Deputy Commissioner of Income-tax, Circle - 1, Aurangabad V. M/s. Nath Biogenes India Ltd, Aurangabad

ITA 46/PUN/2019

AI Insights

The case revolves around the appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) which had allowed the exemption of agricultural income claimed by Nath Biogenes India Ltd. The Revenue contested that the respondent-assessee company did not engage in actual agricultural activities but merely entered into business transactions with farmers. The Tribunal examined the agreements and operations of the respondent-assessee company and found that they did engage in agricultural activities, thus qualifying for the exemption. The Tribunal also addressed and dismissed the Revenue's arguments on the disallowance of deductions under sections 35(2AB) and 14A, affirming the CIT(A)'s decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137156 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-12-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 10-01-2019
• Other Referred Cases: Raja Mustafa Ali Khan Vs. CIT [1948] 16 ITR 330 (PC), Premier Construction Co. Ltd. Vs. CIT [1948] 16 ITR 380 (PC), CIT vs. New Ambadi Estates Ltd. [1967] 63 ITR 325 (SC), CIT vs. Prabhat Agri Biotech Ltd. [2015] 5 ITR-OL 116 (AP), CIT vs. Chettinad Logistics (P.) Ltd., 95 taxmann.com 250 (SC), CIT vs. Kohinoor Project (P.) Ltd., 425 ITR 700 (Bombay), CIT vs. Ajeet Seeds Ltd. in Income Tax appeal Nos.20 to 26 of 2014 decided on 18.06.2015, CIT vs. Ramakrishna Deo 35 ITR 312 (SC), Dhakeswari Cotton Mills Ltd. vs. CIT, 26 ITR 775, Dhirajlal Girdharilal vs. CIT, 26 ITR 736, CIT vs. Daulatram Rawatmull, 87 ITR 349, CIT vs. Maddi Venkatasubbayya, 20 ITR 151 (Madras), CIT vs. Associated Metals Co., 177 ITR 428 (Allahabad), CIT vs. Sir Kameshwar Singh 3 ITR 305 (PC), Forest Dev. Corpn. Of Maharashtra vs. ACIT, 399 ITR 467 (Bombay), CIT vs. Excel Industries Ltd., 350 ITR 295 (SC), CIT vs. Chettinad Logistics Pvt. Ltd., 80 taxmann.com 221 (Mad), CIT vs. Continuum Wind Energy (India) Pvt. Ltd., 430 ITR 52 (Mad), Cheminvest Ltd. vs. CIT, 378 ITR 33 (Delhi), MAN Infraprojects Ltd. (ITA No.259 of 2017 dated 09.04.2019) (Bom.), Asstt. CIT vs. Anima Investment Ltd.[2000] 73 ITD 125 (Delhi) (TM), Asstt. CIT vs. Arunodoi Apartments (P.) Ltd. [2002] 123 Taxman 48 (Gauhati), Zuari Leasing & Finance Corpn. Ltd. vs. ITO[2008] 112 ITD 205 (TM), Karnataka Wakf Board vs. State of Karnataka, AIR 1996 Kar.55, CIT vs. Travancore Titanium Products Ltd., 265 ITR 526 (Kerala)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency; Earning of tax free income; Corroborative evidences
• Section: 143(3); 14A; 205; 250; 251; 64; 48; 73; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.46/PUN/2019 िनधाᭅरण वषᭅ / Assessment Year : 2015-16 DCIT, Circle-1, Aurangabad. Vs. M/s. Nath Biogenes India Ltd., Nath House, Nath Road, Aurangabad- 431005. PAN : AABCN7978E Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the Revenue directed against the order of ld. Commissioner of Income Tax (Appeals)-1, Aurangabad [‘the CIT(A)’] dated 17.10.2018 for the assessment year 2015-16. 2. The Revenue raised the following grounds of appeal :- “1. The Ld. Commissioner of Income Tax (A)-1 erred in passing the order both on the facts of the case and in law. 2. The Ld. Commissioner of Income Tax (A)-1 erred in deleting the additions of Rs.24,49,88,866/- made on account of Agricultural Income claimed by the assessee company on assessee’s income from its seeds productions activity is exempt under section 10(1) of the Income Tax Act, 1961. 3. Ld. Commissioner of Income Tax (A)-1 erred in treating the ‘lease land’ which was utilized for production of seeds treated as agricultural land’. Revenue by : Shri Keyur Patel Assessee by : Shri Vijay Mehta Date of hearing : 22.12.2022 Date of pronouncement : 31.01.2023 ITA No.46/PUN/2019 2 4. The Ld. Commissioner of Income-tax (A)-1 erred in holding that grower can be termed as representative of assessee company; 5. The Ld. Commissioner of Income -tax (A)-1 erred in holding that assessee’s seeds procurement from grower is its agriculture activity. 6. The Ld. Commissioner of Income-tax (A)-1, erred in holding that conversion of seeds into certified seeds is an agriculture activity. 7. The Ld. Commissioner of Income - tax (A)-1 erred in not considering the judgment in the case of Raja Mustafa Ali Khan Vs. CIT [1948] 16 ITR 330 (PC) wherein it was held that no assistance is to be got from the meaning ascribed to the word ‘agriculture’ in other statutes and, though it must always be difficult to draw the line, yet unless there are some measures of cultivation of the land, some expenditure of skill and labour upon it, it cannot be said to be used for agricultural purposes within the meaning of the Income-tax Act, 1961. Whereas in this case the assessee company was not directly involved in agricultural activities instead they have entered into an agreement with the farmers making it pure business transaction. 8. The Ld. Commissioner of Income Tax (A)-1, erred in not considering the judgment in the case of Premier Construction Co. Ltd. Vs. CIT [1948] 16 ITR 380 (PC) wherein it was held that where an assessee receives income, not itself of a character to fall within the definition of ‘agricultural income’ contained in the Income Tax Act, 1961, such income does not assume the character of agricultural income by reason of the source from which it is derived, or the method by which it is calculated. But if the income received falls within the definition of ‘agricultural income’, it earns exemption, in whatever character the assessee receives it. Whereas, the assessee in this case was earning profits by way of selling agricultural produces grown by the farmers with whom the company had entered into agreements. 