Hortus Consultants Pvt.Ltd., Hyd, Hyderabad V. ITO, Ward-2(2), Hyderabad, Hyderabad

ITA 1074/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2199 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 09-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Keywords: Business income; Additional evidence

Judgement Text

ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 1 OF 20 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1074/HYD/2016 (ASSESSMENT YEAR: 2011-12) M/S. HORTUS CONSULTANTS PRIVATE LIMITED HYDERABAD PAN: AABCH 3029 E VS ITO WARD 2 ( 2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI KISHORE PHADKE FOR REVENUE : SHRI P. CHANDRASEKHAR, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2011-12 AGAIN ST THE ORDER OF THE CIT (A)-9, HYDERABAD, DATED 24 TH MARCH, 2016 CONFIRMING THE DISALLOWANCE OF THE CLAIM OF AGRICUL TURAL INCOME BY THE AO. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY ENGAGED IN AGRICULTURAL ACTIVITY AND RELATED CONSUL TANCY, FILED ITS RETURN OF INCOME FOR THE A.Y 2011-12 ON 31.10.2011 ADMITTING INCOME OF RS.21,43,950. IN THE COMPUTATION OF INCOM E, THE ASSESSEE ADMITTED TAXABLE INCOME OF RS.22,53,790 AN D AGRICULTURAL INCOME OF RS.2,65,60,347. THE RETURN W AS INITIALLY DATE OF HEARING: 0 4.10. 2017 DATE OF PRONOUNCEMENT: 29.12.2017 ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 2 OF 20 PROCESSED U/S 143(1) ON 24.1.2012. SUBSEQUENTLY, TH ROUGH CASS, THE CASE WAS SELECTED FOR SCRUTINY AND THE STATUTOR Y NOTICES WERE ISSUED TO THE ASSESSEE. IN REPLY THERETO, THE PERSO NNEL FROM THE ASSESSEE COMPANY APPEARED AND PRODUCED THE INFORMAT ION CALLED FOR. 3. THE AO EXAMINED THE NATURE OF THE AGRICULTURAL ACTIVITIES CARRIED ON BY THE ASSESSEE. BEFORE THE A O, THE ASSESSEE HAD SUBMITTED THAT IN THE YEAR 2010, THE ASSESSEE P ARTICIPATED IN THE GLOBAL TENDER FOR THE RELAYING OF THE STADIUM W ITH TURF GRASS FOR COMMON WEALTH GAMES, NEW DELHI 2010 WITH THE SUPPOR T OF M/S. STRAYTH AYR AN AUSTRALIAN CO, AND PROVIDED EXTENS IVE PRESENTATION OF THE TECHNOLOGY PROPOSED TO BE USED AND ALSO DELIVERED SAMPLES ETC., AND THAT THE ASSESSEE WAS A WARDED THE WORK ON ITS MERITS. IT WAS SUBMITTED THAT THE JOB I NVOLVED GROWING AND LAYING OF TURF GRASS AS PER THE INTERNATIONAL S PORTING STANDARDS AT THE MAIN STADIUM, I.E. JAWAHARLAL NEHR U STADIUM AND THE WORK OF LAYING HAD TO BE ACCOMPLISHED WITHI N A PERIOD OF 24 HOURS OF THE CLOSURE OF THE OPENING CEREMONY AND HAD TO BE READY FOR USE. IT WAS SUBMITTED THAT IN ORDER TO EX ECUTE THE CONTRACT, THE ASSESSEE LEASED SOME LAND NEAR DELHI AND GREW THE SPECIFIED GRASS TURF FORAGE IN ACCORDANCE WITH THE REQUIREMENTS OF THE CONTRACT AND THE ENTIRE GROWING PROCESS LASTED ABOUT 130-135 DAYS UNDER THE INSPECTION OF CWG OFFICIALS FROM TIM E TO TIME. IT WAS SUBMITTED THAT VARIOUS OPERATIONS OF FARMING IN CLUDING LEVELING, IRRIGATION SYSTEM INSTALLATION, MANURE AP PLICATION, GRASS SOWING, IRRIGATION, PESTICIDE/FUNGICIDE SPRAYING, A PPLICATION OF MICRO-NUTRIENTS ETC., WERE CARRIED OUT BY THE ASSES SEE AND THE TURF GRASS OF 90,000 SFT WAS HARVESTED ON THE FARM AND W AS INSTALLED AT ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 3 OF 20 THE JAWAHARLAL NEHRU STADIUM IN A RECORD TIME OF 21 HOURS AND THE APPLICABLE EVENTS WERE SUCCESSFULLY CONDUCTED T HEREON. 4. THE AO OBSERVED THAT THE ASSESSEE PARTICIPATED I N THE BIDDING PROCESS WITH THE SUPPORT OF M/S. STRAYTH AY R AN AUSTRALIAN CO. AND FINALLY LAID DOWN TURF GRASS AT THE JAWAHARLAL NEHRU STADIUM WITH THE EXTENSIVE USE OF IMPORTED TE CHNOLOGY AND TECHNICAL PERSONNEL. HE OBSERVED THAT THESE ACTIVIT IES ARE DIFFERENT FROM THE NORMAL AGRICULTURAL ACTIVITIES THAT ARE CA RRIED OUT BY AN AGRICULTURIST AND THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN THE ACTIVITIES CARRIED ON BY IT IN THIS REGARD, WITH IN SISTENCE ON USAGE OF IMPORTED TECHNOLOGY AND ROLE OF STRAYTH AYR.-AUS TRALIA. IN RESPONSE, THE ASSESSEE FILED COME COLOURED PHOTOGRA PHS OF THE PROCESS INVOLVED IN GROWING OF GRASS TURF WITH IMPO RTED MACHINERY (FROM STRAYTH AYR.) USED IN THE PROCESS, THEIR CAPA CITY TO LAY GRASS TURF ETC. A NOTE WAS ALSO SUBMITTED STATING THE PUR POSE OF THE TECHNICAL ASSISTANCE & TECHNICAL PERSONNEL TO BE A BLE TO REPLANT FRESH TURF OF INTERNATIONAL SPORTING STANDARDS (90, 000 SFT APPROXIMATELY) WITHIN 24 HOURS, IN A SPECIALIZED MA NNER WITH ZERO ROOT DAMAGE AS WAS REQUIRED, WHICH WAS PROVIDED BY THE AUSTRALIAN COMPANY. AFTER GOING THROUGH THESE SUBM ISSIONS, THE AO OBSERVED THAT APART FROM GROWING GRASS TURF IN L EASED LANDS, THE SUBSEQUENT ACTIVITIES OF CUTTING THE TURF, MAKI NG BUNDLES OF SUCH TURF WITH USAGE OF IMPORTED MACHINERY AND FORE IGN TECHNICAL PERSONNEL, TRANSPORTING THE SAME FROM THE FARM BY U SING SPECIALIZED VEHICLES TO THE JLN STADIUM, LAYING OF THE SAME BY DEPLOYING IMPORTED MACHINERY AND FOREIGN TECHNICAL PERSONNEL, DOES NOT APPEAR TO BE INTEGRATED ACTIVITIES IN CONJ UNCTION WITH THE BASIC/ORDINARY AGRICULTURAL ACTIVITY THAT CAN BE EM PLOYED BY THE ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 4 OF 20 CULTIVATORS FOR GROWING GRASS. THEREFORE, THE AO I SSUED A FRESH QUESTIONNAIRE TO THE ASSESSEE AS TO WHY THE ACTIVIT Y SHOULD NOT BE TREATED AS A BUSINESS ACTIVITY. 5. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DATED 31.1.2014 REFERRING TO VARIOUS CLAUSES OF THE CONTR ACT ENTERED INTO BY THE ASSESSEE WITH CWG COMMITTEE, NEW DELHI FOR L AYING THE GRASS TURF IN JLN STADIUM. AFTER CONSIDERING THESE CONTENTIONS, THE AO HELD THAT THE ACTIVITY UP TO THE LEVEL OF GR OWING GRASS, (INCLUDING SPECIALIZED GRASS) FITS INTO THE ACTIVIT Y OF AGRICULTURE, BUT THE SUBSEQUENT OPERATIONS ARE DEFINITELY NOT IN CONTINUATION OF THE EARLIER BASIC ACTIVITY OF AGRICULTURE BUT AR E SPECIALIZED ACTIVITY WITH USAGE OF IMPORTED MACHINERY AND DEPLO YMENT OF FOREIGN TECHNICAL PERSONNEL. HE THEREFORE, HELD THA T THE ACTIVITY OF AGRICULTURE ENDED IN THIS CASE WITH GROWING OF THE TURF GRASS IN LEASED LANDS UNDER THE CONDITIONED ENVIRONMENT, BUT THE OTHER ACTIVITIES CARRIED OUT BY THE ASSESSEE ARE ONLY TO MEET THE CONDITIONS OF THE CONTRACTOR TO MAKE THIS BASIC AGR ICULTURAL PRODUCE FIT TO BE USED FOR CONDUCTING TRACK AND FIE LD EVENTS. THEREFORE, HE TREATED THE ENTIRE ACTIVITY AS ONE IN TEGRATED ACTIVITY AND NOT AS AGRICULTURAL ACTIVITY. 6. THE AO ALSO OBSERVED THAT THE ASSESSEE COMPANY RENDERED ITS SERVICES TO MANY OTHER SOFTWARE COMPAN IES, PRIVATE INDIVIDUALS AND OTHER SPORTS COMMITTEES IN PREPARIN G GREEN LAWNS, FOOTBALL GROUND ETC., AND ALL THE ACTIVITIES WERE C ARRIED OUT WITH THEIR IN-HOUSE KNOWLEDGE AND INVOLVED NORMAL AGRICU LTURAL PROCEDURES, AND THAT IN ALL THE YEARS, THE ASSESSEE HAS BEEN ADMITTING INCOME FROM SUCH ACTIVITIES AS BUSINESS I NCOME AND IT ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 5 OF 20 IS ONLY FOR THE CONTRACT WORK FOR CWG, THAT THE ASS ESSEE CLAIMED IT AS AGRICULTURE. THUS, HE TREATED THE ENTIRE RECEIPT S OF RS.7,25,88,333 AS CONTRACT RECEIPTS AND THE EXCESS OF RECEIPTS OVER PAYMENTS ADMITTED AT RS.2,65,60,347 WERE BROUG HT TO TAX AS BUSINESS INCOME OF THE ASSESSEE. AGGRIEVED, THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE CIT (A), WHO CONFIRM ED THE ORDER OF THE AO, AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI KISHO RE PHADKE, ADVANCED EXTENSIVE ORAL ARGUMENTS REITERATI NG THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AO AND THE CIT (A) AND HAS RELIED UPON THE FOLLOWING CASE LAW IN SUPPO RT OF HIS CONTENTIONS THAT THE ENTIRE ACTIVITY IS AGRICULTURA L ACTIVITY. A) CIT VS. RAJA BINAY KUMAR SAHAS ROY 32 ITR 466 (SC) B) CIT V. SOUNDARYA NURSERY, 241 ITR 530 (MAD.) C) CIT V. WOODLAND ESTATES LTD, 58 ITR 612 (KER.) D) DCIT V. BEST ROSES BIOTECH P LTD 17 TAXMAN.COM 5 6 (AHD.) E) CIT V. RANA GURJIT SINGH, 22 TAXMAN.COM 93 (P&H) F) CIT V. H.G.DATE, 82 ITR 71 (BOM.) G) CIT V. STANES AMALGAMATIONS LTD 232 ITR 433 (MAD .) H) FIVE STAR SHIPPING CO. PVT. LTD V. DCIT ITA NO.2151/MUM/2012 I) ACIT V. P.Z. ESTATE (P) LTD, 2 SOT 563 (DEL.) 8. IN THE ALTERNATIVE, HE ALSO PLEADED THAT SINCE T HE AO HAS OBSERVED THAT THE ACTIVITY UP TO GROWING OF TUR F GRASS IN THE FARMS IS AGRICULTURAL ACTIVITY, INCOME FROM SUCH AC TIVITIES SHOULD BE ALLOWED AS AGRICULTURAL INCOME. 9. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND FILED WRITTEN S UBMISSIONS ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 6 OF 20 CONTENDING THAT THE ACTIVITY CARRIED ON BY THE ASSE SSEE IS NOT AGRICULTURAL IN NATURE AND THEREFORE, THE AO HAS RI GHTLY BROUGHT IT TO TAX AS BUSINESS INCOME. HE ALSO PLACED RELIANCE UPON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS: A) FOREST DEVELOPMENT CORPORATION OF MAHARASHTRA LT D VS. ADD. CIT, NAGPUR REPORTED IN (2017) 84 TAXMANN.COM 214 (BOMBAY). B) CIT (C.C) BANGALORE VS. NAMDHARI SEEDS (P) LTD REPORTED IN (2011) 16 TAXMANN.COM 83 (KAR.) C) K.LAKSHMANAN & CO. V. CIT REPORTED IN (2000) 108 TAXMAN 167 (S.C) D) THIRU AROORAN SUGARS LTD VS. CIT REPORTED IN (19 97) 93 TAXMAN 579 (S.C) 10. