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Facts
The assessee, an individual engaged in agricultural activities, filed a return declaring Rs. 4,80,100. The Assessing Officer observed that the assessee claimed agricultural receipts of Rs. 58,94,436 from the sale of raisins. The AO was of the view that converting grapes to raisins is not an agricultural activity and bifurcated the receipts in a 60:40 ratio, treating 60% as business income.
Held
The Tribunal held that the assessee is an agriculturist using traditional methods for converting grapes into raisins. It noted that in a prior assessment year, the revenue had accepted this activity as agricultural. The Tribunal also referred to a GST circular clarifying that an agriculturist supplying raisins is exempt from GST. Therefore, the addition made by the Assessing Officer was directed to be deleted.
Key Issues
Whether the conversion of grapes into raisins using traditional methods by an agriculturist is an agricultural activity and whether the allocation of 60:40 ratio by the AO is tenable.
Sections Cited
143(3), 23(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: S/SHRI LAXMI PRASAD SAHU & PRAKASH CHAND YADAV
Assessment Year: 2020-21 Shrikant Basangouda Patil, Devoor The Income Tax Officer, Vs. Mannur to Devar Hipparagi, Dist: Ward – 1 & TPS, BIJAPUR Vijayapur,-586 120, Karnataka PAN No.AWAPP 3391 B 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.
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 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.
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 .
Page 3 of 6 and, therefore, the income of the assessee should be treated as agricultural income.
Aggrieved with the order of the Ld. CIT(A), the assessee has come up in appeal before the Tribunal.
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.
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.
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.
We have considered the rival submissions and perused the materials available on record. We observe that the assessee is an .
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 .
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.”
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.