9. The Ld. Commissioner of Income Tax (A)-1, erred in not considering the judgment in the case of CIT vs. New Ambadi Estates Ltd. [1967] 63 ITR 325 (SC) where in it was held that where the assessee company had purchased an estate along with crops which had already been harvested and had paid separately for the crop; it was held that income from the crop was not agricultural income, such income had not arisen out of any agricultural operations carried on by the assessee. Similarly, in this case assessee had not carried on agricultural activities; instead the company had paid to the farmers for the agricultural produce grown by farmers on their land. 10. The Ld. Commissioner of Income Tax (A)-1, erred in deleting the additions made on account of Disallowance of deduction u/s. 35(2AB) of the Act amounting to Rs.70,63,050/- without appreciating the fact that the assessee has failed to satisfy the very basic condition of section 35(2AB) and 35(1) of the Act. 11. The Ld. Commissioner of Income Tax (A)-1, erred in deleting the additions made on account of Disallowance of deduction u/s. 35(2AB) of the Act amounting to Rs.70,63,050/- is justified in interpreting the ITA No.46/PUN/2019 3 provisions of section 35(2AB) of the Act and Rule 6 of the Income Tax Rules 1962 in view of the decision of Hon’ble ITAT Pune in the case of M/s. Minilec India (P) Ltd. Vs. ACIT in (ITA No.690/PUN/2015) dated 09/04/2018. 12. The Ld. Commissioner of Income Tax (A)-1, erred in upholding the contention of the assessee that the provisions of section 14A are not applicable when the investment had not been made out of borrowed funds to earning of such exempt income. 13. The Ld. Commissioner of Income Tax (A)-1, erred in deleting addition made by AO of Rs. 13,52,023/- u/s. 14A r.w.r. 8D of the I.T. Rules 1962 treating that no exempt income was received or receivable during the relevant previous year. 14. The Ld. Commissioner of Income Tax (A)-1, erred in deleting addition made by AO of Rs. 13,52,023/- u/s. 14A r.w.r. 8D of I.T. Rules, 1962 treating that assessee did not sought any income exemption, there could not be any expenditure which could be disallowed. 15. On the facts and circumstances of the case, the order of the Commissioner of Income Tax (Appeals), Aurangabad may be vacated and the order of the AO may be restored. 16. The appellant craves leave to add, amend or alter any grounds of appeal.” 3. Briefly, the facts of the case are that the respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of production, processing and marketing of various types of hybrid seeds. The Return of Income for the assessment year 2015-16 was filed on 25.09.2015 disclosing total income of Rs.6,90,07,502/- and agricultural income of Rs.24,49,88,866/-. Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Circle-1, Aurangabad (‘the Assessing Officer’) vide order dated 30.12.2017 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at total income of Rs.18,08,64,914/-. While doing so, ITA No.46/PUN/2019 4 the Assessing Officer made addition of Rs.70,63,050/- u/s 35(2AB) of the Act, addition of Rs.24,49,88,866/- on account of agricultural income. The Assessing Officer also made addition of Rs.13,52,023/- u/s 14A of the Act. The factual background leading to the above additions is as under : The respondent-assessee company is stated to be engaged in the activity of growing of seeds on the land acquired on lease from several land owners throughout the country. The respondent- assessee company entered into a lease agreement for acquisition of lands with land owners on Rs.100/- stamp paper and such lease agreement is unregistered. Then it is stated that the respondent- assessee company entered into an agreement with growers, who were stated to have carried out the cultivation, harvesting etc on the leased lands under the direct guidance/supervision of employees of the respondent-assessee company on behalf of the respondent- assessee company. The Assessing Officer was of the opinion that the respondent-assessee company had not carried out agricultural activities by giving the following findings of fact :- (i) The lease deed entered into by the respondent-assessee company with land owners was not registered thereby violating the provisions of section 17(1)(d) of the Registration Act, 1908, which stipulates that the lease of immovable property for a term exceeding one year is compulsorily ITA No.46/PUN/2019 5 registerable. Any lease agreement entered into in the violation of provisions of Registration Act does not establish any derivative interest in the land. The Assessing Officer was of the opinion that the ratio of the decision of the Hon’ble Karnataka High Court in the case of CIT vs. Namdhari Seeds (P.) Ltd., 341 ITR 342 (Karnataka) is squarely applicable to the facts of the present case. (ii) The grower agreement entered into by the respondent- assessee company with the growers, it is inter alia agreed that : (a) The respondent-assessee company shall supply parent seed and said parent seed is to be utilized for the seed production programme of the company, (b) The grower under the guidance of respondent- assessee company, to carry out the agricultural operations under the direct supervision and control of the staff of the respondent-assessee company, (c) The grower shall return the seeds to the production/processing centre of the respondent-assessee company. (d) For the seed production activity, the respondent- assessee company shall reimburse the agricultural expenses on fixed rate. (e) The respondent-assessee company shall pay compensation on agreed rate as consideration for working as a grower. ITA No.46/PUN/2019 6 4. Based on the above findings, the Assessing Officer inferred that the respondent-assessee company had not carried out any basic agricultural operations and the respondent-assessee company only purchased the seeds from the cultivators and, therefore, placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. Raja Benoy Kumar Sahas Roy, 32 ITR 466 (SC) and the decision of the Hon’ble Karnataka High Court in the case of Namdhari Seeds (P.) Ltd. (supra) held that the respondent-assessee company had not derived any agricultural income and, accordingly, denied the claim for exemption of tax as “agricultural income”. The Assessing Officer also placed reliance on the decision of the Hon’ble Delhi High Court in the case of Proagro Seeds Co. Ltd. vs. JCIT, 126 Taxman 37 (Delhi). 5. The Assessing Officer also made disallowance of Rs.13,52,023/- u/s 14A rejecting the contention of the respondent- assessee company that no expenditure was incurred to earn the exempt income which does not form part of the total income. 6. The respondent-assessee company made a claim for weighted deduction u/s 35(2AB) to the extent of Rs.24,45,87,050/- in respect of expenditure incurred of Rs.12,22,93,525/-. However, on perusal of Form No.3CM and certificate issued by the DSIR, the DSIR considered only Rs.11,87,62,000/- as eligible expenditure under ITA No.46/PUN/2019 7 R&D restricted the deduction to the extent of Rs.23,75,24,000/- made by the respondent-assessee company. The Assessing Officer disallowed the difference of expenditure of Rs.35,31,525/- and weighted deduction thereon. 