ITO, Pune V. K. F. Bioplants P. Ltd, Pune

ITA 2217/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72434 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Section: 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2217 / P N/ 20 12 ASSESSMENT YEAR : 2009 - 10 INCOME TAX OFFICER, WARD - 11(3), PU NE VS. K F BIOPLANTS PVT. LIMITED, 2413, KUMAR CAPITAL, EAST STREET, SWARGATE, PUNE (APPELLANT) (RESPONDENT) PAN NO. AABCK4309E APPELLANT BY: SHRI S.P. WALIMBE RESPONDENT BY: SHRI RAJENDRA AGIWAL DATE OF HEARING : 05 - 12 - 2013 DATE OF PRONOUNCE MENT : 24 - 12 - 2013 ORDER P ER R.S. PADVEKAR , JM : - IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(A) - I, PUNE DATED 15 - 06 - 2012 FOR THE A.Y. 2009 - 10. THE REVENUE HAS TAKEN THE MULTIPLE GROUNDS BUT GROUND NO. 2 IS THE EFFECT IVE GROUND WHICH READS AS UNDER: THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE ASSESSEES INCOME AS AGRICULTURAL INCOME U/S. 2(1A)(B)(II) OF THE INCOME - TAX ACT, 1961 AND TO EXCLUDE THE SAID INCOME U/S. 10(1) OF THE ACT. 2. THE BRIEFLY STATED FACTS ARE AS UNDER. THE ASSESSEE COMPANY IS IN THE BUSINESS OF PLANT FLORICULTURE / TISSUE CULTURE AND HORTICULTURE WHICH ARE CLAIMED BY THE ASSESSEE AS AGRICULTURAL ACTIVITIES. THE ASSESSEE IS CLAI MING THE INCOME DERIVED FROM THE SAID ACTIVITIES AS AGRICULTURAL INCOME AND CLAIMED THE EXEMPTION U/S. 10(1) OF THE INCOME - TAX ACT. 3. SO FAR AS A.Y. 2009 - 10 IS CONCERNED , THE ASSESSEE DECLARED THE INCOME DERIVED FROM THE SAID ACTIVITIES TO THE EXTENT O F RS.5,75,67,448/ - 2 ITA NO. 2217/PN/2012, K F BIOPLANTS PVT. LIMITED, PUNE AS AGRICULTURAL INCOME AND CLAIMED THE EXEMPTION U/S. 10(1) OF THE I.T. ACT. THIS ISSUE HAS ALREADY BEEN DECIDED IN THE ASSESSEES OWN CASE. IN THE A.Y. 2004 - 05 BY THE ITAT, PUNE HOLDING THAT THE INCOME DERIVED FROM FLORICULTURE / TISS UE CULTURE AND HORTICULTURE IS AN AGRICULTURAL INCOME. THE ASSESSING OFFICER HAS NOTED THAT AS THE ISSUED HAS BEEN CARRIED TO THE HON'BLE JURISDICTIONAL HIGH COURT BY THE DEPARTMENT BY FILING THE APPEAL U/S. 260A , HENCE, THE ASSESSING OFFICER DECLINE D TO FOLLOW THE ORDER OF THE ITAT, PUNE AND BROUGHT TO TAX THE ENTIRE INCOME. THE LD. CIT(A) REFERRED DECISION OF THE ITAT, PUNE IN THE ASSESSEES OWN CASE FOR THE A.Y. 2004 - 05 AND ALLOWED THE CLAIM OF THE ASSESSEE. NOW THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES. WE FIND THAT THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT, B BENCH, PUNE BEING ITA NO. 146/PN/2008 ORDER DATED 26 - 03 - 2009. THE SAID DECISION HAS BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSEES OWN CA SE FOR THE A.Y. 2007 - 08 IN ITA NO. 1110/PN/2011 ORDER DATED 25 - 09 - 2012. THE OPERATIVE PART OF THE SAID DECISION ON THIS ISSUE IS AS UNDER: 3. WE FIND THAT THE TRIBUNAL HAS ALLOWED THE IDENTICAL 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. 1274 TO 1278/PN/2010, COMMON ORDER DATED 22.2.2012. THE OPERATIVE 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 ASSESSEE FOR THE A.Y. 2004 - 05 HAS DISCUSSED AN IDENTICAL ISSUE IN DETAIL BEFORE DECIDING THE SAME IN FAVOUR OF THE ASSESSEE. THE TRIBUNAL WHILE D ECIDING THE ISSUE HAS TAKEN STRENGTH FROM SEVERAL DECISIONS INCLUDING DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJA BENOY KUMAR SAHAS ROY (SUPRA), HONBLE MADRASH HIGH COURT IN THE CASE OF CIT VS. SOUNDARYA NURSERY, 241 ITR 530(MAD.) AND OF HONBLE ALLAHABAD HIGH COURT 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 