The order of the Bench was delivered by
B. RAMAKOTAIAH, A.M. :-This is Revenue's appeal against the order of the Commissioner of Income Tax (Appeals)-V, Hyderabad dated 26-06-2014.
2. Briefly stated, assessee is a company engaged in the business of seed production, research, marketing of field and vegetable crops, wind power generation. For the year under consideration, it admitted income of Rs. 1,62,03,160/- and claimed deduction u/s. 80IA(2) of the Income Tax Act [Act] of Rs. 25,02,985/-. It declared an agriculture income of Rs. 37,54,466/- from the production of basic seeds and claimed exemption u/s. 10(1) of the Act. Assessing Officer (AO) disallowed the amount of Rs. 37,54,466/- on the reason that this is not agriculture income but income from business operations. The matter was carried to Ld.CIT(A) who following the order in earlier years, allowed assessee's contentions holding as under:
"4.3 I have carefully considered the submissions of the appellant and the assessment order. This issue was already decided by my predecessor in the case of the appellant, vide ITANo. 0157/DC 16(3)/CIT(A)-V/2010-11 dated 11-6-2012, for A.Y.2009-10, for A.Y. 2006- 07 vide ITA No.349/AC 16(2)/CIT(A)-V/2007-08 dated 17-9-2010 and also for A.Y.2007-08. For the detailed reasons mentioned in the order for A.Y.2006-07 dated 17-9-2010, relying on the orders of the ITAT, Hyderabad, vide ITA No.94/Hyd/08 dated 8-8-2008 for the A.Y.2004-05 and ITA No.17171Hyd/2008 dated 9-11-2009 for the A.Y.2005-06, where the Tribunal have held the income from seed production as agricultural income and eligible for exemption u/s 10(1) of the Act, my predecessor has directed the A.O. to delete the addition made on the income generated from the production of basic / foundation seeds by the appellant, which were generated out of the cultivation made by the appellant.
4.4. Further, during the assessment proceedings aIso, the A.O. has stated that the claim of the appellant was allowed by Hon'ble ITAT for the A.Ys 2003-04 to 2006-07. The A.O. has disallowed the claim of the appellant stating that the department had not accepted the decision of the Hon'ble ITAT and filed further appeals before the High Court of A.P.
4.5 During the appeal proceedings, the appellant also filed the order of the Hon'ble ITAT fur the A.Ys 2008-08 and A.Y.2009-10, in the case of the appellant vide ITA Nos.1288 & 1289/Hyd/12 dated 4-1-2013, where the appellant's claim was allowed. The important portions of the order are reproduced as under:
"4. The learned AR submitted before us that right from the assessment year 2003-04 itself the same dispute with regard to the claim of exemption u/s 10(1) is going 017. It was submitted by the learned AR that the Income-tax Appellate Tribunal in its order passed in ITA No. 652/Hyd/2007 dated 2-9-2008 for assessment year 2003-04, ITA No.94/Hyd/2008 dated 8-8-2008 for the assessment year 2004-05, ITA No.l717/Hyd/2008 dated 9-11-2009 for the assessment year 2005-06, ITA No. 528/Hyd/10 dated 23-9-2010 for the assessment year 2006-07 and in ITA No. l214/Hyd/2010 and ITA 1215/Hyd/2010 dated 13-4- 2012 for the assessment years 2004-05 and 2007-08 have decided the issue in favour of the assessee by holding that the income generated on cultivation of basic/foundation seeds is agricultural income and as such is exempt u/s 10(1) of the Act. The learned AR submitted before us copies of the orders passed by the Income-tax Appellate Tribunal as aforesaid. We have heard the rival submissions and perused the material on record. Admittedly, the only dispute in the present appeals is with regard to assessee's claim of exemption u/s 10(1) of the Act by treating the income generated from sale of basic/foundation seeds as agricultural income. On perusal of the orders passed by the coordinate benches of this Tribunal in the case of the same assessee for the earlier assessment years, it is seen that identical dispute as involved in the present assessment year came up for consideration before this Tribunal. The Tribunal has consistently held that the income generated from the cultivation of basic/foundation seeds are agricultural income. In its latest order in ITA No. 1214 and 1215/Hyd/2010 dated 13-4-2012, the Tribunal held in the following manner:-
"We have considered the rival submissions and perused the orders of the Revenue authorities. The issue before us is with regard to eligibility of assessee for exemption u/s S.10 (1) in respect of the value of foundation/basic seeds produced by the assessee. We find that the decision of the Tribunal in the case of Swagath Seeds (P) Ltd. relied upon by the learned AR, before us, squarely covers this issue in favour of the assessee and against the revenue. Para-4 of the order of the Tribunal dated 16.5.2008 reads as under:
"4 ………Admittedly, the assessee is cultivating by performing agricultural operation in order to generate basic foundation seeds. The said foundation seeds were distributed to farmers for the purpose of generating further seeds. The learned representative for the assessee clarified that in respect of seeds which are purchased from other farmers, the assessee is not claiming any exemption u/s 10(1) of the IT Act. The assessee is admittedly claiming exemption u/s 10(1) in respect of basic foundation seeds which were generated by performing agricultural operation by the land by the assessee.
This Tribunal in the assessee's own case for assessment year 2001-02 considered this issue and found that the assessee is entitled for exemption u/s 10(1) with regard to the basic seeds which were generated out of cultivation made by the assessee. In our opinion, the decision of the Tribunal for assessment year 2001-02 in the assessee's own case is equally applicable to the assessment year under consideration. Therefore, by following the order of this Tribunal in ITA No. 943/Hyd/2004 dated 18.1.2008, we hold that the assessee is entitled for exemption u/s 10(1) only in respect of basic foundation seeds which are generated out of the cultivation made by the assessee".
Following the above order of the Tribunal, we hold that the assessee is entitled to exemption u/s 10(1) of the Act and that income generated on cultivation of basic / foundation seeds has to be treated as agricultural income. We order accordingly".
Facts involved in the impugned assessment year being identical we respectfully follow the aforesaid decisions of the Tribunal and hold that the income generated from sale of basic seeds being agricultural income is exempt u/s 10(1) of the Act. Accordingly, we dismiss the ground raised by the department."
4.6 In fact, following the decisions of my predecessor and Hon'ble ITAT, Hyderabad, as mentioned above, I held that the income declared from the production of basic seeds was agricultural income and exempt u/s 10 (1) of the Act, in the appellant's own case for the A.Y.2010-11 vide ITA No. 398/ITO 16(2)/CIT(A)-V/2012-13 dated 16-12-2013. Hence, for the same reasons, I hold that the appellant is eligible for exemption u/s 10(1) of the Act and delete the addition of Rs. 37,54,466/-.
3. After considering the rival contentions, we do not see any reason to interfere with the order of the Ld.CIT(A). Not only that, the issue in earlier years was already crystalised in favour of assessee by the decision of the Hon'ble High Court of Judicature of Andhra Pradesh at Hyderabad in assessee's own case in ITA No. 88/2014 dt. 21-02-2014. Hon'ble High Court on similar questions raised in AY. 2008-09 has upheld the order of the ITAT in that year by stating as under:
"We are unable to accept this farfetched idea that artificial production of seeds can be sold or used for commercial purpose. May be a few hybrid seeds could be produced by artificial method in a laboratory. The seeds so produced with non-agricultural activity again will have to be sown in the agriculture field to have a larger quantity for sale in the market. Accordingly, we hold that the seed is a product of agricultural activity. Therefore, the sale of the same cannot be brought under the provisions of the Income Tax Act. We, therefore, upheld the decision of the learned Tribunal in this matter".
4. Since the issue was already decided in favour of assessee by the jurisdictional High Court as well, the order of the CIT(A) is upheld and Revenue's appeal on this is dismissed.
5. In the result, appeal is dismissed.
The order pronounced in the open court on 3rd July, 2015.