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, THE UNDISPUTED FACTS OF THE CASE ARE THA T THE ASSESSEE COMPANY IS ENGAGED IN AGRICULTURAL ACTIVITY AND REL ATED CONSULTANCY. IT PARTICIPATED IN THE BIDDING FOR THE CONTRACT FOR REPLACEMENT OF GRASS TURF WITH LIVE ROLLING GRASS O N FIELD OF PLAY AT JAWAHARLAL NEHRU STADIUM FOR ATHLETIC TRACK AND FIELD EVENT FOR COMMONWEALTH GAMES, NEW DELHI, 2010. THE ASSESS EE WAS AWARDED THE CONTRACT AND IN THE SAID CONTRACT, THE ASSESSEE IS DESCRIBED AS A SERVICE PROVIDER. LET US, THEREFORE, EXAMINE THE NATURE OF THE WORK AWARDED TO THE ASSESSEE. THE REL EVANT CLAUSES TO UNDERSTAND THE NATURE OF THE WORK ARE DISCUSSED AS UNDER: (I) THE SERVICES REQUIRED TO BE PERFORMED BY THE SE RVICE PROVIDER ARE SET OUT IN SCHEDULE-2 OF THE CONTRACT. (II) AS PER CLAUSE 4.2 OF THE CONTRACT, THE SERVICE PROVIDER MUST; ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 7 OF 20 (A) GROW THE GRASS TURF IN ACCORDANCE WITH THE TERM S OF THE CONTRACT; (B) DELIVER THE GRASS TURF AT THE GAMES VENUE JAWAH ARLAL NEHRU STADIUM, NEW DELHI IN A MANNER ESSENTIAL FOR EXECUT ING THIS JOB ON THE DATE SPECIFIED BY DELHI 2010 TO THE SERVICE PROVIDER AS STATED AND IN THE MANNER PROVIDED IN SCHEDULE 2 OF THE CONTRACT. (III). CLAUSE 11 SPECIFIED THE FEE FOR SERVICES; (IV) CLAUSE 11.8 PROVIDES THAT PAYMENTS MADE BY DE LHI 2010 TO THE SERVICE PROVIDER ARE NOT WAGES OR SALAR Y. (V). CLAUSE 24 MANDATES THAT THE SERVICE PROVIDER M UST NOT SUB-LICENSE ITS RIGHTS UNDER THE CONTRACT WITHOUT T HE PRIOR WRITTEN CONSENT OF DELHI 2010 WHICH MAY BE WITHHELD OR GRAN TED IN ITS ABSOLUTE DISCRETION. (VI). CLAUSE 25 MANDATES THAT THE SERVICE PROVIDER MUST NOT SUB-CONTRACT THE WHOLE OR ANY PART OF THE SERVICE W ITHOUT DELHI 2010 I.E. CONTRACTEES PRIOR WRITTEN CONSENT. (VII). SCHEDULE-2 OF THE CONTRACT DESCRIBES THE SCO PE OF THE SERVICES. IT IS SEEN THAT THE SERVICE PROVIDER WILL BE ENTIRELY RESPONSIBLE FOR THE GRASS TURF REPLACEMENT ON COMPL ETION OF THE OPENING CEREMONY AND MAINTAIN THE GRASS TURF UPTO T HE CLOSURE OF ALL THE TRACT AND FIELD EVENTS OF THE GAMES. SUB-CL AUSE (C) OF THE SCHEDULE PROVIDES THAT THE SERVICE PROVIDER AGREES AND UNDERTAKES THAT IT WOULD ONLY USE THE BELOW MENTIONED SPECIFIC ATIONS/GRASS TYPE/BREED FOR THE TURF RELAYING. 1. SELECTION NO.1. (VIII). CLAUSE (F) OF SCHEDULE 2 PROVIDES THAT THE SERVICE PROVIDER ALSO UNDERTAKES THAT THE AREA WHERE IT WIL L GROW THE ROLLED TURF FOR THE PURPOSE OF GAMES WILL BE AT THE BELOW MENTIONED ADDRESS: ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 8 OF 20 ASODA FARMA, OPP: TO ASODA MAHAL, ASODA VILLAGE, HAPUR TEHSIL, GHAZIABAD DISTT. U.P. INDIA (IX). CLAUSE I PROVIDES THAT THE SOIL SHALL BE AGRI CULTURAL SOIL OR ANY OTHER MEDIA VIZ., COCO PEAT/PEAT MOSS ETC., INCLUDING MESH. (X). CLAUSE (J) PROVIDES THAT NOT MORE THAN 01% OF THE ROOT ZONE SHOULD BE DAMAGED DURING HARVESTING AND CLAUSE (K) PROVIDES THAT THE THICKNESS OF THE TURF SHALL BE 50 MM HIGH WITH PLANTING MATERIAL VIZ., EARTH/COCO PEAL PEAT MOSS. THE TURF SHALL BE GREEN AND FREE FROM WEEDS. (XI). CLAUSE (L) PROVIDES THAT THE TURF ROLL SHOULD BE READY FOR USE AFTER COMPLETION OF THE PLANTATION PROCEDUR E. (XII). CLAUSE (O) LISTS OUT THE SCHEDULE OF THE ACT IVITIES TO BE CARRIED OUT BY THE ASSESSEE FOR EXECUTING THE ABOVE CONTRACT WHICH IS AS UNDER: S.NO TASK VISIT DATE OF OC DESIGNATED SURVEYOR 1 WHETHER THE WORK HAS STARTED FOR THE GROWING OF THE GRASS AT THE SPECIFIED VENUE GIVEN BY THE SERVICE PROVIDER WITHIN 30 DAYS FROM THE COMMENCEMENT DATE (21 ST JUNE, 2010) 2 WHEN THE GROUND IS PREPARED FOR GRASSING INCLUDING THE GRASSING WITH SEED/ SOD OF SPECIFIED GRASS STAIN WITHIN 60 DAYS FROM THE COMMENCEMENT DATE (21 ST JULY,2010) 3 TO CHECK IF THE GRASS IS FULLY GROWN AND IS LUSH GREEN AND AT LEAST 3 TO 4 MOVING ARE CARRIED OUT WITHIN 90 DAYS FROM THE COMMENCEMENT DATE (21 ST AUGUST, 2010) 4 TO CHECK IF THE ROLLS/GRASS ARE READY AND ARE LUSH GREEN AND ARE IN PROPER STATE AND FIT FOR USE WITHIN 120 DAYS FROM THE COMMENCEMENT DATE (21 ST SEPTEMBER, 2010) (XIII). SCHEDULE 3 PRESCRIBES THE SCHEDULE OF THE F EES AND PAYMENTS AND TABLE-1 THEREUNDER GIVES THE FOLLOWING DETAILS. 1. IN CONSIDERATION OF THE SATISFACTORY PROVISION OF THE SERVICES (WHICH WILL BE DETERMINED BY DOING PERIODIC CHECKS, DELHI 2010 WILL PAY TO THE SERVICE PROVIDERS NOMINATED ACCOUNT A TOTAL OF RS. 7,25,88,333/- ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 9 OF 20 (RUPEES SEVEN CRORES TWENTY FIVE LACS EIGHTY EIGHT THOUSAN D THREE HUNDRED AND THIRTY THREE ONLY) (INCLUSIVE OF ALL EX ISTING TAXES) AS, FEES IN INR IN THE FOLLOWING INSTALMENTS: S.NO AMOUNT TASK 01 10% OF THE TOTAL AMOUNT OF THE CONTRACT WITHIN 15 DAYS OF SUBMISSION OF THE PERFORMANCE SECURITY OR WITHIN 15 DAYS OF SIGNING ON THIS CONTRACT WHICHEVER IS LATER. 