THE CASE OF THE ASSESSEE FOR A.Y. 2004 - 05 (SUPRA) ARE BEING REPRODUCED HEREUNDER FOR A REA DY REFERENCE : 33. IN OUR CONSIDERED VIEW, THEREFORE, THE OPERATIONS CARRIED OUT ON THE FACTS OF THE CASE BEFORE US ARE AGRICULTURAL OPERATIONS IN NATURE. THE OBJECTIONS TAKEN BY THE AUTHORITIES BELOW ARE DEVOID OF ANY LEGALLY SUSTAINABLE MERITS/. APP LYING THE RATIO OF THE HONBLE 3 ITA NO. 2217/PN/2012, K F BIOPLANTS PVT. LIMITED, PUNE SUPREME COURTS JUDGMENT IN THE CASE OF RAJA BENOY KUMAR SAHAS ROY (SUPRA), THE INCOME FROM THESE OPERATIONS HAS TO BE TREATED AS AGRICULTURAL INCOME. 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, THEIR LORDSHIPS, INTER ALIA, NOTED AS FOLLOWS: THE TRIBUNAL, AFTER CONSIDERING ALL THE RELEVANT FACTS, AS ALSO THE APPLI - CABLE LAW, CONCLUDED T HAT THE ASSESSEES ACTIVITIES ARE TO PREPARE SEEDLINGS ON SCIENTIFIC LINES: THAT THE OTHER PLANTS ARE GROWN ON PREPARED BEDS ON LANDS OWNED BY IT AND THE PLANTS ARE THEN GRAFTED OR BUDDED ; THAT THE RESULTING GRAFTS ARE TRANSPLANTED IN SUITABLE CONTAIN ERS AND ARE REARED IN GREEN HOUSES OR IN SHADE AND AFTER THEY TAKE ROOT, THEY ARE TRANSMITTED TO LARGE CONTAINERS FILED WITH TOP SOIL AND MANURE, ETC, TILL THEY ESTABLISH THEMSELVES; AND THEREAFTER THOSE PLANTS ARE SOLD AND THAT THE PRIMARY SOURCE OF TH E PLANT IS THE MOTHER PLANT, WHICH IS REARED ON EARTH AND FOR WHICH ACTIVITIES, CERTAINLY CONTRIBUTION OF HUMAN LABOUR 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 LABOUR AND ENERGY WAS ESSENTIAL. THESE OBSERVATIONS EQUALLY APPLY TO ASSESSEES CASE AS WELL. 36. IN SOUNDARYA NURSERYS CASE, HONBLE MADRAS HIGH COURT, AFTER TAKING N OTE OF THE LAW LAID DOWN BY THE HONBLE SUPREME 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 UTILITY EITHER FOR CONSUMPTION OR FOR TRADE OR COMMERCE, I F THEY ARE BASED ON LAND, WOULD BE AGRICULTURAL PRODUCTS. HERE, IT IS NOT THE CASE OF THE REVENUE THAT WITHOUT PERFORMING THE BASIC OPERATIONS, ONLY THE SUBSEQUENT OPERATIONS, AS DESCRIBED IN THE DECISION OF THE APEX COURT HAVE BEEN PERFORMED BY THE ASSES SEE. IF THE PLANTS SOLD BY THE ASSESSEE IN POTS WERE THE RESULT OF THE BASIC OPERATIONS ON THE LAND ON EXPENDING HUMAN SKILL AND LABOUR THEREON AND IT IS ONLY AFTER THE PERFORMANCE OF THE BASIC OPERATIONS ON THE LAND, THE RESULTANT PRODUCT GROWN OR SU CH PART THEREOF AS WAS SUITABLE FOR BEING NURTURED IN A POT, WAS SEPARATED AND PLACED IN A POT AND NURTURED WITH WATER AND BY PLACING THEM IN THE GREEN HOUSE OR IN SHADE AND AFTER PERFORMING SEVERAL OPERATIONS, SUCH AS WEEDING, WATERING, MANURING, ETC., THEY ARE MADE READY FOR SALE AS PLANTS ALL THESE QUESTIONS WOULD BE AGRICULTURAL OPERATIONS ALL THIS INVOLVES HUMAN SKILL AND EFFORT. THUS, THE PLANTS SOLD BY THE ASSESSEE IN POTS WERE THE RESULT OF PRIMARY AS WELL AS SUBSEQUENT OPERATIONS COMPREHENDED WI THIN 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 OPERATIONS ARE CARRIED OUT IN THE PRESENT CASE, WHICH REQUI RE HUMAN SKILL AND 4 ITA NO. 2217/PN/2012, K F BIOPLANTS PVT. LIMITED, PUNE LABOUR, AND SUBSEQUENT OPERATIONS , NO MATTER HOW SOPHISTICATED, IF THAT BE USED AGAINST THE ASSESSEE, ARE ONLY TO FOSTER THE GROWTH AND TO PROTECT THE PRODUCE, WE FIND THAT THE INCOME FROM THESE OPERATIONS CAN ONLY BE SAID TO BE AGRICULT URAL INCOME. THEIR LORDSHIPS WERE ALSO DEALING WITH A SITUATION IN WHICH OPERATIONS WERE CARRIED ON IN A GREENHOUSE. THEREFORE, MERELY BECAUSE A GREENHOUSE IN INVOLVED, THE