The Commissioner of Income tax-IV, Hyderabad. V. M/s Prabhat Agri Biotech Limited,

ITTA/88/2014

AI Insights

The case involves the Commissioner of Income Tax-IV, Hyderabad as the appellant and M/s Prabhat Agri Biotech Limited, Hyderabad as the respondent. The core issue was whether the income from the sale of seeds by the respondent, which claimed exemption as agricultural income under Section 10(1) of the Income Tax Act, 1961, was justifiably treated as such by the lower authorities. The Tribunal had previously upheld the respondent's claim, leading to the present appeal by the Commissioner of Income Tax. The appellant argued that the activities of the respondent, which included the development and marketing of seeds, were purely commercial and should not be classified under agricultural activities. However, the court, referencing the nature of seed production and relevant legal precedents, dismissed the appeal, affirming the Tribunal's decision.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 740897 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 21-02-2014
• Assessment Year: misc
• Other Referred Cases: CIT Vs Raja Benoy Kumar Sahasrai (33 ITR 466), M/s Pro Agro Seeds
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Agricultural income; Commercial Activity; Hybrid seeds; Seed production
• Section: 10(1)

Judgement Text

"HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.88 of 2014 Date: 21.02.2014 Between: Commissioner of Income Tax-IV, Hyderabad .....Appellant AND M/s Prabhat Agri Biotech Limited., Hyderabad ...Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.88 of 2014 JUDGMENT: (per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta ) This appeal is directed against the judgment and order of the learned Tribunal dated 4th January, 2013 in relation to the assessment year 2008-09 and sought to be admitted on the following suggested questions of law: 1. Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT was justified in upholding the order of the CIT (A) allowing deduction under Section 10(1) of the Income Tax Act, 1961 without appreciating that the activity of development and marketing seeds is purely a commercial activity and does not fall under Agricultural activity? 2. Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT was correct in not appreciating the fact that the assessee’s activity is composite in nature and production of basic seeds was with the ultimate aim of selling the hybrid seeds in which commercial element is involved? 3. Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT was justified in not appreciating the decisions of Apex Court in the case of CIT Vs Raja Benoy Kumar Sahasrai (33 ITR 466) and the decision held by the Hon’ble ITAT, D Bench, Delhi in the case of M/s Pro Agro Seeds? We have heard the learned Counsel for the appellant, who says that the judgment on which reliance has been placed to render the decision has already been appealed against. We are of the view that because one matter is admitted, it cannot be said we cannot decide this appeal for admission purpose. In this case, we find that the assessee claimed for exemption under Section 10 (1) of the Income Tax Act, 1961 treating the income generated from the sale of basic/foundation seeds as agricultural income. Therefore, the question is whether the income arising from out of the sale of seeds can be treated to be income otherwise than the agricultural income. No one can dispute that the seed is the product of agricultural activity and the seeds cannot be sold commercially, unless it is produced by agricultural activity. Mr.J.V.Prasad, learned Counsel for the appellants says that the hybrid seeds are produced by chemical process. We are unable to accept this farfetched idea that artificial production of seeds can be sold or used for commercial purpose. May be a few hybrid seeds could be produced by artificial method in a laboratory. The seeds so produced with non-agricultural activity again will have to be sown in the agriculture field to have a larger quantity for sale in the market. Accordingly, we hold that the seed is a product of agricultural activity. Therefore, the sale of the same cannot be brought under the provisions of the Income Tax Act. We, therefore, upheld the decision of the learned Tribunal in this matter. Accordingly, the appeal is dismissed. No order as to costs. ___________________ K.J. SENGUPTA, CJ __________________ SANJAY KUMAR, J 21-.2-2014 Gsn "