VYJAYANTHI MUDAPAKA,HYDERABAD vs. INCOME TAX OFFICER, WARD-11(1), HYDERABAD

During the scru�ny proceedings the assessee stated that she Is Involved in the business of Tissue Culture. She derives income from the sale of saplings or seedlings of Banana Grown in a nursery which is exempt u/s 10(1) of the Income Tax Act and also, she further carried out the opera�ons of tes�ng of seeds on behalf of third party. The income earned by her through tes�ng were included in her total income however the income derived through Tissue Culture were not offered for Tax due to the reason that it is exempt u/s 10(1) of the Act. Learned Assessing Officer held that the ac�vity of the assessee of growing baby banana saplings in the laboratory and further sale of the same through nursery cannot be treated as agriculture and hence the income derived from such ac�vity is liable to be brought to tax.

Assessee preferred appeal before the learned CIT(A). Learned CIT(A), however, placing reliance on the decision of the Bangalore Bench of the Tribunal in the case of Invitro Interna�onal (P.) Ltd. v. DCIT [2012] 21 taxmann.com 328 (Bang.) dismissed the appeal holding that the produc�on and sale of the �ssue culture plant is a business ac�vity, not an agriculture ac�vity. Hence this appeal by the assessee.

Learned AR argued that by virtue of amendment by Finance Act, 2008 and introduc�on of explana�on 3 to sec�on 2 (1A) of the Act, the income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income. He further relied on the decision of a coordinate Bench of this Tribunal in the case of Inventaa Industries Private Limited in to 1018 /Hyd/ 2015 by order dated 9/7/2018 wherein a�er reviewing the decision is on this aspect, the Tribunal held that “soil”, even when separated from land and placed in trays, pots, containers, terraces, compound walls etc., con�nues to be a species of land and hence “land” for the sole purpose of determining whether ac�vity performed on such land is for produc�on of an agricultural product. It cau�oned that one cannot be pedan�c in view on this issue because the view of the legislature is more expensive and purposive than the view of the courts.

Learned AR submi�ed that all the ac�vi�es of agriculture are undertaken in the ac�vi�es conducted by the assessee which include preparing the soil, adding the manuals, fer�liser and pes�cides, soil is a speed up by using urea, periodic nutrients, aera�on and controlled atmospheric condi�ons, watering and maintaining the moisture, and diseases are prevented by controlling the temperature and using pes�cides. He placed reliance on the decision of the Hon’ble Apex Court in the case of Anant Mills company limited vs. state of Gujarat AIR 1975 SC 1234. He lastly submi�ed that for the assessment year 2017-18 the learned Assessing Officer himself allowed the claim of the assessee by accep�ng that the impugned income derived from the produc�on of banana saplings represent agricultural income.

Per contra, learned DR placed heavy reliance on the decision is referred to by the learned CIT(A) and submi�ed that as rightly pointed out by the learned CIT(A) the produc�on of the banana saplings through ar�ficial method is in laboratories amounts to produc�on but not agriculture.

I have gone through the record in the light of the submissions made on either side. There is no dispute that the assessee is carrying out the ac�vi�es enumerated by the learned AR in the produc�on of banana saplings which includes preparing the soil, adding the manuals, fer�liser and pes�cides, speeding it up by using urea, periodic nutrients, aera�on and controlled atmospheric condi�ons, watering with a view to maintain the moisture conducive for cul�va�on of banana saplings and also taking all the measures and precau�ons to prevent the diseases by controlling the temperature and using pes�cides. All the ac�vi�es to answer the descrip�on of agriculture ac�vity referred to by the Hon’ble Apex Court in the case of Raja Binoy Kumar Sahas Roy are undertaken by the assessee in producing the banana saplings. In respect of the objec�on taken by the authori�es that some ac�vi�es have taken place not in the soil as such also does not appear to be sound in view of the decision of the coordinate Bench in the case of Inventaa Industries Private Limited (supra) where this issue was dealt with in extenso.

Considering the amendment and the consistent view taken by the courts in this respect, I am of the considered opinion that the income derived by the assessee from the produc�on of banana saplings represent agricultural income, and for that ma�er, it remains undisputed that the learned Assessing Officer himself treated such income so for the assessment year 2017-18. Holding so, I direct the learned Assessing Officer to delete the addi�on made on this count.