Invitro International Pvt Ltd Vs DCIT (ITAT Bangalore)- Plant tissue culture is used to reproduce clones of a plant to get multiple plants with the same traits by placing various tissues of the mother plant in containers and required medium, which is definitely not consisting of land or soil. Such multiple plants which are generated or produced in the laboratories are then transferred to soil and after their adaptation to the natural conditions, they are allowed to be grown into mature plants to be sold to the customers. Thus, it can be seen that the subsequent argument of the assessee that the laboratories are only meant to keep the demonstration plants under controlled condition is not entirely correct. Where any operation is not carried out on land, such an operation cannot be called as agricultural operation.
When the assessee is not carrying on the cultivation of land or plants in the soil in pots, the operations cannot be called as agricultural operations. The medium is not the soil or basic operations of agriculture such as tilling of the land, sowing of the seeds etc. are not carried out. Of course, once the sampling has been planted in the soil and is let to grow into a mature plant, this operation is definitely agricultural operation and income there-from has to be treated as agricultural income. Thus, we are in agreement with finding of the assessing authority that the entire operation of the assessee is not agricultural income and, therefore, the entire income cannot be treated as agricultural income. AO had held that 30% of the income is non agricultural income but he has not given any basis for such bifurcation. The criteria to bifurcate the income into agricultural and non agricultural income would be to take into account the expenditure incurred by the assessee on the micro propagation i.e tissue culture operation carried out by it and the expenditure incurred by it on growing of the plants after they are planted in the soil and in this proportion of expenditure only income can also be bifurcated into agricultural and non agriculture income. It is further observed that the assessee has filed an affidavit stating that no operations are carried on in the laboratories. This fact also needs verification by the AO. Therefore, the AO is directed to make a field inspection of the assessee’ s laboratory to see and observe the activities carried on by the assessee. If the assessee’ s operations are all carried on in the land as stated by him in the affidavit, then assessee is eligible for exemption of entire income otherwise the income has to be bifurcated in the ratio of investment and expenditure Therefore, we deem it fit and proper to remit the issue back to the Assessing Officer only for the purpose of making a field inspection of the assessee’ s site and thereafter if he finds that any of the agricultural activities are carried on in the laboratory, then he shall compute the ratio of the expenditure between the agricultural and non agricultural operations and we also direct him to apportion the agricultural income in the same ratio.