02 25% OF THE TOTAL AMOUNT OF THE CONTRACT WITHIN 15 DAYS OF THE SURVEYOR CERTIFYING THAT THE WORK HAS STARTED. 03 25% OF THE TOTAL AMOUNT OF CONTRACT WITHIN 15 DAYS OF THE SURVEYOR CERTIFYING THAT THE GROUND IS PREPARED FOR GRASSING INCLUDING THE GRASSING WITH SEED/SOLD OF SPECIFIED GRASS STAIN 04 10% OF THE TOTAL AMOUNT OF CONTRACT WITHIN 15 DAYS OF THE SURVEYOR CERTIFYING THAT THE GRASS IS GROWN AND IS GREEN AND AT LEAST 3 MOWING ARE CARRIED OUT. 05 10% OF THE TOTAL AMOUNT OF CONTRACT WITHIN 15 DAYS OF THE SURVEYOR CERTIFYING THAT THE ROLLS/GRASS ARE GREEN AND READY 06 10% OF THE TOTAL AMOUNT OF CONTRACT WITHIN 15 DAYS OF THE SURVEYOR CERTIFYING THAT LAYING WORK AT SITE HAS BEEN COMPLETED 07 10% OF THE TOTAL AMOUNT OF CONTRACT WITHIN 15 DAYS OF THE EXECUTION OF THE CLOSING CEREMONY. (XIV). SCHEDULE 4 MILESTONES TO BE ACHIEVED BY TH E ASSESSEE: S.NO TASK VISIT DATE OF OC DESIGNATED SURVEYOR 1 WHETHER THE WORK HAS STARTED FOR THE GROWING OF THE GRASS AT THE SPECIFIED VENUE GIVEN BY THE SERVICE PROVIDER WITHIN 30 DAYS FROM THE COMMENCEMENT DATE (21 ST JUNE, 2010) ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 10 OF 20 2 WHEN THE GROUND IS PREPARED FOR GRASSING INCLUDING THE GRASSING WITH SEED/SOD OF SPECIFIED GRASS STAIN WITHIN 60 DAYS FROM THE COMMENCEMENT DATE (21 ST JULY, 2010) 3 TO CHECK IF THE GRASS IS FULLY GROWN AND IS GREEN AND AT LEAST 3 TO 4 MOVING CARE CARRIED OUT WITHIN 90 DAYS FROM THE COMMENCEMENT DATE (21 ST AUGUST, 2010) 4 TO CHECK IF THE ROLLS/GRASS ARE READY AND ARE GREEN AND ARE IN PROPER STATE AND FIT FOR USE. WITHIN 120 DAYS FROM THE COMMENCEMENT DATE (21 ST SEPTEMBER, 2010) 11. FROM THE ABOVE CLAUSES OF THE CONTRACT, IT IS S EEN THAT THE WHOLE CONTRACT IS FOR (I) GROWING OF THE SPECIF IED VARIETY OF GRASS FOR A SPECIFIED ACTIVITY; AND (II) DELIVERY O F THE GRASS AT THE VENUE IN THE SPECIFIED MANNER WITHIN THE PRESCRIBED PERIOD. THE AO HAS TREATED BOTH THE ACTIVITIES AS ONE INTEGRATE D ACTIVITY AND SINCE THE SECOND OPERATION OF THE ACTIVITY IS NOT A GRICULTURAL ACTIVITY, THE AO HAS TREATED THE ENTIRE ACTIVITY AS NON-AGRICULTURAL ACTIVITY AND INCOME THEREFROM AS BUSINESS INCOME. I N SUCH CIRCUMSTANCES, THE QUESTIONS BEFORE US ARE (A) WHET HER THE ENTIRE ACTIVITY OF THE ASSESSEE IS AGRICULTURAL ACTIVITY? AND (B) IF NOT, CAN THE ACTIVITY BE BIFURCATED INTO AGRICULTURAL AND NO N-AGRICULTURAL ACTIVITIES AND IF THE ANSWER TO (B) IS YES, THEN UP TO WHAT STAGE IS IT AGRICULTURAL ACTIVITY?. 12. ACCORDING TO THE ASSESSEE, IT HAS BEEN AWARDED THE CONTRACT OF GROWING THE GRASS AND DELIVERING IT IN THE PRESCRIBED CONDITION AT THE VENUE OF THE CONTRACT. THEREFORE, THE ENTIRE ACTIVITY IS ONE SINGLE ACTIVITY WHERE THE ASSESSEE IS REQUIRED TO SUPPLY THE AGRICULTURAL PRODUCE IN A PARTICULAR CON DITION AND THE ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 11 OF 20 OPERATIONS SUBSEQUENT TO THE HARVEST AND UP TO THE DELIVERY OF THE GOODS TO THE CUSTOMER IS ALSO PART OF THE AGRICULTU RAL ACTIVITY. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON VARIOUS DECISIONS WHICH HA VE BEEN LISTED ABOVE. NO DOUBT, THE ASSESSEE HAS BEEN AWARDED THE CONTRACT TO PROVIDE THE SERVICE OF RELAYING THE GRASS TURF IN T HE JAWAHARLAL NEHRU STADIUM FOR THE COMMONWEALTH GAMES TO BE HELD AT NEW DELHI IN 2010 AND AS FAR AS CWG IS CONCERNED, IT IS A CONTRACT FOR SERVICE AND THE PAYMENTS ARE NOT TOWARDS SALARY OR WAGES. THEREFORE, IT MADE TDS FROM THE PAYMENT. THIS FACTO R ALONE DOES NOT DETERMINE THE NATURE OF THE ACTIVITY. THIS IS O NE OF THE SEVERAL FACTORS WHICH DETERMINE THE NATURE OF THE ACTIVITY. THE CONTRACT INVOLVES CERTAIN ACTIVITIES WHICH MAY FALL UNDER TH E CATEGORY OF AGRICULTURAL ACTIVITY. AS SEEN FROM THE CONTRACT TE RMS & CONDITIONS, THE CONTRACT PAYMENT IS FOR THE ENTIRE ACTIVITY AND IS PAID IN INSTALMENTS ONLY TO ENSURE THAT THE ASSESSE E ADHERES TO THE TIMEFRAME AND MILESTONES AND COMPLETES THE PROC ESS AS PER THE REQUIREMENT OF THE CONTRACTEE AND THE PAYMENT S CHEDULE IS FIXED IN PROPORTION TO THE ACTIVITIES CARRIED ON BY THE ASSESSEE. THEREFORE, THE PAYMENT FOR THE AGRICULTURAL ACTIVIT Y HAS NOT BEEN APPORTIONED BY THE PARTIES TO THE CONTRACT. THE PAY MENT IS FOR THE ENTIRE ACTIVITY OF GROWING THE GRASS AS WELL AS LAY ING AND MAINTAINING THE GRASS TURF AT THE PRESCRIBED VENUE. IN SUCH CIRCUMSTANCES, CAN THE INCOME BE BIFURCATED AMONGST THE ACTIVITIES CARRIED ON BY THE ASSESSEE? AND IF YES, THEN ON WHAT BASIS? BEFORE ANSWERING THE ABOVE QUESTION, IT IS F IRST REQUIRED TO BE EXAMINED WHETHER THE ASSESSEE HAS CARRIED ON ANY AGRICULTURAL ACTIVITY. WHAT IS AGRICULTURAL ACTIVITY, THE INCOME FROM WHICH IS ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 12 OF 20 EXEMPT FROM TAX HAS BEEN CONSIDERED BY THE COURTS I N VARIOUS CASES. 