;;aiifies the specifécatien indicated by 'th7e _.ass,e's$e.e""e;f net has in be given to the assessee and ispecztifieetiere, t%ie"~VessVes--seeA'sI=%é$%ii eay e fixee eréce se far as the seeds weéeéi evifizteiity the eeecifieetiee eee ether seees WE§§ he eeée ié§ii:.¥j:e Neees: meeaet ea; tee eeseeeee ease there 53 ee ufiixetiee ef em; eece fer tee seees whéctz de net meet tee The farmer has to eeeure fertiiity ef the fand, suitabifity of the iand, cuktévatiorz of the fend, watering ef the land, use cf the seeds suppiieé assessee and also has to se1E the hybrid seedajiaty fixed by the asssessee. Cfause-8 ofwtheéagtreegﬁem:°is_'_}ar{.,, 'V important condition and Et reads as'i3.nd:'ei*:J "8, During the period 53¢"

above or any Lftitpexny shait have eki and heVr§fe'§tithe"g the {and earmt--.:.rVV§§eﬁti§HrV1.'.'te'rtti:§,'t_'t;f"'tiiietgatgteement, as if

-eg'tge'ss_eeuetth0ugh ali parties ag§fee"t?tat~.;§{;.E§»a:_S'e_:':E's'"treated in terms of this ; 'avgt.ee4:;tie.t}tV;-hTtte- ex'? this Centract ts the net censésterat watt": the Land Reforms eat ghaéi be A eQ:"s::é.{§.ieteé eg mi: aed veééf .jE§t Tweet: fee aemeerzg;-= seye it ties 3%: the réggiréte sf V' "..jj:::3Et'€%.;et%Vee; geesegeéem arse harxzestéeg at the hyeréd seeée it is not open to the assessee te contend that it is fofthe concerned authorities to question the same and the Income Tax Act. Then expianatéoe to * Act also comes in the way. Evvent benefits under Section 803 or 80 the conversion of feundatioheeteds to VceVrtEfived"~._fseed£§ as " ' manufacturing activiﬁ'/I it weuV§d---ttdt_e'n.dre.te'the Vbcenefit of the assessee S0 farVe'sV:é'$ectc;_Q1n} Act (total exemption). V

57. 3:-i_a§}€i_ng_ rent per acre to the tanner _ahythEng in kind iéke produce to the ' oniy pays a fixed price at Rst3,;2€}f3_j'~ e.erf.Vq'n'i:éta.§"0t; any ether erice depending upon ."V'tt1e"ttern-9&5; dfthe egteemeet fer feendetien seeds gtewn by %VE.c:sfe:er nee te agree that the seeds grewh eg hint-..__w§§§v't3eV#'ti€5tée§ected te §i'3C€$S ef cieanéhg and grading:

._V'*The e§e:~;.essee~cemeen*g' scetgée nave eeéd the rent er e éeettieeéet erneunt eet ecte fer the Eeeee 9% the iene, V. .,,_'?hey are net eeanng terme: any ether emeent tezeetde the 9 3 labdtrr or supptying any input. The orriy payment they are making is the se caiied compensation at a specif§ed:'f':ate pea" quintaE as agreed. If the farmer has to Eabour and pay the Eabour chargescandé atsdhhsipehed '.:V*he_p_ey-,_V for other operations either basic he can oniy take advance arhpt;-.rrt freme theta_sse;ss'e.e"jand " t such amount paid by the assessee'L~wGagL§d he"de_du"ct'ed from the so catted c<)rhper1Vs'éati":,.,».x the quaiified foundation seedS'E3.t_ r«t:h--e' The entire terms of ehtyfihhhhihdicate that the foundation, woutd be purchased by fer a certain price provided seeds qua'i§fxf thes_pVef;if§~c;ati<>hs as per the agreement. It Es V_h'€'xthi_hgusheh:r.Q_f___éa fertéie womb being offered sy a 'sVi§'r'rsgs,te~rrh.e'th.er fer the growth of ehiid of ssmeene eise.

The"--vt'asse'ssee supervises ass eversees the sewing, suithzstVE"eVp.'r'§ght frerh the precess sf sewing tééé the end in '*x:""~f' {Q 'A "..f_>sr§e.rA is get the susérfées fstasssiéeh seeds es per the speeiféestiess se as is perry sh his trade is S€§§§§"i§ certified 'seeds The main interest 0? the sssessee is is see that 94 good and heeithy seeds are produced by the fa-F__i'i"iei' meeting the requirement specified by it. Such scientific methed iii giving advice to the farmr:'§":"caiiifie't"ib:e"1 "

termed as either basic agricuiturai £2f3€»3'.&liCEOfi o'f"sieI.;t;se"qviijentv.. it operations arciinariiy empieyE=W,._ '"the"-- agricuiturist. If the basic"e.,;:§ie.rjatioAii's.__of _ai§;~:fi<itiEt't;2*e"jare " i not carried on by theasseAs.<:.e§.u.._-4"--..,c.<>mt3ariyi, then the harvested foundation him and converting them:te__cei\¥/;'fi§a;i:§>:i_:see'd'sieaefieit be termed as integrated the 'aV;cit'i'iV.iVity of agricuiture. Therefone.e3fe~ii'.'if»V'1-e{e_a»g:f>e:e'Athat.the mechanical process of agricuEtviiira--i' basic operations Oi' subsequeri'ti._4deetatiaiﬁ'eiiauid not be an impediment te make}: such ee'eraij_i_e;fr.s as egrieiiitiirai eeeretions, the e§.Viestie.,ri'iseiiiether sue?) oeeratiehs are eeridiicted by the a':~:is'e;<:*se{e'u.e:< tee farmer er semeeiie eiee. Tee entire 'V ieed4'ie§""ef "the teriiie ef the agreement ieeeie etiiy iiidieete ij»..t§iat-eseeeeee -~ £Gi"i'i§§i'i§i wee iiitereetee eiiie ire iiaize iiieeitiiy feuneetieii eeeee gieien fer the ereeeee ei Weenvertieg the Same as certified seeds. /,, '. K V 95

58. Therefore the View of the first appeilate that 100% of the operations upto foundation seeds as agriciiftural if assssee company and therefore ;i'i1Vc<3:i.r.h"e'fV exempted from tax under A.1"O(_1)__of.: ti<z:e""'Ac':t is " ' erroneous. Simiiarly Jegemost-f--ee."given. by' t§i§'e».Ti"ri.huriai for 90% of the income is opine that that the Tiibunai wa:e:ju.stifie5 the income as business in€cofri._g :i«';_):i"<)VV_c:e'sVsirig of foundation seeds to. verlih'~:f:;<i.at'§view of the matter, we hoid the to business income of the asses"se_es_ a'iid4V's.A'ss:'e'ssEng Officer was justified in treet~i.:og; the totai-éii_§:_o,iiie as business income. As a matter >::{f"fact--,fo.r'iseome of the assessment years based on the ogiiioiosi Voii'iu--"<?~--ii:€5'»iof the senior cooosei on taxation iifirx i<,R ,, j §res:eii,"'.:he essessee --» eomoaey efiereo its income as .' L'?

V' '..ji*i.b5'esi~ifiess ioeooze eoo ever: eieiroee eeeeeiioo under s sseéiion so ifi~iC of the fact, .,>' 96

59. In View of the above diacussion and reason'f.r}g, we answer the substantial questians of iaw in favgm Revenue and against the assessaes.

gssf' ..

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Karnataka High Court

The Commissioner Of Income Tax vs M/S Namdhari Seeds Pvt Ltd on 24 October, 2011

Bench: Manjula Chellur, Aravind Kumar