NAMDHARI SEEDS,BANGALORE V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3(2)(1), BANGALORE

ITA 802/BANG/2025

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Namdhari Seeds, a partnership firm engaged in the import and export of hybrid seeds and cultivation of vegetables, fruits, and hybrids, appealed against the order of the Addl/JCIT(A)-2, Ahmedabad, which confirmed the assessment order passed under section 143(3) of the Income Tax Act. The primary contention was regarding the classification of income from co-cultivation agreement land as agricultural income, which the AO and CIT(A) had classified as business income. The AO also adjusted the income from own and leased lands based on the ratio of land holding and processed income, respectively. The tribunal noted that the matter is currently sub-judice before the Hon'ble Supreme Court and decided to remand the issue back to the AO for a fresh decision post the Supreme Court's ruling.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 777088 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2025
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 02-04-2025
• Other Referred Cases: CIT and another vs. Namdhri Seeds Pvt Ltd (2012) 341 (Kar), Namdhri Seeds Pvt Ltd in ITA No. 346/2012 dated 18th July 2014
• Laws Referred To: Income Tax Act, 1961
• Court: TRIBUNAL
• Department Lawyers: REVENUE; GANESH R GHALE; STANDING
• Assessee Lawyers: SUMAN LUNKAR
• Keywords: Set aside; Business income
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No.802/Bang/2025 Assessment Year: 2014-15 Namdhari Seeds, No.8, Sri Sai Arcade, 12th Cross, 1st Phase, Ideal Homes Township, Rajarajwshwari Nagar, Bengaluru – 560 098. PAN – AABFN 0971 G Vs. The Asst. Commissioner of Income Tax, Circle – 3(2)(1), Bengaluru. APPELLANT RESPONDENT Assessee by : Smt. Suman Lunkar, CA Revenue by : Shri Ganesh R Ghale, Advocate – Standing Counsel for Revenue Date of hearing : 26.06.2025 Date of Pronouncement : 16.09.2025 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against the order passed by the Addl/JCIT(A)-2, Ahmedabad vide order dated 07/02/2025 in DIN No.ITBA/APLS/S/250/2024-25/1073020722(1) for the assessment year 2014-15. The assessee has raised following grounds of appeal: Printed from counselvise.com ITA No.802/Bang/2025 Page 2 of 7 . “1. The learned Addl/JCIT(A)-2, Ahmedabad has erred in confirming the assessment order passed u/s 143(3) of the Act. The orders passed being bad in law and such orders are liable to be quashed. 2. The learned ADDL/JCIT(A) has erred in confirming that the income arising from agricultural activities carried on the co cultivation agreement land is non-agricultural and same is o e assesse as income from business On proper appreciation of facts and the law applicable, it will be clear that the income from co-cultivation agreement and is also agricultural income and the same is to be treated agricultural income. 3. In any case, the learned ADDL/JCIT(A) has erred in confirming the calculation of income from activities from Agricultural Land as done by the Assessing Officer. The recomputation of agricultural income as done being fully erroneous and quite excessive is to be ignored and the computation as given by appellant is to be accepted. 4. The learned Addl/JCIT(A) has erred in confirming that 10% of Agricultural Income from own lands would be assessed under the head business income as this portion pertains to post-harvest processing of hybrid seeds Such a conclusion by the authorities below being erroneous both on facts and law applicable is to be rejected. 5. The appellant denies liability to pay interest. The interest U/s. 234D of the I.T. Act, 1961 having been levied erroneously is to be deleted. 6. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the impugned order be quashed or atleast the additions as made to w income be deleted income returned be accepted and interest levied be deleted.” 3. The relevant facts are that the assessee is partnership firm and engaged in the business of import and export of hybrid seeds of vegetables, fruits and flowers. The assessee has also undertaken the activity of cultivation and growing of vegetable, fruits and vegetables. Printed from counselvise.com ITA No.802/Bang/2025 Page 3 of 7 . 4. During the year, the assessee was in possession of 69.11 acers of own land and 685.08 acers of leased land from farmers where it is cultivating and growing fruits, vegetables and hybrids seeds. The assessee claimed that the only one set of books of accounts were maintained for the revenue generated from both type of land. However, the assessee during assessment furnished the bifurcation of profit and loss for the cultivation from both types of land. As such the assessee from own land declared income of Rs. 97,48,554/- and from leased land shown loss of Rs. 78,23,173/- and thereby shown aggregate profit of Rs. 19,25,381/- only. 5. The AO held that the factors considered by the assessee for the bifurcation of the income from own land and leased land are not correct and based on scientific reasoning. Hence, the AO bifurcated the income in the ratio of land holding and worked out the income from own land and leased land at Rs. 1,76,195/- and Rs. 17,49,186/- only. 5.1 The AO further observed that the assessee after harvesting the seeds, processed the same which included treatment, cleaning, grading etc which ensure the longevity of the seeds and eroded the risk of infestation. The processing carried out by the assessee added in the value of the seeds in the market. The AO held that the saleable value of seeds increased after harvesting due to artificial processing. Therefore, such additional sale value cannot be held from agricultural activity. Accordingly, the AO in the given facts estimated value of additional income not from agriculture at 10% of profit from own land i.e. 1,76195 * 10% = Rs. 17,619/- only. Printed from counselvise.com ITA No.802/Bang/2025 Page 4 of 7 . 5.2 With regard to the cultivation carried out at the leased/agreement land, the AO observed that the assessee firm entered into agreement with farmers for 3 to 6 months. As per the agreements all agricultural activities are carried by the farmers as well as the expenses incurred in relation to the agriculture such as labour expenses, chemicals, fertilizer etc were incurred by the farmers but later on remitted by the assessee. As such, the assessee firm has only given technical supervision through its staff but the basic agricultural activities were executed by the farmers only. Accordingly, the AO held that the assessee firm has not carried out agricultural activities on leased land and therefore the same is not eligible for exemption for income generated from agreement farming. 5.3 The AO held that the activity carried out by the assessee firm is in the nature of contract farming only where it entered into agreement with farmer to grow agricultural produce under certain terms and condition. The AO referred the decision of Hon’ble Jurisdictional High Court in the case of CIT and another vs. Namdhri Seeds Pvt Ltd (sisters concern) reported in (2012) 341 (Kar) dated 24-10-2011 where it was held that the income from contract farming cannot be claimed as exempt under section 10(1) of the Act. 5.4 The AO further considered subsequent judgment of Hon’ble High court in case Namdhri Seeds Pvt Ltd in ITA No. 346/2012 dated 18th July 2014 wherein mater was set aside to the AO for fresh consideration in the light of relevant land reform Act. 5.5 The AO finally considering the both the judgement of Hon’ble High Court as mentioned above held that the income arising from leased Printed from counselvise.com ITA No.802/Bang/2025 Page 5 of 7 . land is not an agricultural income and the assessee is not eligible for deduction under section 10(1) of the Act. 5.6 The finding and addition made by the AO was subsequently confirmed by the learned CIT(A) vide order dated 07-02-2025. 6. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 7. The learned AR for the assessee before us submitted that both the judgment Hon’ble High courts in the case of sister concern Namdhri Seeds Pvt Ltd are subject to further appeal before the Hon’ble Supreme Court and SLP has been admitted. Now the matter is under sub-judice before the Hon’ble Supreme Court. 7.1 The learned AR further submitted in the case of Namdhri Seeds Pvt Ltd the appeal for A.Ys. 2005-06 to 2014-15 has been set aside to the AO to decide the issue as per the view to be taken by Hon’ble Supreme Court in the case of above mentioned sub-judice appeals. 8. On the contrary, the learned DR vehemently supported the order of the authorities below. 9. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that assessee and its group entities has been claiming exemption under section 10(1) of the Act for last several years for the income generated from contract farming which has been disallowed by the revenue. The Printed from counselvise.com ITA No.802/Bang/2025 Page 6 of 7 . issue has been subject to litigation at various judicial forum and now sub-judice before he Hon’ble Supreme Court. We also note the coordinate bench of this tribunal in the case of sister concern for A.Ys. 2005-06 to 2015-16 vide order dated 11-01-2022 has set aside the issue to the file of the AO to decide a fresh in accordance with view to be taken by the Hon’ble Supreme Court. The relevant finding of the coordinate bench reads as under: 13.2 We note that for A.Ys 1999-00 to 2004-05, the issue travelled for the second round before this Tribunal wherein it was remanded back to the Ld. AO. The present situation is that the decision of Hon’ble Karnataka High Court vide orders dated 24.10.2011, 18.07.2014 and 02.08.2014 in the issue based on land holdings by assessee in excess and the permitted limits which is sub judice before Hon’ble Supreme Court. We therefore deem it fit and proper to remand these issues back to the Ld. AO. The Ld. AO is directed to decide these appeals in accordance with the view taken by Hon’ble Supreme Court in assessee’s own case. Accordingly, grounds raised by assessee stands allowed for statistical purposes. 9.1 Respectfully following the view taken by the coordinate bench and considering over all facts and circumstances, we hereby set aside the finding of the learned CIT(A) and remand back the issue to the file of the AO to decide the issue afresh in the light of view to be taken by Hon’ble Supreme Court. Hence the ground of appeal filed by the assessee is hereby allowed for statistical purposes. 10. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in court on 16th day of September, 2025 Sd/- Sd/- (KESHAV DUBEY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 16th September, 2025 Printed from counselvise.com ITA No.802/Bang/2025 Page 7 of 7 . / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore Printed from counselvise.com "