13. IN THE DECISIONS RELIED UPON BY THE LEARNED COU NSEL FOR THE ASSESSEE, FOR CALLING ANY ACTIVITY AS AGRICULTU RAL ACTIVITY, THE BASIC AND FOREMOST REQUIREMENT IS THAT THE AREA ON WHICH THE ASSESSEE IS CARRYING ON THE ACTIVITY, MUST BE AGRIC ULTURAL LAND. AS SEEN FROM THE LEASE AGREEMENT WITH THE ASSODA FARM, THE ASSESSEE HAS ENTERED INTO A LEASE FOR CARRYING ON A GRICULTURAL ACTIVITY ON THE AGRICULTURAL LAND. AS SEEN FROM THE PHOTOS FILED BY THE ASSESSEE, SHOWING VARIOUS ACTIVITIES CARRIED ON BY THE ASSESSEE, THE ASSESSEE HAS TILLED THE LAND AND LEVE LLED THE LAND WITH TRACTORS. THEREAFTER, IT IS THE CASE OF THE AS SESSEE THAT IT HAS GROWN THE GRASS IN THE SAID LAND. ONE OF THE REQUIR EMENT OF THE CONTRACT IS THAT THE LAND ON WHICH THE GRASS IS GRO WN, SHOULD BE AGRICULTURAL LAND OR IT CAN ALSO BE OTHER MEDIA. TH E ASSESSEE HAS CHOSEN THE MEDIUM OF AGRICULTURAL LAND. THE OTHER C ONDITION IS THAT SUCH MEDIUM SHOULD INCLUDE THE MESH. AS SEEN F ROM THE BILLS, AND ALSO THE HIGH SEA SALE AGREEMENT PRODUCE D BY THE LEARNED AR BETWEEN M/S. MAHESHWARI ENGINEERING & TR ADING CO. PUNE, AS ADDITIONAL EVIDENCE, WE FIND THAT THE ASSE SSEE HAS PURCHASED THE PLASTIC NET FROM M/S. STRATHYR TURF S YSTEMS PTY LTD, SEYMOUR FOR USE OF THE SAME IN GROWING OF THE GRASS. IT APPEARS THAT THE MESH IS USED TO HOLD THE GRASS TOG ETHER AS IT IS TO BE USED FOR FIELD AND ATHLETIC EVENTS AND THE GRASS DOES NOT GET DAMAGED. THE CASE OF THE REVENUE IS THAT THE ASSESS EE, THOUGH HAS LEVELLED THE LAND BY USE OF TRACTORS, HAS NOT D ONE ANY FURTHER AGRICULTURAL ACTIVITY OF SOWING THE SEEDS ETC. THE PHOTOGRAPHS PRODUCED BY THE ASSESSEE ALSO DO NOT SHOW THE SOWIN G OF SEEDS OR THE GERMINATION OF THE SEEDS IN THE FIELD. IN FACT, THE INVOICES ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 13 OF 20 PLACED BEFORE US IN THE ADDITIONAL EVIDENCE ALSO SH OW THAT THE ASSESSEE HAS PURCHASED AS MUCH AS 1,65,903 SFT. OF GRASS CARPET FROM VARIOUS SUPPLIERS AND THERE IS NO BILL FOR ANY PURCHASE OF THE SEEDS NOR IS THERE ANY BILL FOR FERTILIZERS AND CHE MICALS. IT IS THE CASE OF THE LEARNED DR, THAT THE ASSESSEE HAS SOURC ED THE GRASS FROM VARIOUS CULTIVATORS AND HAS ONLY MAINTAINED TH E GRASS TILL IT HAS GROWN TO A PARTICULAR LENGTH BEFORE HARVESTING AND LAYING IT IN THE FIELD. HAVING GONE THROUGH THE INVOICES FOR PUR CHASE OF THE GRASS CARPET, WHICH HAS BEEN PURCHASED FROM 10.07.2 010 TO 23.09.2010 FROM VARIOUS PARTIES, WE FIND THAT THE G RASS CARPET OF NEARLY 90,000 SFT WAS SUPPOSED TO BE RELAYED IN THE FIELDS ON 3.10.2010. THE ASSESSEES CASE IS THAT IT HAD TO GR OW LARGE EXTENT OF GRASS IN ORDER TO MEET THE REQUIREMENT OF THE GO OD AND HIGH STANDARD OF GRASS REQUIRED UNDER THE CONTRACT AND S OME OF THE PURCHASES ARE ONLY TO SEE THAT THE ASSESSEE FULFILL S THE CONDITIONS EVEN IF SOME OF THE GRASS GROWN BY THE ASSESSEE IS DAMAGED BY THE VAGARIES OF THE NATURE. HOWEVER, AS SEEN FROM THE I NVOICES, SINCE THERE ARE NO EXPENSES TOWARDS PURCHASE OF SEEDS OR THE PURCHASE TOWARDS THE FERTILIZERS AND CHEMICALS, IT IS NOT CL EAR AS TO WHETHER THE ASSESSEE HAS GROWN THE GRASS FROM THE SEEDS OR HAS PURCHASED THE GRASS WHICH HAS BEEN MAINTAINED ON TH E FIELDS TAKEN ON LEASE BY THE ASSESSEE. AS SEEN FROM THE LI ST OF MILESTONES AT PAGE 112 OF THE PAPER BOOK, THE OFFICERS FROM TH E CWG WERE REQUIRED TO VISIT THE FIELD ON 21.07.2010 TO EXAMIN E WHETHER THE GROUND IS PREPARED FOR GRASS INCLUDING THE GRASSING WITH SEED/SOD OF SPECIFIED GRASS STAIN. FROM THE ADDITIONAL EVIDE NCE FILED BY THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE HAS INCURRED CERTAIN EXPENDITURE ON 13.07.2010 FOR PREPARATION OF SEEDS AND THE AMOUNTS SPENT ON SUCH ACTIVITY IS RS.38,250. THEREF ORE, IT ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 14 OF 20 APPEARS THAT THE ASSESSEE HAS DONE SOME ACTIVITY FO R GROWING THE GRASS FROM SEEDS IN THE FIELDS OTHER THAN SOURCING THE GRASS CARPET FROM VARIOUS OTHER NURSERIES. IT IS ALSO NOT IN DOU BT THAT THE GRASS WHICH HAS BEEN GROWN AND HARVESTED BY THE ASSESSEE IS FROM THE AGRICULTURAL LAND TAKEN ON LEASE BY THE ASSESSEE AN D ITS GROWTH AND HARVESTING HAS BEEN SUPERVISED AND INSPECTED BY THE OFFICIALS OF THE CWG TEAM. THEREFORE, THE ACTIVITY CARRIED ON BY THE ASSESSEE, TILL THE GRASS IS GROWN AND REMOVED FROM THE SOIL CAN BE CONSIDERED AS THE AGRICULTURAL ACTIVITY. THE SUBSEQ UENT ACTIVITY OF TRANSPORTING THE GRASS AND RELAYING IT AT THE FIELD S AND MAINTAINING THE SAME TILL THE CLOSURE OF THE CWG CA NNOT BE SAID TO BE AN ACTIVITY INTEGRATED WITH THE AGRICULTURAL ACTIVITY. IT CLEARLY IS AN ACTIVITY OF SERVICE. FOR COMING TO THIS CONCL USION, WE RELY UPON THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RAJA BINAY KUMAR SAHAS ROY 32 ITR 466 (SC) WHICH IS ONE OF THE FOREMOST DECISIONS ON THE ACTIVITIES WHI CH CONSTITUTE AGRICULTURAL ACTIVITY. THE RELEVANT PORTION IS AS U NDER: THE PRIMARY SENSE IN WHICH THE TERM AGRICULTURE IS UNDERSTOOD IS AGAR-FIELD AND CULTRA--CULTIVATION, I .E., THE CULTIVATION OF THE FIELD, AND IF THE TERM IS UNDERS TOOD ONLY IN THAT SENSE AGRICULTURE WOULD BE RESTRICTED ONLY TO CULTIVATION OF THE LAND IN THE STRICT SENSE OF THE TERM MEANING THEREBY, TILLING OF THE LAND, SOWING OF THE SEEDS, PLANTING AND SIMILAR OPERATIONS ON THE LAND. THEY WOULD BE THE BASIC OPE RATIONS AND WOULD REQUIRE THE EXPENDITURE OF HUMAN SKILL AN D LABOUR UPON THE LAND ITSELF. THERE ARE HOWEVER OTHE R OPERATIONS WHICH HAVE GOT TO BE RESORTED TO BY THE AGRICULTURIST AND WHICH ARE ABSOLUTELY NECESSARY FO R THE PURPOSE OF EFFECTIVELY RAISING THE PRODUCE FROM THE LAND. THEY ARE OPERATIONS TO BE PERFORMED AFTER THE PRODU CE SPROUTS FROM THE LAND, I.E., WEEDING, DIGGING THE S OIL AROUND THE GROWTH, REMOVAL OF UNDESIRABLE UNDERGROWTHS AND ALL OPERATIONS WHICH FOSTER THE GROWTH AND PRESERVE THE SAME NOT ONLY FROM INSECTS AND PESTS BUT ALSO FROM DEPRE DATION FROM OUTSIDE, TENDING, PRUNING, CUTTING, HARVESTING , AND RENDERING THE PRODUCE FIT FOR THE MARKET. THE LATTE R WOULD ALL BE AGRICULTURAL OPERATIONS WHEN TAKEN IN CONJUNCTIO N WITH ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 15 OF 20 THE BASIC OPERATIONS ABOVE DESCRIBED, AND IT WOULD BE FUTILE TO URGE THAT THEY ARE NOT AGRICULTURAL OPERATIONS A T ALL. HOWEVER, THE MERE PERFORMANCE OF THESE SUBSEQUENT OPERATIONS ON THE PRODUCTS OF THE LAND, WHERE SUCH PRODUCTS HAVE NOT BEEN RAISED ON THE LAND BY THE PERFORMANCE OF THE BASIC OPERATIONS WHICH HAVE BEEN DESCRIBED ABOVE WO ULD NOT BE ENOUGH TO CHARACTERIZE THEM AS AGRICULTURAL OPERATIONS. IN ORDER TO INVEST THEM WITH THE CHARAC TER OF AGRICULTURAL OPERATIONS, THESE SUBSEQUENT OPERATION S MUST NECESSARILY BE IN CONJUNCTION WITH AND A CONTINUATI ON OF THE BASIC OPERATIONS WHICH ARE THE EFFECTIVE CAUSE OF T HE PRODUCTS BEING RAISED FROM THE LAND. IT IS ONLY IF THE PRODUCTS ARE RAISED FROM THE LAND BY THE PERFORMANC E OF THESE BASIC OPERATIONS THAT THE SUBSEQUENT OPERATIO NS ATTACH THEMSELVES TO THE PRODUCTS OF THE LAND AND A CQUIRE THE CHARACTERISTIC OF AGRICULTURAL OPERATIONS. THE CULTIVATION OF THE LAND DOES NOT COMPRISE MERELY OF RAISING THE PRODUCTS OF THE LAND IN THE NARROWER SENSE OF THE TERM LIKE TILLING OF THE LAND, SOWING OF THE SEEDS, PLANTING, AND SIMILA R WORK DONE ON THE LAND BUT ALSO INCLUDES THE SUBSEQUENT OPERATIONS SET OUT ABOVE ALL OF WHICH OPERATIONS, B ASIC AS WELL AS SUBSEQUENT, FORM ONE INTEGRATED ACTIVITY OF THE AGRICULTURIST AND THE TERM 'AGRICULTURE' HAS GOT TO BE UNDERSTOOD AS CONNOTING THIS INTEGRATED ACTIVITY OF THE AGRICULTURIST. ONE CANNOT DISSOCIATE THE BASIC OPER ATIONS FROM THE SUBSEQUENT OPERATIONS AND SAY THAT THE SUBSEQUENT OPERATIONS, EVEN THOUGH THEY ARE DIVORCE D FROM THE BASIC OPERATIONS CAN CONSTITUTE AGRICULTURAL OP ERATIONS BY THEMSELVES. IF THIS INTEGRATED ACTIVITY WHICH CO NSTITUTES AGRICULTURE IS UNDERTAKEN AND PERFORMED IN REGARD T O ANY LAND THAT LAND CAN BE SAID TO HAVE BEEN USED FOR 'AGRICULTURAL PURPOSES' AND THE INCOME DERIVED THER EFROM CAN BE SAID TO BE 'AGRICULTURAL INCOME' DERIVED FRO M THE LAND BY AGRICULTURE. THE MERE FACT THAT AN ACTIVITY HAS SOME CONNECTION WITH OR IS IN SOME WAY DEPENDENT ON LAND IS NOT SUFFICIENT TO BRING IT WITHIN THE SCOPE OF THE TERM AND SUCH EXTENSION OF THE TERM 'AGRICULTURE' IS UNWARRANTED. THE TERM 'AGRICU LTURE' CANNOT BE DISSOCIATED FROM THE PRIMARY SIGNIFICANCE THEREOF WHICH IS THAT OF CULTIVATION OF THE LAND AND EVEN T HOUGH IT CAN BE EXTENDED IN THE MANNER STATED BEFORE BOTH IN REGARD TO THE PROCESS OF AGRICULTURE AND THE PRODUCTS WHIC H ARE RAISED UPON THE LAND, THERE IS NO WARRANT AT ALL FO R EXTENDING IT TO ALL ACTIVITIES WHICH HAVE RELATION TO THE LAND OR ARE IN ANY WAY CONNECTED WITH THE LAND. THE USE OF THE WORD AGRICULTURE IN REGARD TO SUCH ACTIVITIES WOULD CERTAINLY BE A DISTORTION OF THE TERM. ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 16 OF 20 IT THE TERM 'AGRICULTURE' IS UNDERSTOOD AS COMPRISI NG WITHIN ITS SCOPE THE BASIC AS WELL AS SUBSEQUENT OPERATION S IN THE PROCESS OF AGRICULTURE AND THE RAISING ON THE LANDS OF PRODUCTS WHICH HAVE SOME UTILITY EITHER FOR CONSUMP TION FOR TRADE AND COMMERCE, IT WILL BE SEEN THAT THE TERM 'AGRICULTURE' RECEIVES A WIDER INTERPRETATION BOTH IN REGARD TO ITS OPERATIONS AS WELL AS THE RESULTS OF THE SAME. NEVERTHELESS THERE IS PRESENT ALL THROUGHOUT THE BA SIC IDEA THAT THERE MUST BE AT THE BOTTOM OF ITS CULTIVATION OF LAND IN THE SENSE OF TILLING OF THE LAND, SOWING OF THE SEE DS, PLANTING, AND SIMILAR WORK DONE ON THE LAND ITSELF. THIS BASIC CONCEPTION IS THE ESSENTIAL SINE QUA NON OF ANY OPERATION PERFORMED ON THE LAND CONSTITUTING AGRICU LTURAL OPERATION. IF THE BASIC OPERATIONS ARE THERE, THE R EST OF THE OPERATIONS FOUND THEMSELVES UPON THE SAME. BUT IF T HESE BASIC OPERATIONS ARE WANTING THE SUBSEQUENT OPERATI ONS DO NOT ACQUIRE THE CHARACTERISTIC OF AGRICULTURAL OPER ATIONS. 14. SUBSEQUENT TO THIS DECISION OF THE HON'BLE SUPR EME COURT, THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SOUNDARYA NURSERY REPORTED IN (2002) 241 ITR 530 (M AD.) HAS HELD AS UNDER: IF THE PLANTS SOLD BY THE ASSESSEE IN POTS WERE THE RESULT OF THE BASIC OPERATIONS ON THE LAND ON EXPENDING HU MAN SKILL AND LABOUR THEREON AND IT WAS ONLY AFTER THE PERFORMANCE OF THE BASIC OPERATIONS ON THE LAND, TH E RESULTANT PRODUCT GROWN OR SUCH PART THEREOF AS WAS SUITABLE FOR BEING NURTURED IN A POT, WAS SEPARATED AND PLACED IN A POT AND NURTURED WITH WATER AND BY PLAC ING THEM IN THE GREEN HOUSE OR IN SHADE AND AFTER PERFO RMING SEVERAL OPERATIONS, SUCH AS WEEDING, WATERING, MANU RING, ETC., THEY WERE MADE READY FOR SALE AS PLANTS, ALL THESE OPERATIONS WOULD BE AGRICULTURAL OPERATIONS THAT IN VOLVED HUMAN SKILL AND EFFORT. THUS, THE PLANTS SOLD BY TH E ASSESSEE IN POTS WERE THE RESULT OF PRIMARY AS WELL AS SUBSEQUENT OPERATIONS COMPREHENDED WITHIN THE TERM 'AGRICULTURE' AND THEY WERE CLEARLY THE PRODUCTS OF AGRICULTURE. SO FAR AS THE SEEDS ARE CONCERNED, IT IS NOT POSSIB LE FOR THE SEEDS TO EXIST WITHOUT THE MOTHER PLANTS, AND THE M OTHER PLANT IS GROWN ON LAND. IT WAS NOT THE CASE OF THE REVENUE THAT THE SEEDS WERE THE RESULT OF THE WILD GROWTH A ND NOT ON ACCOUNT OF CULTIVATION BY THE ASSESSEE. THE SEEDS W ERE ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 17 OF 20 CLEARLY A PRODUCT OF AGRICULTURE AND THE INCOME DER IVED FROM THE SALE OF SEEDS, WAS AGRICULTURAL INCOME. 15. IN THE CASE OF CIT VS. WOODLAND ESTATES LTD REP ORTED IN (1965) 58 ITR 612 (KERALA), THE HON'BLE KERALA HIGH COURT HAS HELD AS UNDER: SMOKED SHEETS AND SOLE CREPE SHOULD BE TREATED ALIK E AND THAT BOTH HAVE UNDERGONE ONLY PROCESSES THAT ARE NECESSARY TO RENDER THE PRODUCE FIT TO BE TAKEN TO MARKET. THAT SMOKED SHEETS SHOULD BE CONSIDERED AS HAVING UNDERGONE ONLY A PROCESS NECESSARY FOR RENDERING TH E PLANTATION PRODUCE FIT TO BE TAKEN TO MARKET IS CLE AR FROM MUHAMED V. SALES TAX OFFICER [1961] KL.J. 1156 AND DEPUTY COMMISSIONER OF AGRICULTURAL INCOME-TAX AND SALES TAX V. TRAVANCORE RUBBER AND TEA CO. LTD. [1964] KL .J. 534 AS WELL. THE LATTER DECISION WOULD ALSO SHOW THAT T HE USUAL METHOD IS CONVERSION INTO SMOKED SHEETS AND THAT TH E SAID CONVERSION IS NOT A MANUFACTURING PROCESS BUT A PRO CESS ESSENTIAL FOR THE TRANSPORT AND MARKETING OF THE PR ODUCE CONCERNED. 16. IN THE CASE OF DY. CIT VS. BEST ROSES BIOTECH ( P) LTD, REPORTED IN (2012) 17 ITR (T) 211 (AHD.) IT WAS HEL D AS UNDER: IT WAS NOT IN DISPUTE THAT THE LAND IN QUESTION IS AN AGRICULTURAL LAND AND IT BELONGED TO AGRICULTURISTS . VIDE LEASE AGREEMENT, IT WAS ALSO VERIFIED THAT THE LAND IN QUESTION HAPPENED TO BE HOLDING THE CHARACTER OF AGRICULTURAL LAND. THE REVENUE HAS NOT DISPUTED THE SE FACTS BUT RAISED OBJECTION PRIMARILY IN RESPECT OF THE OP ERATION CARRIED OUT BY THE ASSESSEE. .. CONSIDERING THE ADVANCEMENT OF TECHNOLOGY AND THE USE OF THE ADVANCED EQUIPMENT IN CULTIVATION COUPLED WITH THE CONVENTIONAL CULTIVATION METHOD PUT TOGETHER, IT HA S TO BE HELD THAT THE OPERATION CARRIED OUT BY THE ASSESSEE WAS AGRICULTURAL OPERATION IN NATURE. THEREFORE, THE IN COME IN QUESTION WAS AN AGRICULTURAL INCOME. IT CANNOT BE I NCLUDED IN TOTAL INCOME BEING WITHIN THE AMBITS OF THE PROV ISIONS OF SECTION 10(1). 17. IN THE CASE OF ASSTT. CIT VS. P.Z. ESTATES (P) LTD, REPORTED IN (2005) 2 SOT 563 (DEL.) THE TRIBUNAL WA S CONSIDERING ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 18 OF 20 THE NATURE OF THE INCOME DERIVED BY THE ASSESSEE TH EREIN FROM GROWING SPECIAL QUALITY OF GRASS REQUIRED FOR CREAT ING GOLF COURSE AND HAS HELD IT TO BE AGRICULTURAL INCOME. 