Namdhari Seeds Vs ACIT (ITAT Bangalore)
Post-Harvest Processing vs Pure Agriculture – ITAT Keeps Issue Alive Pending Supreme Court’s Word Contract; Hybrid Seed Income from Leased Lands Not Yet Settled
Assessee, a partnership firm engaged in cultivation of hybrid seeds, fruits and vegetables along with import/export activities, held 69.11 acres of own land and 685.08 acres of leased land from farmers under co-cultivation agreements. It declared income of ₹97.48 lakh from own land and loss of ₹78.23 lakh from leased land, thereby showing an aggregate profit of ₹19.25 lakh.
Assessment Proceedings
AO rejected the Assessee’s bifurcation method & instead re-allocated income based on land holding ratio, computing ₹1.76 lakh from own land & ₹17.49 lakh from leased land. AO observed that post-harvest processing of hybrid seeds (treatment, cleaning, grading, etc.) enhanced market value, thus 10% of income from own land was treated as business income. For leased land, AO held that actual agricultural activities were carried out by farmers, with the Assessee providing only technical supervision. Hence, income from leased land was treated as business income & not eligible for exemption u/s 10(1). AO relied on Karnataka HC rulings in CIT v. Namdhari Seeds Pvt. Ltd. (2011 & 2014), holding contract farming not to be agricultural income.
