A.G. Biotech Laboratories (India) Ltd. Vs ITO (Telangana High Court)
Telangana High Court held that the income derived from tissue culture operations by the assessee qualifies as agricultural income and hence exempted from tax under Section 10(1) of the Income Tax Act. Accordingly, the present writ stands allowed.
Facts- The appellant is engaged in the business of micro-propagation of plants through tissue culture technology. The primary dispute in the instant case is classification of income earned by the assessee from the sale of tissue-cultured plants for the assessment year 2002-03. The assessee claimed that this income should be treated as agricultural income exempt from tax under Section 10(1) of the Act. The Income-tax Officer rejected this claim and treated the income as business income subject to taxation.
Now the question that arise for consideration by this Bench is “whether the resultant product sold in the market was a direct result of basic agricultural operations carried out on land involving human skill and labour, or whether it was primarily the outcome of scientific and technological processes conducted in clinical laboratories, thereby constituting business or professional income rather than agricultural income?”
Conclusion- Held that the income earned by the assessee from the sale of tissue cultured plants constitutes agricultural income within the meaning of Section 2(1A) of the Act and is therefore exempted from tax under Section 10(1) of the Act holding that mother plants are grown on land owned or leased by the assessee through basic agricultural operations and the tissue culture process that follows is merely an advanced method of propagating and multiplying the plant material derived from those mother plants. The fact that the multiplication occurs in a controlled laboratory environment rather than in open fields does not sever the essential connection to agriculture or transform the character of the income.