7. Being aggrieved by the above assessment order, an appeal was filed before the ld. CIT(A) contesting the above disallowances. The ld. CIT(A) distinguishing on facts of the respondent-assessee’s case with facts of the case in decision of the Hon’ble Karnataka High Court in the case of Namdhari Seeds (P.) Ltd. (supra) and following the decision of his predecessor in assessee’s own case for the assessment year 2012-13 held that the respondent-assessee company had carried out agricultural activities. Accordingly, the ld. CIT(A) held that the agricultural income derived by the respondent-assessee company is exempt from tax. The ld. CIT(A) further held that the ratio of the decision of the Hon’ble Karnataka High Court in the case of Namdhari Seeds (P.) Ltd. (supra) and the decision of the Hon’ble Delhi High Court in the case of Proagro Seeds Co. Ltd. (supra) have no application to the facts of the present case, as the decisions in those cases were rendered having regard to the peculiar facts and circumstances of those cases. The ld. CIT(A) also placed reliance on the decision of the Hon’ble Andhra Pradesh High Court ITA No.46/PUN/2019 8 in the case of CIT vs. Prabhat Agri Biotech Ltd. [2015] 5 ITR-OL 116 (AP) and the various judicial precedents. B. As regard the disallowance u/s 14A, the ld. CIT(A) held that no disallowance u/s 14A can be made in the absence of any exempt income placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. Chettinad Logistics (P.) Ltd., 95 taxmann.com 250 (SC). C. As regards to the disallowance u/s 35(2AB), the ld. CIT(A) allowed the claim of the respondent-assessee company by holding that it is only from the assessment year 2017-18 that the DSIR, as prescribed authority, can look into the nature and quantum of expenditure incurred by the respondent-assessee company placing reliance on the certain judicial precedents. 8. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 9. The ld. CIT-DR argued that the ld. CIT(A) having regard to the facts and circumstances of the case ought not to have held that the respondent-assessee company had carried out basic agricultural operations ignoring the following facts :- ITA No.46/PUN/2019 9 (i) As per the growers agreement, the growers were reimbursed the expenses on fixed rate, not on actual basis. (ii) The respondent-assessee company was not in a position to furnish of actual bills and vouchers in support of the various expenses incurred on agricultural activities such as fertilizers, pesticides and labour wages. (iii) The respondent-assessee company had no derivative interest in the land, as the lease agreements were not registered as required under the provisions of the Registration Act. Further, the ld. CIT-DR by referring to certain clauses of agreement entered into by the respondent-assessee company with the growers such as clause (2), clause (4) and pointed out that the growers agreement entered into by the respondent-assessee company with the growers is nothing but a make believe story. He further submitted that the ld. CIT(A) merely granted relief to the respondent-assessee company following the decision in assessee’s own case for earlier assessment years without giving any independent finding having regard to the material facts of the case. Thus, he submits that the findings of the ld. CIT(A) are not based on ITA No.46/PUN/2019 10 the any evidence found in the case and, therefore, the findings of the ld. CIT(A) should be reversed. B. As regards to the disallowance u/s 14A, he submits that in the event, this Tribunal is to hold that the respondent-assessee company had carried out the agricultural activity and consequently is going to hold in favour of the respondent-assessee company in respect of claim for exemption under the provisions of agricultural income, the provisions of section 14A should be applied. C. As regards to the disallowance u/s 35(2AB), he submits that there is no change in the provisions of section 35(2AB) of the Act. It is only w.e.f. 01.04.2016, the DSIR was empowered to look into the quantum of the expenditure. In the absence of any change in the provisions of main enactment, the Rules made, cannot override the provisions of the Act. 10. Per contra, ld. Authorized Representative, Mr. Vijay Mehta submits that the assessment order was made, based on the findings given by his predecessor in the earlier assessment years in assessee’s own case. Similarly, the decision of the ld. CIT(A) is also based on the decision of the ld. CIT(A) for the assessment years 2011-12 to 2014-15. Thus, he submits that the issue with regard to the claim for exemption of agricultural income is no more res integra. He further submits that on principle of consistency, in ITA No.46/PUN/2019 11 the absence of any change in the facts, the claim for exemption under the agricultural income should be decided in favour of the respondent-assessee company placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. Excel Industries Ltd., 350 ITR 295 (SC). B. Without prejudice to the above, he submits that in terms of the lease agreement entered into by the respondent-assessee company with the land owners, the respondent-assessee company had acquired leasehold rights in the lands. He submits that the lease agreement were accepted by this Tribunal in assessee’s own case for the earlier assessment years i.e. A.Ys. 2011-12 to 2014-15 and mere non-registration of lease agreement does not take away the leasehold rights in the lands of the respondent-assessee company. 11. He further submitted that as per the provisions of section 17(1)(d) of the Registration Act, 1908, mere non-registration of documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882, after commencement of amendment w.e.f. 24.09.2001, it shall have no effect for the purpose of section 53A. However, non-registration of lease agreement does not deprive the respondent-assessment company from leasehold rights since both the parties to the lease agreement had acted upon it. Any ITA No.46/PUN/2019 12 unregistered deed will not be used as evidence as per section 49 of the Registration Act for specific enforcement. However, the unregistered lease agreement can be used for collateral purpose and unregistered agreement is merely a voidable agreement. It is further submitted that the decision of the Hon’ble Karnataka High Court in the case of Namdhari Seeds (P.) Ltd. (supra) was rendered by completely different set of facts and the respondent-assessee company had brought on record the distinguishing facts which remain un-rebutted by the Department. He submits that one additional or difference facts may make a world of difference between conclusion in two cases placing reliance on the decision of the Hon’ble Supreme Court in the case of Padmausundara Rao (Dead) & Ors. vs. State of T. N. & Ors. in Appeal (civil) 2226 of 1997 judgement dated 13.03.2002. 12. As regards to the allegation of the Assessing Officer that respondent-assessee company merely purchased the seeds from the farmers, taking us through the terms of the agreement entered into by the respondent-assessee company with the growers, he submitted that even in the absence of any production by the grower, still the grower was reimbursed and compensated for the services rendered. With regard to the allegation of the Assessing Officer that the respondent-assessee company had not produced the agreement ITA No.46/PUN/2019 13 entered into with his growers before the Assessing Officer as well as the CIT(A), taking us through the note no.36 to the annual accounts, he submits that as per the said note no.36 of the annual accounts, the respondent-assessee company was engaged in the agricultural activities, production of seeds on leasehold land admeasuring 6400 Acres situated at various parts of India and the respondent-assessee company had reimbursed the cultivation expenses of Rs.30,02,23,288/- in terms of the agreement entered into with its growers, as the supporting evidence was available with the growers, who were situated all over India, the same could not be presented before the auditor for verification and this cannot lead to the conclusion that there is no evidence of expenditure incurred in support of the cultivation expenditure. The ld. AR also placed reliance on the decision of the Bangalore Bench of the Tribunal in the case of Advanta India Ltd. vs. ACIT, 143 ITD 387 (Bangalore – Trib.), decision of the Hyderabad Bench of the Tribunal in the case of Vibha Agrotech Ltd. vs. ITO, 120 ITD 182 (Hyderabad – Trib.) and the decision of the Pune Bench of the Tribunal in assessee’s own case for the assessment years 2011-12 to 2014-15. 13. Finally, he submits that in the interest of judicial discipline, for any reason, this Tribunal was of the opinion that the departure from the earlier view is required by doubting the correctness of the ITA No.46/PUN/2019 14 decision of this Tribunal in assessee’s own case (supra), the matter be referred to the Hon’ble President of the Income Tax Appellate Tribunal for constituting a Special Bench placing reliance on the decision of the Hon’ble Kerala High Court in the case of CIT vs. Travancore Titanium Products Ltd., 265 ITR 526 (Kerala). 14. As regards to the ground relating to the correctness of the decision of the ld. CIT(A) deleting the addition u/s 14A, he submits that admittedly, the respondent-assessee company had not earned any exempt income placing reliance on the decision of the Hon’ble Bombay High Court in the case of PCIT vs. Kohinoor Project (P.) Ltd., 425 ITR 700 (Bombay), the order of the ld. CIT(A) should be upheld. 15. As regards to the ground relating to the correctness of the decision of the ld. CIT(A) interpreting the provisions of section 35(2AB), he submits that prior to amendment w.e.f. 01.04.2016, there was no requirement of approval of expenditure earned on scientific research by the DSIR placing reliance on the following decisions of the Co-ordinate Bench of the Tribunal :- (i) Cummins India Ltd. vs. DCIT, 96 taxmann.com 576 (Pune – Trib.). (ii) MAHLE Behr India (P.) Ltd. v. DCIT, 213 TTJ 481 (Pune - Trib.). (iii) ACIT vs. Crompton Greaves Ltd., 181 ITD 40 (Mumbai – Trib.). ITA No.46/PUN/2019 15 (iv) DCIT vs. Force Motors Ltd., 193 ITD 344 (Pune – Trib.). 16. We heard the rival submissions and perused the material on record. The ground of appeal nos.1 to 9 challenges the decision of the ld. CIT(A) allowing the exemption of agricultural income by holding that the respondent-assessee company had actually carried out agricultural activities. In order to be eligible to claim exemption of agricultural income u/s 10(1), an assessee should derive agricultural income as defined u/s 2(1A) of the Act. All that the definition of agricultural income requires is that there should be income by way of rent, or revenue or income from agricultural operations from the land situated in India. And the person making claim for exemption of agricultural income should have derivative interest in the land i.e. immediate source should be the land. It is not necessary that person who claims exemption of agricultural income should own the land. It is sufficient, if he has some interest in the land as has been held by the Hon’ble Madras High Court in the case of CIT vs. Maddi Venkatasubbayya, 20 ITR 151 (Madras). In the said decision what constitutes the requisite interest in the land is explained in the following words :- “The owner of the land, or of an interest therein, be he the landlord, ryot, lessee or usufructuary mortgagee, has an interest in the land and derives his income from the land. He may actually cultivate the land or he may receive the rent from cultivating tenants. In either case, the rent is the immediate and effective source of income and if the rent is derived from agriculture, the exemption from tax is attracted. ITA No.46/PUN/2019 16 Section 2(1) (a), (b)(ii) and (iii) and (c) of the Act clearly indicate that the persons entitled to exemption are the persons falling within the following categories:—The owner who lets agricultural land to cultivating tenants for a stipulated rent; the owner of agricultural land in which the tenant has a permanent right of occupancy with liability to pay a fixed rent or revenue ; the owner of agricultural land who cultivates it himself; the lessee of such land ; an occupancy tenant of such land having a permanent tenancy with liability for a fixed rent a usufructuary mortgagee of the interest of the owner, landholder or tenant of such land as the case may be ; a sub-lessee ; and persons occupying a similar position.” 17. The Hon’ble Supreme Court in the case of CIT vs. Raja Benoy Kumar Sahas Roy, 32 ITR 466 (SC) had an occasion to deal with what constitutes agricultural operations and held as follows :- “...... 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 understood 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 operations and would require the expenditure of human skill and labour upon the land itself. There are however other operations which have got to be resorted to by the agriculturist and which are absolutely necessary for the purpose of effectively raising the produce from the land. They are operations to be performed after the produce sprouts from the land, e.g, weeding, digging the soil 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 depredation from outside, tending, pruning, cutting, harvesting, and rendering the produce fit for the market. The latter would all be agricultural operations when taken in conjunction with the basic operations above described, and it would be futile to urge that they are not agricultural operations at all. But even though these subsequent operations may be assimilated to agricultural operations, when they are in conjunction with these basic operations could it be said that even though they are divorced from these basic operations they would nevertheless enjoy the characteristic of agricultural operations ? Can one eliminate these basic operations altogether and say that even if these basic operations are not performed in a given case the mere performance of these subsequent operations would be tantamount to the performance of agricultural operations on the land so as to constitute the income derived by the assessee therefrom agricultural income within the definition of that term ? ITA No.46/PUN/2019 17 We are of opinion that 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 we have described above would not be enough to characterize them as agricultural operations. In order to invest them with the character of agricultural operations, these subsequent operations must necessarily be in conjunction with and a continuation of the basic operations which are the effective cause of the products being raised from the land. It is only if the products are raised from the land by the performance of these basic operations that the subsequent operations attach themselves to the products of the land and acquire 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 similar work done on the land but also includes the subsequent operations set out above all of which operations, basic 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 operations from the subsequent operations and say that the subsequent operations, even though they are divorced from the basic operations can constitute agricultural operations by themselves. If this intregated activity which constitutes agriculture is undertaken and performed in regard to any land that land can be said to have been used for "agricultural purposes" and the income derived therefrom can be said to be "agricultural income" derived from the land by agriculture.” The Hon’ble Supreme Court in the above case had further proceeded to hold that the term “agricultural” is not confined to production of grain and food products meant for human beings/beasts, but must be understood as comprising all the products of the land which have some utility either for consumption or for trade and commerce and would also include forest product such as timber, sal and piyasal trees, casuarina plantations, tendu leaves, borra etc. 18. It is also settled position of law that the agricultural income is excluded from the scope of the Income-tax Act not dependent upon ITA No.46/PUN/2019 18 the character of the recipient of the income whether such income is assessable as business profits received by an assessee not as an ordinary landlord. Reference can be made in the case of CIT vs. Sir Kameshwar Singh 3 ITR 305 (PC). 19. The Jurisdictional High Court in the case of Forest Dev. Corpn. Of Maharashtra vs. ACIT, 399 ITR 467 (Bombay) had interpreted the provisions of section 2(1A) of the Act, to mean that it is not a popular or technical understanding of the term agricultural but only of a nature as defined u/s 2(1A) of the Act in the following words :- “10. A plain reading of the definition of agricultural income under Section 2(1A) of the Act would indicate that it is a restrictive definition as indicative from it being defined by word "means". It is a settled position that the definition clause using the word "mean" is to be read in restrictive sense and therefore, has to be construed strictly unless the context otherwise requires. Nothing has been shown to us that the context requires it to be read as inclusive or differently from restrictive. Thus, agricultural income as defined under clause (a) of Section 2(1A) of the Act would mean : (I) any rent/revenue derived from land; (II) the land is used for agricultural purposes and (III) the land is situated in India. Clause (b) of Section 2(1A) of the Act seeks to include any income (other than rent or revenue) derived from such land either by :— (i) agriculture; or (ii) the performance by a cultivator/receiver of rent in kind of any process ordinarily carried out by a cultivator to make agricultural product/produce fit to be taken into market; or (iii) sale by a cultivator of any agricultural produce in respect of which the process is carried out other than the process indicated in (ii) above. Clause (b) of the above definition restricts the three classes of income as specified in sub-clauses (i), (ii) and (iii) thereof only to any income derived from such land. Such land would indicate the land which has been described in clause (a) of Section 2(1A) of the Act i.e. ITA No.46/PUN/2019 19 the land which is situated in India, used for agricultural purposes and the income derived from such land should be other than rent or revenue indicated in Section 2(1A)(a) of the Act. However, the sine qua non for any income to be considered as an agricultural income is that it should be derived from land situated in India and used for agricultural purposes. The words 'derived from' as held by the Apex Court in Liberty India v. CIT [2009] 317 ITR 218/183 Taxman 349 is narrower than the words "attributable to". The use of the words "derived from' indicates that it does not cover sources beyond the first degree.” 20. Keeping in view the legal position enunciated above, we now proceed to examine the facts of the present case, whether or not respondent-assessee company had satisfied the above necessary ingredients for claiming exemption of agricultural income. 21. The case of the respondent-assessee company is that it had carried out the agricultural activity of producing the hybrid seeds on leasehold lands through an agreement entered into by the respondent-assessee company with the growers. The respondent- assessee company had grown the hybrid seeds on 6400 Acres situated throughout the country by entering into the agreement with land owners and growers. It is stated before us that the lands owners were always not the growers of the seeds. The Assessing Officer was of the opinion that the respondent-assessee company had no interest on the lease lands for the reason that the lease agreements entered into by the respondent-assessee company with land owners were not registered as required under the provisions of Registration Act, 1908. ITA No.46/PUN/2019 20 In our considered opinion, the reasoning of Assessing Officer is not tenable in the eyes of law, in view of the law laid down by the Hon’ble Supreme Court in the case of Rana Bidya Bhusan Singh vs. Ratiram [1969] UJ (SC) 21 and the decision of the Hon’ble Supreme Court in the case of Padma Vithoba Chakkayya vs. Mohd. Multani [1963] 3 SCR 229, wherein, it is held that non-registration of a compulsorily registrable document is inadmissible as evidence of a transaction affecting immovable property. However, notwithstanding the fact that the document was not registered as required the provisions of Registration Act, 1908, but, it can be used as evidence of collateral facts or for any collateral purpose i.e. for any purpose of other than that of creating, declaring, assuming and extinguishing a right to immovable property. Further, by virtue of provisions of sub-section (1)(d) of section 17 of the Registration Act, 1908, it is only the document containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 shall have no effect for the purpose of section 53A. Similar provision was not enacted in respect of lease of immovable property. Therefore, in view of the above legal position, it can be said that mere non-registration of the lease agreement does not deprive of the lease holder derivative interest in the land and especially in ITA No.46/PUN/2019 21 view of the fact that both the parties to the lease agreement had acted upon in terms of the lease agreements. There is no bar under the provisions of any law, to use unregistered agreement for a collateral purpose such as whether land was used for agricultural purpose or not. Therefore, it can be safely concluded that it cannot be said that the respondent-assessee had no derivative interest in the land for the purpose of carrying out agricultural operations on the said land. Thus, we are of the considered opinion that the necessary ingredient of having derivative interest in the land on which the agricultural operations were stated to have been carried out stands satisfied. Secondly, it is not necessary that the person who claims exemption of agricultural income should own land as held by the Hon’ble Madras High Court in the case of CIT vs. Maddi Venkatasubbayya, 20 ITR 151 (Madras). On similar lines, the decision of the Hon’ble Allahabad High Court in the case of CIT vs. Associated Metals Co., 177 ITR 428 (Allahabad), wherein, it was held that the contention of the Revenue that since land belonged to the Bhumidhars, the income arising out of such land would belong to him and not to the assessee, who had entered into an agreement with Bhumidhars for sowing, growing and protecting of the crops. ITA No.46/PUN/2019 22 22. The next question that comes up for consideration is whether the respondent-assessee company actually carried out the agricultural operations or not on such lands. It is the case of the respondent-assessee company that it had carried out primarily agricultural operations like cultivation of land, preparing of land, levelling, preparation of beds, sowing of seeds, and application of pesticides and harvesting etc through growers under the guidance or supervision of staff in terms of the agreement entered into by respondent-assessee with the growers. The Assessing Officer had doubted the genuineness of the claim of the respondent-assessee company that it had carried out the agricultural operations in view of the fact that the respondent-assessee company had reimbursed the expenditure on agricultural operations at fixed rate and compensation was also paid to the growers on fixed sums on per acre basis. The Assessing Officer was also of the opinion that the respondent-assessee company had applied scientific method in giving advice to farmers which cannot be termed as “basic agricultural operations” or does not amount to subsequent operations of ordinary processed employed by the farmers. He also placed reliance on the decision of the Hon’ble Karnataka High Court in the case of Namdhari Seeds (P.) Ltd. (supra) and the decision of the Hon’ble Delhi High Court in the case of Proagro ITA No.46/PUN/2019 23 Seeds Co. Ltd. (supra). Thus, the Assessing Officer concluded that the basic agricultural operations were carried out by the growers not by the respondent-assessee company. Accordingly, the Assessing Officer denied the claim for exemption of agricultural income. 23. In the present case, the respondent-assessee company had entered into an agreement with the growers for the purpose of producing the hybrid seeds. In terms of the said agreement, the growers performed the functions of cultivation of land, preparing of land, levelling, preparation of beds, sowing of seeds, and application of pesticides and harvesting etc through growers under the guidance or supervision of staff in terms of the agreement entered into by respondent-assessee with the growers. There is neither requirement under the law nor practically feasible that the basic agricultural operations should be carried out by an assessee who claims the exemption of agricultural income. 24. It is settled position of law that the burden of proof of agricultural income lies upon the assessee who claims the benefit of exemption from tax as held by the Hon’ble Supreme Court in the case of CIT vs. Ramakrishna Deo 35 ITR 312 (SC). In the present case, the respondent-assessee company had discharged the onus cast upon it of proving that it had carried out the agricultural operations on the leasehold lands for the purpose of producing hybrid seeds by ITA No.46/PUN/2019 24 production of copies of lease agreements and agreement with the growers. On conjoint perusal of both these agreements, it would be reveal that assessee had carried on the agricultural activities of production of hybrid seeds on leasehold lands. No doubt, the fact that the respondent-assessee company had reimbursed to the growers at fixed rate per acre and also compensation was paid on fixed sums, would give raise to suspicion as to the substance of the transaction, but it is settled law that suspicion, howsoever strong cannot take the place of proof. It is settled position of law no assessment order can be passed based on surmises and suspicion. Reliance can be placed on the decision of Dhakeswari Cotton Mills Ltd. vs. CIT, 26 ITR 775, Dhirajlal Girdharilal vs. CIT, 26 ITR 736 and CIT vs. Daulatram Rawatmull, 87 ITR 349. 25. In the present case, the Assessing Officer had chosen not to do anything further on the evidence produced by the respondent- assessee company in support of the agricultural activities carried out by it. He simply jumped to the conclusion that the respondent- assessee company had not carried out the agricultural operations, without making any efforts to rebut the evidence produced by the respondent-assessee company in support of the agricultural activities carried out by it. The presumption under law is that the apparent state of affairs is real, unless the contrary is proved. ITA No.46/PUN/2019 25 Therefore, the burden of proving that the agreements entered into by the respondent-assessee company with growers as well as the landlords is sham lies upon the Assessing Officer. As stated by us supra, the Assessing Officer had failed to prove that all that apparent is not real state of affairs. 26. Further, the respondent-assessee company brought on record the distinguishing facts of the present case from that of the case in the case of Namdhari Seeds (P.) Ltd. (supra) decided by the Hon’ble Karnataka High Court as set out by the ld. CIT(A) in page no.6 of the impugned order. The distinguishing facts had been remain uncontroverted by ld. CIT-DR nor had he brought any material on record as to how the ratio of the decision in the case of Namdhari Seeds (P.) Ltd. (supra) is applicable to the facts of the present case. Thus, we are of the considered opinion that the Assessing Officer had failed to discharge the onus of rebuttal of evidence produced by the respondent-assessee company in support of the agricultural operations carried out by it. 27. The reliance placed by the Assessing Officer on the decision of the Hon’ble Delhi High Court in the case of Proagro Seeds Co. Ltd. (supra) has no application to the facts of the present case, inasmuch as, the facts in the said case are relating to the development of germ plasm seeds by applying high technology of ITA No.46/PUN/2019 26 the seeds, whereas, in the present case, the respondent-assessee company is a mere production of the hybrid seeds which does not involve application of high technology or anything. The reliance placed by the ld. CIT-DR on the decision of Co- ordinate Bench of this Tribunal (same combination) in the case of ACIT vs. R. J. Biotech, 142 taxmann.com 105 (Pune – Trib.) does not advance the case of the Revenue, inasmuch as, the decision was rendered on the basis of failure of the assessee to do disprove the what is apparent is not real. In the said case, there was a prima- facie evidence available on the record wherein it is shown that cost of purchase of seeds was debited to the Profit & Loss Account which clearly indicated that the assessee company had not carried on the agricultural operations. Similarly, we find the impugned order passed by the ld. CIT(A) is based on the order passed by this Tribunal in assessee’s own case for earlier assessment years (supra), which in turn place reliance on the decision of the Hon’ble Bombay High Court in the case of CIT vs. Ajeet Seeds Ltd. in Income Tax appeal Nos.20 to 26 of 2014 decided on 18.06.2015. 28. We are informed at the bar that as on today the decision of the Hon’ble Tribunal in assessee’s case for earlier years was not overruled by the Hon’ble High Court. As stated by us supra, the ITA No.46/PUN/2019 27 whole basis of the assessment in the present year is the assessment order for earlier assessment years, as on today, the basis had been uprooted by this Tribunal. As a corollary, the impugned assessment order also cannot be sustained in the eyes of law. Keeping in view the salutary principle of judicial discipline that where the fact and on law in subsequent year are the same, no authority whether quasi- judicial or judicial can generally be permitted to take a different view. Reference can be made para 20 of Bharat Sanchar Nigam Ltd. vs. Union of India, 282 ITR 273, we are unable to take a different view. Lastly, we are not inclined to accept the submission of the ld. CIT-DR to remand this issue to the file of the Assessing Officer for further investigation keeping in view of well settled principle of law that the remand should not be made, in order to patch up the lacuna in the case. Now, in the present case, Revenue had not discharged the onus of proving that the respondent-assessee had not carried on the agricultural operations. The submission of the ld. CIT-DR that an opportunity may be granted to the Assessing Officer to discharge onus, cannot be accepted, in view of the above well settled principle of law. Reliance can be placed on the following decision of the ITAT: ITA No.46/PUN/2019 28 i. Asstt. CIT v. Anima Investment Ltd.[2000] 73 ITD 125 (Delhi) (TM); ii. Asstt. CIT v. Arunodoi Apartments (P.) Ltd. [2002] 123 Taxman 48 (Gauhati) The Courts have held that appeals are not to be decided for giving 'one more innings' to the lower authorities in the appellate jurisdiction. i. Rajesh Babubhai Damania v. CIT[2001] 251 ITR 541/[2002] 122 Taxman 614 (Guj.) ii. CIT v. Harikishan Jethalal Patel[1987] 168 ITR 472/33 Taxman 217 (Guj.) Remand not for the benefit of the party seeking it to fill up gaps. Even the Hon'ble Karnataka High Court in the case of Karnataka Wakf Board v. State of Karnataka, reported in AIR 1996 Kar.55 at pages 63 & 64 held as under: "Where the party had an opportunity of adducing evidence in the case but with open eyes failed to adduce that evidence, the case should not be remanded to give a second chance to the party to adduce that evidence. The policy of the law is that once that matter has been fairly tried between the parties, it should not, except in special circumstances, be reopened and retrieved. In a recent decision their Lordships of the Supreme Court laid down that power to order retrial after remand, where there had already been a trial on evidence before the court of first instance, cannot be exercised merely because the Appellate Court is of the view that the parties who could lead better evidence in the Courts of first instance have failed to do so." ITA No.46/PUN/2019 29 The Hon'ble Tribunal, Delhi Bench in the case of Zuari Leasing & Finance Corpn. Ltd. v. ITO[2008] 112 ITD 205 (TM), following the case-laws referred to above held that the Tribunal should not remand back to the file of the AO in order to give a second innings to the litigant. Therefore, following the principles enunciated in the above decision, we are unable to remand the present assessment order to the file of the AO for de novo examination. Therefore, we do not find any merit in the ground of appeal nos.1 to 9 filed by the Revenue. Accordingly, the ground of appeal nos.1 to 9 filed by the Revenue stands dismissed. 29. Ground of appeal nos.10 and 11 challenges the decision of the ld. CIT(A) allowing the deduction u/s 35(2AB) as the expenditure incurred on R&D facilities was not specified by the DSIR. It is now settled position of law that prior to the amendment by the Finance Act, 2016 the provisions of section 35(2AB) does not provide that the expenditure incurred on R&D facilities for the purpose of claiming weighted deduction u/s 35(2AB) requires to be approved by the DSIR as held by the Hon’ble Gujarat High Court in the case of CIT vs. Sun Pharmaceutical Industries Ltd., 250 Taxman 270 (Gujarat) and by the Hon’ble Karnataka High Court in the case Tejas Networks Ltd. vs. DCIT, 233 Taxman 426 (Karnataka). The ld. CIT(A) only followed the law laid down by the Hon’ble High ITA No.46/PUN/2019 30 Court referred to supra, therefore, we do not find any reason to interfere with the order of the ld. CIT(A). Thus, the ground of appeal nos.10 and 11 filed by the Revenue stands dismissed. 30. Ground of appeal nos.12 to 14 challenges the decision of the ld. CIT(A) deleting the addition made u/s 14A of the Act. It is contention of the respondent-assessee company that it had not earned any exempt income and in the absence of any exempt income, the provisions of section 14A of the Act cannot be invoked. This fact was verified by us on pursing the annual audited financial statement for the year under consideration, this fact had also not been disputed by the departmental authorities. Now, it is settled position of law that in the absence of any exempt income, resort to the provisions of section 14A of the Act cannot be made. The various High Courts in catena of decisions held the same view and reference can be made to the following decisions :- (i) Redington (India) Ltd. vs. Addl. CIT, 392 ITR 633 (Mad); (ii) CIT vs. Celebrity Fashion Ltd., 428 ITR 470 (Mad); (iii) CIT vs. Chettinad Logistics Pvt. Ltd., 80 taxmann.com 221 (Mad) (Against which the SLP filed by the Department was dismissed by the Hon’ble Supreme Court in the case of CIT vs. Chettinad Logistics P. Ltd., 95 taxmann.com 250 (SC); (iv) CIT vs. Continuum Wind Energy (India) Pvt. Ltd., 430 ITR 52 (Mad); (v) PCIT vs. Kohinoor Project Pvt. Ltd., 425 ITR 700 (Bom.); (vi) Cheminvest Ltd. vs. CIT, 378 ITR 33 (Delhi); (vii) MAN Infraprojects Ltd. (ITA No.259 of 2017 dated 09.04.2019) (Bom.). 31. The Jurisdictional High Court in the case of PCIT vs. Kohinoor Project Pvt. Ltd. (supra) placing reliance on the decision of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. ITA No.46/PUN/2019 31 CIT (supra) and its own decision in the case of MAN Infraprojects Ltd. (supra) held as follows :- “8. Section 14A of the Act deals with expenditure incurred in relation to income not includible in total income. As per sub-section (1) of section 14A, for the purpose of computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income. In Cheminvest Ltd. (supra) Delhi High Court examined the expression "does not form part of the total income" as appearing in sub-section (1) of section 14A of the Act. Delhi High Court held that the said expression envisages that there should be an actual receipt of income which is not includible in the total income during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. It was clarified that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. 9. This view has been followed in several decisions by this Court. In fact in Pr. CIT v. Man Infraprojects Ltd. [IT Appeal No. 259 of 2017, dated 9-4-2019], this Court followed the decision of the Delhi High Court in Cheminvest Ltd. (supra). It was further noted in MAN Infraprojects Ltd. that the decision of the Delhi High Court was challenged by the revenue before the Supreme Court by fling SLP but the SLP was dismissed.” 32. In view of the above settled position of law, we hold that the provisions of section 14A of the Act have no application in the absence of any exempt income. Thus, we find that order of the ld. CIT(A) is based on proper appreciation of facts and law and does not warrant any interference by us. The contention of ld. CIT-DR that in the event that in view of our finding that the assessee is entitled for exemption of agricultural income, then the provisions of section 14A should be applied has no merit in view of the fact that what is claimed as agricultural income is only net of all the ITA No.46/PUN/2019 32 expenditures incurred on agricultural activity. Accordingly, the ground of appeal nos.12 to filed by the Revenue stands dismissed. 33. Ground of appeal nos.15 and 16 general in nature stands dismissed as such. 34. In the result, the appeal filed by the Revenue stands dismissed. Order pronounced on this 31 st day of January, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 31 st January, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-1, Aurangabad. 4. The Pr. CIT-1, Aurangabad. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.