NATURE OF OPERATIONS WOULD NOT CHANGE. LEARNED CIT(A) HAS DISTINGUISHED THIS PRE CEDENT ON THE GROUND THAT IN ASSESSEES CASE, BASIC OPERATIONS HAVE NOT BEEN CARRIED OUT ON LAND. THAT PREMISES ITSELF, FOR THE DETAILED REASONS 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 CHARACTER OF OPERATIONS. THE DISTINCTION WAS THUS WRONGLY MADE OUT BY THE CIT(A), IN OUR CONSIDERED VIEW, THE PRINCIPLES LAID DOWN BY THE HONBLE MADRA S 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 COURT 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 LANDMARK 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 INVITED TO EXPLANATION (3) TO SECTION 2(1A) OF THE ACT WHICH HAS BEEN INSERTED BY THE FINANCE ACT, 2008. THIS EXPLANATION PROVIDES THAT ANY INCOME DERIVED FROM SAPLINGS OR SEEDLINGS GROWN IN A NURSERY SHALL BE DEEMED TO BE AGRICULTURAL INCOME AND, THEREFORE, IRRESPECTIVE OF WHETHER THE BASIC OPERATIONS HAVE BEEN CARRIED OUT ON LAND, SUCH INCOME WILL BE TREATED AS AGRICULTURAL INCOME QUALIFYING FOR EXEMPTION UNDER SECTION 10(1) OF THE ACT. LEAR NED COUNSEL HAS CONTENDED THAT THIS EXPLANATION IS RETROSPECTIVE IN EFFECT INASMUCH AS IT IS MERELY CLARIFICATORY IN NATURE. WE ARE TAKEN THROUGH THE BUDGET SPEECH BY THE FINANCE MINISTER, EXPLANATORY MEMORANDUM TO THE FINANCE BILL AND OTHER DOCUMENTS TO SUPPORT THE CONTENTION THAT THIS AMENDMENT IN LAW WAS MERELY CLARIFICATORY. OUR ATTENTION WAS THUS INVITED TO SEVERAL JUDICIAL PRECEDENTS IN WHICH IT IS NOTED THAT EVEN WHILE AN AMENDMENT IS STATED TO BE PROSPECTIVE IN APPLICATION, BUT HELD TO BE RET ROSPECTIVE IN EFFECT. ON THE BASIS OF THESE ELABORATE ARGUMENTS, IT WAS SUBMITTED 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 AGRICULTU RAL INCOME. THIS PLEA WAS CLEARLY AN ALTERNATIVE PLEA. SINCE WE HAVE ALLOWED THE BASIC PLEA OF THE ASSESSEE 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 A CADEMIC 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 AUTHORITIES BELONG INDEED ERRED IN LAW AND ON FACTS OF THIS CASE IN HOLDING THAT THE IMP UGNED INCOME IS NOT AGRICULTURAL INCOME. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO TREAT THE SAID INCOME AS AGRICULTURAL INCOME 5 ITA NO. 2217/PN/2012, K F BIOPLANTS PVT. LIMITED, PUNE UNDER SECTION 2 (1A)(B)(I) OF THE ACT. AS A COROLLARY TO THIS DIRECTION, THE ASSESSING OFFICER SHALL ALSO EXCLUDE THE SAI D 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 DECISION 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 APPELLATE ORDER ON THE ISSUE IN FAVOUR OF THE ASSESSEE BASED ON THE SAID ORDER OF THE TRIBUNAL UNDER SIMILAR FACTS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THE SAME IS UPHELD. THE GROUND S INVOLVING THE ISSUE ARE THUS REJECTED. 4. AS THE ISSUE IS IDENTICAL IN THIS YEAR, WE FIND NO REASON TO TAKE DIFFERENT VIEW. WE, THEREFORE, FOLLOWING THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE REFERRED (SUPRA), CONFIRM THE ORDER OF THE LD . CIT(A) AND DISMISS ALL THE GROUNDS TAKEN BY THE REVENUE. 5. WE, THEREFORE, FOLLOWING THE DECISIONS OF THIS TRIBUNAL IN ASSESSEES OWN CASE , CONFIRM THE ORDER OF THE LD. CIT( A) ON THIS ISSUE. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN T HE OPEN COURT ON 24 - 12 - 20 1 3 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 24 TH DECEMBER, 20 1 3 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) - I, PUNE 4 THE CIT ( - I, PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL , PUNE