Income-tax Officer, Pune V. K.F. Bioplant Pvt. Ltd., Pune

ITA 1110/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9936 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH VERMA
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO. 1110/PN/2011 (ASSTT. YEAR : 2007-08) INCOME TAX OFFICER, ... APPELLANT WARD- 11(3), 4 TH FLOOR, C WING, PMT BUILDING, SWARGATE, PUNE V. K.F. BIOPLANT PVT. LTD. RESPONDENT EAST STREET, CAMP, PUNE PAN: AABCK4309E APPELLANT BY : SHRI MU KESH VERMA, CIT RESPONDENT BY : SHRI RAJENDRA AGIWAL DATE OF HEARING : 17/09/12 DATE OF PRONOUNCEMENT : - 9-12 ORDER PER R.S. PADVEKAR, JM IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE IM PUGNED ORDER OF THE LD CIT(A) -I, PUNE, DATED 19.1.2011 FOR THE A. Y. 2007-08. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS I N THE APPEAL : 01) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) GROSSLY ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT ASSESSEES INCOME AS AGRICULTURE INCOME U/S. 2(1A)(B)(I) OF THE INCOME-TAX ACT, 1961 AND TO EXCLUDE SAID INCOME U/S 10(1) OF THE ACT. 02. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN IGNORING THE FACTS THAT THERE IS NO BASIC PLACE IN A GREEN HOUSE AND TISSUE CULTURE LABORATORY WHICH CANNOT BE TERMED AS LAND O R NURSERY FOR GROWING PLANTS. 03. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN IGNORING THE FACTS THAT THE SALE OF THE ASSESSEE CO NSISTED MAINLY OF FLOWERING PLANTS DEVELOPED OUT OF IMPORTED MOTHER P LANTS IN A TISSUE CULTURE LABORATORY AND NOT GROWN IN A NURSERY. 2. THE FACTS IN BRIEF ARE AS UNDER. THE ASSESSEE I S PRIMARILY ENGAGED IN THE BUSINESS OF PLANT FLORICULTURE/TISSUE CULTUR E. THE ASSESSEE HAS CLAIMED EXEMPTION OF THE INCOME FROM THE ABOVE ACT IVITIES U/S. 10(1) 2 ITA NO.1110/PN/2011 K.F. BIOPLANT PVT LTD.. A.Y. 2007-08 R.W.S. 2(1A)(B)(I) OF THE ACT AS AGRICULTURE INCOME . THE ASSESSING OFFICER DECLINED TO ACCEPT THE CLAIM OF THE ASSESSEE THAT I NCOME FROM THE ACTIVITIES OF THE FLORICULTURE/TISSUE CULTURE AND H ORTICULTURE IS THE AGRICULTURE INCOME IN SPITE OF THE FACT THAT THE SA ID ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT, B BENCH IN ASSESSEES OWN APPEAL FOR THE A.Y. 2004-05 BEING ITA NO. 146/P N/08, ORDER DATED 26.3.2009. THE ASSESSING OFFICER MADE THE ADDITION OF RS. 4,76,171/- BY GIVING THE REASON THAT THE DECISION OF THE ITAT, PU NE IN ASSESSEES OWN CASE CANNOT BE FOLLOWED AS THE FURTHER APPEAL IS FI LED BEFORE THE HONBLE BOMBAY HIGH COURT. THE LD CIT(A) FOLLOWING THE DEC ISION OF THE ITAT PUNE BENCH IN ASSESSEES OWN CASE, ALLOWED THE CLAI M OF THE ASSESSEE. 3. WE FIND THAT THE TRIBUNAL HAS ALLOWED THE IDENTI CAL CLAIM OF THE ASSESSEE ON THE IDENTICAL SET OF FACTS IN THE A.Y. 2004-05. THE SAID ORDER OF THE TRIBUNAL IS FOLLOWED IN THE OTHER YEARS ALSO BEING A.YS. 2001-02, 2003-04 AND 2005-06 AND 2006-07 BEING ITA NOS. 127 4 TO 1278/PN/2010, COMMON ORDER DATED 22.2.2012. THE OP ERATIVE PART OF THE ORDER OF THE TRIBUNAL IN ITA NOS. 1274 TO 1278/ PN/2010 DATED 22 ND FEBRUARY 2012 IS AS UNDER : 7. WE FIND THAT THE TRIBUNAL IN THE CASE OF ASSESSE E FOR THE A.Y. 2004- 05 HAS DISCUSSED AN IDENTICAL ISSUE IN DETAIL BEFOR E DECIDING THE SAME IN FAVOUR OF THE ASSESSEE. THE TRIBUNAL WHILE DECIDIN G THE ISSUE HAS TAKEN STRENGTH FROM SEVERAL DECISIONS INCLUDING DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJA BENOY KUMAR SAHA S ROY (SUPRA), HONBLE MADRASH HIGH COURT IN THE CASE OF CIT VS. S OUNDARYA NURSERY, 241 ITR 530(MAD.) AND OF HONBLE ALLAHABAD HIGH COU RT IN THE CASE OF JUGAL KISHORE ARORA VS. DCIT, 269 ITR 133 (ALLHAD.) . THE RELEVANT PARA NOS. 33 TO 40 OF THE DECISION OF THE TRIBUNAL IN TH E CASE OF THE ASSESSEE FOR A.Y. 2004-05 (SUPRA) ARE BEING REPRODUCED HEREU NDER FOR A READY REFERENCE : 33. IN OUR CONSIDERED VIEW, THEREFORE, THE OPERATI ONS CARRIED OUT ON THE FACTS OF THE CASE BEFORE US ARE AGRICULTURAL OPERAT IONS IN NATURE. THE OBJECTIONS TAKEN BY THE AUTHORITIES BELOW ARE DEV OID OF ANY LEGALLY SUSTAINABLE MERITS/. APPLYING THE RATIO OF THE HO NBLE SUPREME COURTS JUDGMENT IN THE CASE OF RAJA BENOY KUMAR SAHAS ROY (SUPRA), THE INCOME FROM THESE OPERATIONS HAS TO BE TREATED AS A GRICULTURAL INCOME. 3 ITA NO.1110/PN/2011 K.F. BIOPLANT PVT LTD.. A.Y. 2007-08 34. WE WOULD ALSO LIKE TO DEAL WITH HONBLE MADRAS HIGH COURTS JUDGMENT IN THE CASE OF CIT VS. SOUNDARYA NURSERY ( SUPRA) AT THIS STAGE. AS FAR AS THE FACTS OF THE CASE WERE CONCERNED, TH EIR LORDSHIPS, INTER ALIA, NOTED AS FOLLOWS : THE TRIBUNAL, AFTER CONSIDERING ALL THE RELEVANT FA CTS, AS ALSO THE APPLI-CABLE LAW, CONCLUDED THAT THE ASSESSEES ACTI VITIES ARE TO PREPARE SEEDLINGS ON SCIENTIFIC LINES: THAT THE OT HER PLANTS ARE GROWN ON PREPARED BEDS ON LANDS OWNED BY IT AND TH E PLANTS ARE THEN GRAFTED OR BUDDED ; THAT THE RESULTING GRAFTS ARE TRANSPLANTED IN SUITABLE CONTAINERS AND ARE REARED IN GREEN HOU SES OR IN SHADE AND AFTER THEY TAKE ROOT, THEY ARE TRANSMITTED TO L ARGE CONTAINERS FILED WITH TOP SOIL AND MANURE, ETC, TILL THEY ESTA BLISH THEMSELVES; AND THEREAFTER THOSE PLANTS ARE SOLD AND THAT THE PRIMARY SOURCE OF THE PLANT IS THE MOTHER PLANT, WHICH IS REARED ON EARTH AND FOR WHICH ACTIVITIES, CERTAINLY CONTRIBUTION OF HUMAN L ABOUR AND ENERGY ARE ESSENTIAL. 35. THEIR LORDSHIPS THUS CLEARLY NOTED THE PRIMARY SOURCE OF THE PLANT IN THE ASSESSEES ACTIVITIES WAS THE MOTHER PLANT, WHICH IS REARED ON EARTH AND FOR WHICH CERTAINLY CONTRIBUTION OF HUMAN LABO UR AND ENERGY WAS ESSENTIAL. THESE OBSERVATIONS EQUALLY APPLY TO ASS ESSEES CASE AS WELL. 36. IN SOUNDARYA NURSERYS CASE, HONBLE MADRAS HIG H COURT, AFTER TAKING NOTE OF THE LAW LAID DOWN BY THE HONBLE SUP REME COURT IN THE CASE OF RAJA BENOY KUMAR SAHAS ROY (SUPRA) AND THE FACTS OF THE CASE, OBSERVED AS FOLLOWS : ALL THE PRODUCTS OF THE LAND, WHICH HAVE SOME UTILI TY EITHER FOR CONSUMPTION OR FOR TRADE OR COMMERCE, IF THEY ARE BASED ON LAND, WOULD BE AGRICULTURAL PRODUCTS. HERE, IT IS NOT THE CASE OF THE REVENUE THAT WITHOUT PERF ORMING THE BASIC OPERATIONS, ONLY THE SUBSEQUENT OPERATIO NS, AS DESCRIBED IN THE DECISION OF THE APEX COURT HAVE B EEN PERFORMED BY THE ASSESSEE. IF THE PLANTS SOLD BY T HE ASSESSEE IN POTS WERE THE RESULT