PCIT Vs Nuziveedu Seeds Ltd (Telangana High Court)
Telangana High Court held that income earned from production of hybrid seeds under supervision of company is in the nature of agricultural activity and income earned from such activity is exempt under section 10(1) of the Income Tax Act. Accordingly, appeal of revenue dismissed.
Facts- The assessee is a company engaged in the business of production of Hybrid seeds and it claimed for an exemption of Rs.39.26 crores u/s. 10 (1) of the Act and also Rs.1.53 crores u/s. 14A of the Act,1961. AO passed an order opining that the assessee is not directly involved in any agricultural activity and the income earned by it from the production of seeds was not in the nature of agricultural income. Therefore, the claim of the assessee for exemption of income earned from production and sale of seeds u/s. 10 (1) of the Act was disallowed by AO vide order, dated 30.03.2014.
CIT(A) allowed the appeal of the assessee. Being aggrieved, revenue has preferred the present appeal.
Read SC Interim Order in this case: SC Admits Revenue Appeal on Agricultural Income From Hybrid Seed Production
Conclusion- As the company gets the cultivation done under its supervision and at its own costs and risks, the production of these seeds, and the farmer wherein under the supervision, technical guidance and control of the company is in agreement for the production of the Hybrid seeds, since they have direct nexus with the land owned by it or on the leased lands by supplying seeds to the farmers and getting them cultivated under its supervision and control and the company plays an active role of action of monitoring and nurturing the plants by the assessee cultivated by the farmers As there is an element of involvement of assessee by entering into an agreement with the farmers for utilizing the lands owned by them and from such agreements, the assessee company is being utilizing for production of hybrid seeds on mass scale from the foundation seeds on payment of certain compensation. Though the assessee may not be directly involved in the activity of cultivation but it is being involved through farmers for production of hybrid yielding seeds for different types of hybridization and which are used for the purpose of agriculture for deriving high yielding seeds. Therefore, this bench is of the opinion that though the assessee is not directly involved into the agricultural activity, but indirectly they are involved in the said activity.