18. IN THE DECISIONS RELIED UPON BY THE LEARNED DR, WE FIND THAT THE JUDGMENT OF THE HON'BLE SUPREME COURT IN T HE CASE OF THIRU AROORAN SUGARS LTD V. CIT (SUPRA) IS NOT APPL ICABLE TO THE FACTS OF THE CASE BEFORE US AS IT IS DISTINGUISHABL E ON FACTS. 19. IN THE CASE OF CIT V NAMDHARI SEEDS (P) LTD (SU PRA), THE HON'BLE KARNATAKA HIGH COURT WAS CONSIDERING TH E CASE WHETHER THE HYBRID SEEDS WERE GROWN BY THE FARMERS WHICH WERE PURCHASED AND SOLD BY THE ASSESSEE AND NONE OF THE OTHER ACTIVITIES WERE UNDERTAKEN BY THE ASSESSEE COMPANY THEREIN. THE HON'BLE HIGH COURT HELD THAT THE SEEDS WERE PURCHAS ED AND SOLD BY THE ASSESSEE COMPANY AFTER CONVERTING THE SAME A S CERTIFIED SEEDS. THE HON'BLE HIGH COURT HELD THAT SALE OF HYB RID SEEDS SHOULD NOT BE TREATED AS AGRICULTURAL INCOME. THE F ACTS IN THE CASE BEFORE US ARE DISTINGUISHABLE AND THEREFORE, THE SA ID DECISION IS NOT APPLICABLE. 20. IN THE CASE OF FOREST DEVELOPMENT CORPORATION O F MAHARASHTRA LTD VS. ADD. CIT NAGPUR (SUPRA), THE HO N'BLE BOMBAY HIGH COURT WAS DEALING WITH A CASE WHERE THE ASSESSEE COMPANY WAS ENGAGED IN PROVIDING SERVICES OF PLANTA TIONS, ROCK GARDENS ETC., AND INITIALLY THE ASSESSEE DEVELOPED PLANTS ON ITS OWN LAND TILL THESE PLANTS WERE TRANSPLANTED TO LAN DS OF CUSTOMERS AND MAINTAINED FOR A PERIOD TILL PLANTS REACHED DES IRED HEALTH AND ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 19 OF 20 HEIGHT AND THEREAFTER THE MAINTENANCE WAS HANDED OV ER TO CUSTOMERS WHETHER THE ACTIVITIES OF SOWING SEEDS AND DEVELOPING PLANTS ON ASSESSEES OWN LAND AND THEREAFTER TRANSP LANTING THOSE PLANTS ON LAND OF CUSTOMER ARE DIFFERENT FROM OPERA TIONS CARRIED OUT ON LAND BELONGING TO CUSTOMERS AND WHETHER THE ACTIVITY CARRIED OUT AT THE INITIAL STAGE WAS AN AGRICULTURA L ACTIVITY AND THUS THE INCOME DERIVED FROM IT WAS AGRICULTURAL IN COME AND THE INCOME RECEIVED BY THE ASSESSEE FROM LATER PART OF CONTRACT WAS NOT DERIVED FROM ITS OWN LAND BUT WAS DERIVED FROM SERVICE WHICH THE ASSESSEE RENDERED TO CUSTOMER IN TAKING CARE OF ITS PLANTS, THE SAME WAS NOT AGRICULTURAL ACTIVITY WERE CONSIDERED BY THE HON'BLE HIGH COURT AND IT WAS HELD THAT ACTIVITIES OF INITI AL STAGE IS AGRICULTURAL INCOME. IN THE CASE BEFORE US, WE HAVE HELD THAT THE INCOME FROM THE ACTIVITY OF GROWING OF THE GRASS AN D HARVESTING THE SAME IS AGRICULTURAL ACTIVITY AND THEREAFTER, T HE ACTIVITY IS NOT AGRICULTURAL IN NATURE. 21. IN THE CASE OF K.LAKSHMANAN & CO. VS. CIT (SUPR A), THE HON'BLE SUPREME COURT WAS DEALING WITH A CASE O F AN ASSESSEE WHICH WAS GROWING MULBERRY LEAVES AND REARING SILKW ORMS AND THE ASSESSEE HAS GROWN THE MULBERRY TREE AND PLUCKE D THE LEAVES FROM THE TREES WHICH WERE CUT AND FED TO THE SILKWO RMS AND THE SILK COCOONS WERE SOLD IN THE MARKET BY THE ASSESSE E. THE ASSESSEE CLAIMED THAT THE ENTIRE INCOME DERIVED FRO M GROWING OF MULBERRY LEAVES AND SALE OF COCOONS WAS EXEMPT FROM LEVY OF INCOME-TAX AS IT WAS AGRICULTURAL INCOME. THE HON 'BLE SUPREME COURT HELD THAT THE AGRICULTURAL PRODUCE OF THE CUL TIVATOR WILL BE MULBERRY LEAVES AND BY NO STRETCH OF IMAGINATION CA N THE SILKWORMS AND CERTAINLY NOT THE SILK COCOONS BE REG ARDED AS THE ITA NO.1074 OF 2016 HORTUS CONSULTANTS P LTD HYDER ABAD. PAGE 20 OF 20 AGRICULTURAL PRODUCE OF THE CULTIVATOR. WE FIND SUP PORT FROM THIS JUDGMENT ALSO IN FAVOUR OF OUR FINDINGS. THE ASSESS EE HAS FILED THE COPIES OF THE INVOICES AND BILLS AND AGRICULTURAL A CTIVITIES AS ADDITIONAL EVIDENCE BEFORE US AND WE HAVE CONSIDERE D THE SAME FOR GIVING RELIEF TO THE ASSESSEE. HOWEVER, SINCE T HIS ADDITIONAL EVIDENCE WAS NOT FILED BEFORE THE AUTHORITIES BELOW , WE DEEM IT FIT AND PROPER TO ADMIT THE SAME AND REMAND THE SAME TO THE FILE OF THE AO FOR VERIFICATION OF THE AUTHENTICITY OF THE SAID DOCUMENTS AND FOR COMPUTATION OF AGRICULTURAL INCOME. IF IT I S FOUND THAT THESE DOCUMENTS ARE GENUINE, THEN OUR FINDINGS STAN DS. IF IT IS OTHERWISE, THE AO IS FREE TO TAKE A DECISION ON THE BASIS OF ONLY SUCH DOCUMENTS WHICH ARE FOUND TO BE GENUINE. THE A SSESSEE IS DIRECTED TO FURNISH THE BIFURCATION OF ITS INCOME F ROM CWG TOWARDS AGRICULTURAL ACTIVITY AND NON-AGRICULTURAL ACTIVITY BEFORE THE AO ON THE BASIS OF OUR FINDING THAT ACTIVITY UP TO HARVESTING IS AGRICULTURAL ACTIVITY. THE ALTERNATE GROUND OF APPE AL I.E. GROUND OF APPEAL NO.5 IS ALLOWED AND THE OTHER GROUNDS 1 TO 4 ARE REJECTED. 22. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 29 TH DECEMBER, 2017. VINODAN/SPS COPY TO: 1 M/S. HORTUS CONSULTANTS PRIVATE LTD, 4-3-146/1, K ANDA SWAMY LANE, HANUMAN TEKDI, SULTAN BAZAR, HYDERABAD 2 ITO WARD 2(2) HYD ERABAD 3 CIT (A)-9 HYDERABAD 4 PR. CIT 2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER