SHRIKANT BASANGOUDA PATIL,VIJAYAPUR V. INCOME TAX OFFICER, WARD-1 & TPS , BIJAPUR

ITA 616/BANG/2025

AI Insights

The case revolves around the classification of income derived from the conversion of grapes into raisins by the assessee, Shrikant Basangouda Patil, an individual engaged in agricultural activities. The Income Tax Officer (ITO) had treated 60% of the income from the sale of raisins as non-agricultural income, subjecting it to taxation. The assessee contested this decision, arguing that the conversion of grapes into raisins was done using traditional methods without any machinery, and thus should be considered agricultural activity. The CIT(A) upheld the ITO's decision, leading the assessee to appeal to the Income Tax Appellate Tribunal. The Tribunal, after considering the facts and relevant legal provisions, ruled in favor of the assessee, classifying the income as agricultural.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717325 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2020-2021
• Appeal Filed On: 25-03-2025
• Other Referred Cases: M/s. Bafna Agro Farm in IT(SS) anO.29/Pun/2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH R GHALE; STANDING COUNSEL
• Assessee Lawyers: VINAY K KULKARNI
• Keywords: Business income

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH, BANGALORE BEFORE S/SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND PRAKASH CHAND YADAV,JUDICIAL MEMBER ITA No.616/Bang/2025 Assessment Year: 2020-21 Shrikant Basangouda Patil, Devoor Mannur to Devar Hipparagi, Dist: Vijayapur,-586 120, Karnataka PAN No.AWAPP 3391 B Vs. The Income Tax Officer, Ward – 1 & TPS, BIJAPUR APPELLANT RESPONDENT Assessee by : Shri Vinay K Kulkarni, CA Revenue by : Shri Ganesh R Ghale, Adv Standing Counsel Date of hearing : 01.07.2025 Date of Pronouncement : 12.08.2025 O R D E R Per Prakash Chand Yadav, Judicial Member: The present appeal of the assessee is arising from the order of the ld CIT(A), NFAC, Delhi dated 28.1.2025 having DIN No.ITBA/APL/S/250/2024-25/1072629527(1) and relates to assessment year 2020-21. 2. Brief facts of the case as coming out from the orders of authorities below are that the assessee is an individual carrying out agricultural activities. For the year under consideration, the assessee has filed his return of income declaring income of Rs.4,80,100/-. The Printed from counselvise.com ITA No.616 /Bang/2025 Page 2 of 6 . return of income filed by the assessee was selected for scrutiny and thereafter, an assessment u/s.143(3) of the Act has been framed. During the course of assessment proceedings, the Assessing Officer observed that the assessee has claimed agricultural receipts on the sale of raisins to the tune of Rs.58,94,436/-. The Assessing Officer was of the view that the conversion of grapes into raisins is not an agricultural activity. Accordingly, the Assessing Officer sought an explanation of the assessee as to why the income from sale of raisins would not be taxed as non-agricultural income. In response to the Assessing Officer query, the assessee replied that the assessee is a simple farmer and engaged in cultivation of grapes and many a times, certain quantity of grapes remains unsold and the assessee converts those grapes into raisins by applying traditional methods. However, the Assessing Officer did not find any force in the explanation of the assessee and bifurcated the agricultural receipts by applying 60:40% ratio and treated 60% receipts as business income and 40% receipts as agricultural income. 3. Aggrieved with the order of the Assessing Officer, the assessee filed an appeal before the ld CIT(A) and inter alia argued that in assessment year 2018-19, the department itself has treated the activity of selling of raisins as agricultural activity and the assessee is not deploying any machine or labour for conversion of grapes into raisins Printed from counselvise.com ITA No.616 /Bang/2025 Page 3 of 6 . and, therefore, the income of the assessee should be treated as agricultural income. 4. Aggrieved with the order of the Ld. CIT(A), the assessee has come up in appeal before the Tribunal. 5. The solitary issue, which we have to decide whether the allocation of 60:40 ratio vis-à-vis the total agricultural receipts of the assessee, made by the Ld. AO is tenable or not. 6. Ld A.R. of the assessee reiterated the arguments made before the lower authorities and further specifically pointed out thatthe assessee is engaged in cultivation of grapes and deriving agriculture income therefrom. It is next submitted that sometimes certain quantity of grapes remains with the assessee, which the assessee converts into raisins by drying the grapes in natural sun light and no machinery or technique is deployed by the assessee for the conversion of the grapes into rasins. 7. On the contrary, ld D.R. appearing on behalf of the revenue relied upon the authorities below as well as relied upon the judgment of ITAT Pune Benches in the case of M/s. Bafna Agro Farm in IT(SS) anO.29/Pun/2018 order dated 10.2.2023. 8. We have considered the rival submissions and perused the materials available on record. We observe that the assessee is an Printed from counselvise.com ITA No.616 /Bang/2025 Page 4 of 6 . agriculturist and deriving income by selling grapes. The assesse is using traditional methods for converting the grapes into raisins as evident from page number 18-19-20 of the Paper Book. No material has been brought on record by the Assessing Officer to refute the factual aspect that the assessee is not using traditional methods for conversion of grapes into raisins. We further note that the judgment relied upon by ld standing counsel for the revenue is not applicable to the facts of the present case as that was a case of agro farm of partnership firm, which was engaged in trading of various agricultural produce as well as engaged in conversion of grapes into raisins by deploying scientific methods. The Co-ordinate Bench while deciding that matter has noted certain judicious findings in paragraph 8 of the order, which are reproduced hereunder: “It is also an admitted fact that the appellant is also engaged in the business of purchase and sale of raisins and agency commission business. The Assessing Officer was of the opinion that the process undertaken by the appellant for the purpose of converting the grapes into raisins is not an ordinarily process employed by any cultivator to render the produce fit to be taken into the market. The Assessing Officer also set out the process undertaken by the appellant to convert the grapes into raisins vide para 12 of the assessment order, from which it would be clear that the process involves dipping in solutions containing chemicals and then drying such fruits in the temperature ranging from 35oC to 41oC and also requiring land and buildings, machineries, furniture, electrical power, man power etc. The Assessing Officer also further noted that the raisins product is subject to VAT observed that the grapes converted into raisins produces altogether commercial a new distinct product liable to Printed from counselvise.com ITA No.616 /Bang/2025 Page 5 of 6 . tax under the provisions of VAT @ 1%. Based on these findings, the Assessing Officer applied Rule 7(1) of the Rules, computed the non-agricultural income. The methodology of the computation of non-agricultural income is not under challenge before us. Even on appeal before the ld. CIT(A), the findings of the Assessing Officer were confirmed.” 9. Perusal of the above factual findings would show that the facts in that case are completely different from the facts as involved in the present case. Further, we also observe that in the assessment year 2018-19, the revenue itself has accepted the activities of conversion of grapes into raisins as agricultural activities. Further, the assessee has also placed on record Circular No.247/04/2025-GST, in which, it has been categorically clarified in para 2.2 that an agriculturist supplying raisins is not liable to be registered under section 23(1) of the CGST Act and is exempt from GST. Considering all these legal as well as factual aspects, we are of the considered view that the activities carried out by constitute agricultural activity and hence, we direct the Assessing Officer to delete the addition of Rs 18,84,665/- being 60% of the total agriculture receipts. 10. In the result, appeal of the assessee stands allowed as indicated above. Order pronounced in court on 12th day of August, 2025 Sd/- sd/- (LAXMI PRASAD SAHU) (PRAKASH CHAND YADAV) Accountant Member Judicial Member Printed from counselvise.com ITA No.616 /Bang/2025 Page 6 of 6 . Bangalore Dated, 12th August, 2025 / B.K.Parida, sr.PS(OS)/ 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 "