OF THE BASIC OPER ATIONS ON THE LAND ON EXPENDING HUMAN SKILL AND LABOUR THE REON AND IT IS ONLY AFTER THE PERFORMANCE OF THE BASIC OPERATIONS ON THE LAND, THE RESULTANT PRODUCT GRO WN OR SUCH PART THEREOF AS WAS SUITABLE FOR BEING NURTURE D IN A POT, WAS SEPARATED AND PLACED IN A POT AND NURTURE D WITH WATER AND BY PLACING THEM IN THE GREEN HOUSE O R IN SHADE AND AFTER PERFORMING SEVERAL OPERATIONS, SUCH AS 4 ITA NO.1110/PN/2011 K.F. BIOPLANT PVT LTD.. A.Y. 2007-08 WEEDING, WATERING, MANURING, ETC., THEY ARE MADE RE ADY FOR SALE AS PLANTS ALL THESE QUESTIONS WOULD BE AGR ICULTURAL OPERATIONS ALL THIS INVOLVES HUMAN SKILL AND EFFORT. THUS, THE PLANTS SOLD BY THE ASSESSEE IN POTS WERE THE RE SULT OF PRIMARY AS WELL AS SUBSEQUENT OPERATIONS COMPREHEND ED WITHIN THE TERM AGRICULTURE AND THEY ARE CLEARLY THE PRODUCTS OF AGRICULTURE. 37. WHEN WE APPLY THE ABOVE TESTS TO THE FACTS OF THE PRESENT CASE, AND WE BEAR IN MIND OUR FINDINGS THAT BASIC OPERATI ONS ARE CARRIED OUT IN THE PRESENT CASE, WHICH REQUIRE HUMAN SKILL AND LAB OUR, AND SUBSEQUENT OPERATIONS, NO MATTER HOW SOPHISTICATED, IF THAT BE USED AGAINST THE ASSESSEE, ARE ONLY TO FOSTER THE GROWTH AND TO PROT ECT THE PRODUCE, WE FIND THAT THE INCOME FROM THESE OPERATIONS CAN ONLY BE SAID TO BE AGRICULTURAL INCOME. THEIR LORDSHIPS WERE ALSO DEA LING WITH A SITUATION IN WHICH OPERATIONS WERE CARRIED ON IN A GREENHOUSE. THEREFORE, MERELY BECAUSE A GREENHOUSE IN INVOLVED, THE NATURE OF OPE RATIONS WOULD NOT CHANGE. LEARNED CIT(A) HAS DISTINGUISHED THIS PREC EDENT ON THE GROUND THAT IN ASSESSEES CASE, BASIC OPERATIONS HAVE NOT BEEN CARRIED OUT ON LAND. THAT PREMISES ITSELF, FOR THE DETAILED REASO NS SET OUT EARLIER IN THIS ORDER, RESTS ON A UNSUSTAINABLE LEGAL FOUNDATION. THE BASIC OPERATIONS HAVE BEEN, AND CAN ONLY BE, CARRIED OUT ON THE LAND . THE FACT THAT THIS LAND IS IN A GREENHOUSE DOES NOT CHANGE THE CHARACT ER OF OPERATIONS. THE DISTINCTION WAS THUS WRONGLY MADE OUT BY THE CIT(A ), IN OUR CONSIDERED VIEW, THE PRINCIPLES LAID DOWN BY THE HONBLE MADR AS HIGH COURTS JUDGMENT IN THE CASE OF SOUNDARAYA NURSERY (SUPRA) APPLY TO THE FACTS OF THE CASE BEFORE US AS WELL. 38. WE MAY ALSO REFER TO HONBLE ALLAHABAD HIGH CO URT JUDGMENT IN THE CASE OF JUGAL KISHORE ARORA VS DCIT (269 ITR 133). IN THIS CASE, THEIR LORDSHIPS, AFTER TAKING NOTE OF AND ANALYZING THE L ANDMARK SUPREME COURT JUDGMENT IN THE CASE OF RAJA BENOY KUMAR SAHAS ROY (SUPRA), ALSO OBSERVED THAT THE NATURE OF PRODUCE RAISED HAS NO RELEVANCE TO THE CHARACTER THAT THE NATURE OF PRODUCE RAISED HAS NO RELEVANCE TO THE CHARACTER OF AGRICULTURAL OPERATION. IT WAS NOTED THAT CULTIVATION OF FLOWERS OF ARTISTIC AND DECORATIVE VALUE WOULD ALSO BE INCLUDED IN THE SCOPE OF AGRICULTURAL OPERATIONS. THIS OBSERVATION WILL ALSO APPLY TO THE FACTS OF THE PRESENT CASE. 39. WE MAY MENTION THAT OUR ATTENTION WAS ALSO INV ITED TO EXPLANATION (3) TO SECTION 2(1A) OF THE ACT WHICH HAS BEEN INSE RTED BY THE FINANCE 5 ITA NO.1110/PN/2011 K.F. BIOPLANT PVT LTD.. A.Y. 2007-08 ACT, 2008. THIS EXPLANATION PROVIDES THAT ANY INC OME DERIVED FROM SAPLINGS OR SEEDLINGS GROWN IN A NURSERY SHALL BE D EEMED TO BE AGRICULTURAL INCOME AND, THEREFORE, IRRESPECTIVE OF WHETHER THE BASIC OPERATIONS HAVE BEEN CARRIED OUT ON LAND, SUCH INCO ME WILL BE TREATED AS AGRICULTURAL INCOME QUALIFYING FOR EXEMPTION UNDER SECTION 10(1) OF THE ACT. LEARNED COUNSEL HAS CONTENDED THAT THIS EXPL ANATION IS RETROSPECTIVE IN EFFECT INASMUCH AS IT IS MERELY C LARIFICATORY IN NATURE. WE ARE TAKEN THROUGH THE BUDGET SPEECH BY THE FIN ANCE MINISTER, EXPLANATORY MEMORANDUM TO THE FINANCE BILL AND OTHE R DOCUMENTS TO SUPPORT THE CONTENTION THAT THIS AMENDMENT IN LAW WAS MERELY CLARIFICATORY. OUR ATTENTION WAS THUS INVITED TO S EVERAL JUDICIAL PRECEDENTS IN WHICH IT IS NOTED THAT EVEN WHILE A N AMENDMENT IS STATED TO BE PROSPECTIVE IN APPLICATION, BUT HELD TO BE R ETROSPECTIVE IN EFFECT. ON THE BASIS OF THESE ELABORATE ARGUMENTS, IT WAS S UBMITTED THAT, IN ANY EVENT, BASED ON THIS CLARIFICATORY AMENDMENT IN LAW , BASIC OPERATIONS HAVING BEEN CARRIED OUT ON LAND IS NO LONGER SINE QUA NON FOR TREATING INCOME AS AGRICULTURAL INCOME. THIS PLEA WAS CLEAR LY AN ALTERNATIVE PLEA. SINCE WE HAVE ALLOWED THE BASIC PLEA OF THE ASSESSE E AND WE HAVE HELD THAT THE BASIC OPERATIONS WERE CARRIED OUT ON LAND, IT IS NOT REALLY NECESSARY TO DEAL WITH THIS ALTERNATIVE PLEA WHICH IS ONLY ACADEMIC IN THE PRESENT CONTENT. WE LEAVE IT AT THAT. 40. IN VIEW OF THE ABOVE DISCUSSIONS, AND FOR THE REASONS SET OUT ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE AUTHO RITIES BELONG INDEED ERRED IN LAW AND ON FACTS OF THIS CASE IN HOLDING T HAT THE IMPUGNED INCOME IS NOT AGRICULTURAL INCOME. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO TREAT THE SAID INCOME AS AGRICULTURAL INCOME UNDER SECTION 2 (1A)(B)(I) OF THE ACT. AS A COROLLARY TO THIS DIRECTION, THE ASS ESSING OFFICER SHALL ALSO EXCLUDE THE SAID INCOME FROM THE TOTAL INCOME UNDER SECTION 10(1) OF THE ACT. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. SINCE THE ISSUE RAISED IS FULLY COVERED BY THE DEC ISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR THE A.Y . 2004-2005, UNDER SIMILAR SET OF FACTS, WE DO NOT FIND INFIRMITY IN THE FIRST APP ELLATE ORDER ON THE ISSUE IN FAVOUR OF THE ASSESSEE BASED ON THE SAID ORDER OF T HE TRIBUNAL UNDER SIMILAR FACTS DURING THE ASSESSMENT YEAR UNDER CONSIDERATIO N. THE SAME IS UPHELD. THE GROUNDS INVOLVING THE ISSUE ARE THUS REJECTED. 6 ITA NO.1110/PN/2011 K.F. BIOPLANT PVT LTD.. A.Y. 2007-08 4. AS THE ISSUE IS IDENTICAL IN THIS YEAR, WE FIND NO REASON TO TAKE DIFFERENT VIEW. WE, THEREFORE, FOLLOWING THE ORDER S OF THE TRIBUNAL IN ASSESSEES OWN CASE REFERRED (SUPRA), CONFIRM THE O RDER OF THE LD CIT(A) AND DISMISS ALL THE GROUNDS TAKEN BY THE REVENUE. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 2 5TH SEPTEMBER 2012. SD/- SD/- (G.S. PANNU) ACCOUNTANT MEMBER (R.S.PADVEKAR ) JUDICIAL MEMBER PUNE, DATED THE 25TH SEPTEMBER, 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT- I,PUNE 4. THE CIT(A)-I,PUNE 5. THE D.R. A BENCH, PUNE 6. GUARD FILE /- TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE