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Whether the Ld.CIT(A) is lawfully justified in law in holding that income from sale of Bonsai plants is agricultural income when no basic agricultural operations are carried out but only subsequent non-basic operations are carried out at the location of the plants where it was grown wild or spontaneously and little operation takes place inside the Farm for a very brief period before the product is saleable without any conjunction with basic operations ( as no basic operation need to be undertaken in this case) clearly violating the settled law of the and as enunciated by the Hon’ble Apex Court in CIT Vs. Raja Binoy Kuniar Sahas Roy [1957] 32 ITR 466.”The bonsai tree is nothing but a product on which primary and basic operation of agriculture is carried insofar as in order to make the biological change in it, it had to make eligible continue to live within a limited area. This clearly indicates that the trees/plant uprooted from soil and taken to farm in pot or polythene bags filled with soil for sale or transportation will not affect or change the nature of agricultural operations. Bonsai plants have been prepared on the land by the assessee and there are several agricultural operations, as explained in brief and observed in the order of the authorities below, that transplanting in a suitable container including pots and kept at the proper place i.e., green house or in the shed and after performing several operations, such as weeding, watering, manuring etc., they are made ready for sale as bonsai plant. It was not necessary to plough the land which is a must for implanting a seed. The very nature of the plant ultimately nurtured, is such that it has to be taken care of independently. Once the plants are able to live or out grow the basic agricultural operation carried out and they are ready for sale insofar as the bonsai is to live the life of the original tree which fetches a value

Reena Panda, Balasore vs Department Of Income Tax on 25 June, 2012

Agriculture

Agriculture (Photo credit: thegreenpages)

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

Before : Shri K.K.Gupta, AM, and Shri K.S.S.Prasad Rao, JM

ITA No.084/CTK/2012 and C.O.No.18/CTK/2012

(Assessment Year 2008-09) (C.O. filed by the assessee) Income-tax Officer, Ward 1, Versus Smt. Reena Panda, Ichhapur, Balasore. Bhanaga, Balasore ACMG 3384 P

(Appellant) (Respondent) For the appellant: Shri A.Bhattacharjee, DR For the respondent Shri P.K.Mishra, AR

Date of hearing : 20.06.2012

Date of pronouncement : 25.06.2012

ORDER

Shri K.K.Gupta, AM : The Revenue has filed this appeal against the order

dt.25.11.2011 of the Commissioner of Income-tax (Appeals) for the

Assessment Year 2008-09, raising the following grounds of appeal.

“01. On the facts and circumstances of the case, the Ld. First Appellate Authority is not justified in giving direction to treat the income from sale of Bonsai plants of ₹ 55,65,746 as exempt under the provision of section 10(1) of the I.T.Act.

02. Whether the Ld.CIT(A) is lawfully justified in law in holding that income from sale of Bonsai plants is agricultural income when no basic agricultural operations are carried out but only subsequent non-basic operations are carried out at the location of the plants where it was grown wild or spontaneously and little operation takes place inside the Farm for a very brief period before the product is saleable without any conjunction with basic operations ( as no basic operation need to be undertaken in this case) clearly violating the settled law of the and as enunciated by the Hon’ble Apex Court in CIT Vs. Raja Binoy Kuniar Sahas Roy [1957] 32 ITR 466.”

The assessee has filed the Cross objection supporting the impugned order of

the learned CIT(A).

2. At the outset, the learned AR of the assessee submitted that the issue

raised by the Revenue has already been decided in favour of the assessee by

this Tribunal in assessee’s own case for the earlier years i.e., Assessment ITA No.084/CTK/2012

and C.O.No.18/CTK/2012

2

Years 2004-05, 2005-06, 2006-07 and 2007-08 in ITA Nos. 191,102,103 and

104/CTK/2011 dt.12.08.2011. The learned DR did not dispute the above fact.

3. After hearing both the parties and perusing the material made

available to the Tribunal, we find that the learned CIT(A) has allowed the

appeal of the assessee by following the decision of the Tribunal in ITA

Nos.101,102,103 and 104/CTK/2011 dt.12.8.2011 (supra), wherein the

Tribunal has decided the issue in favour of the assessee by observing in

paragraph 6 therein, as under.

“6. We have heard the rival contentions and perused the material available on record. On our careful consideration of the facts, we are inclined to hold that the agricultural operation are carried out by the assessee even after the plants are shifted and matured, cultured and nurtured under a controlled environment on the agricultural land owned by the assessee therefore the method adopted by the assessee was in the nature of carrying out agricultural operations. The assessee has been consistently following the same earlier operations which system is in the impugned AYs therefore culminates to the final finding that plant or plants therefore could whether be distinct as bonsai or otherwise as sapling or seedling nursery is a distinction irrelevant to the circumstances. The basic plant may have been grown spontaneously or from a seed on carrying out basic operation on soil the same has to be considered as agriculture produce. The question for consideration whether the income from sale of plants grown by the assessee in nursery/farm can be said to agricultural income as defined in Section 2(1A) of the I.T.Act,1961 has been complied with by the assessee insofar as the income has been derived from land which is situated in India and is used for agriculture purpose. The operations carried out by the assessee are agricultural operations therefore rendered as agricultural income. The Assessing Officer and the learned CIT(A) have rejected the claim of the assessee on the ground that the activities carried out by the assessee do not fall within the ITA No.084/CTK/2012

and C.O.No.18/CTK/2012

3

meaning of the word “agriculture”. The meaning of the word “agriculture” is no more res integra in view of the judgment of Hon’ble Apex Court, which the learned Counsel for the assessee has reiterated as mentioned above. “Agricultural operation” in its primary sense denotes the cultivation of the field and is restricted to the cultivation of land in the strict sense of the term meaning thereby tilling of the land, sowing of seeds, planting and similar operations in the land. Having said so, Hon’ble Supreme Court let the same to be considered for adjudication in the light of the facts of the assessee’s case insofar as the activities carried out by the assessee after having recognized a particular plant to be produced as bonsai carried out the same activities such as implanting a sapling to the soil, preparing soil bed in accordance with the nature of the plant to grow in its normal atmosphere but at the same time not to let it to grow beyond certain height and width in order to be called a miniature so that it gains value as bonsai tree. The bonsai tree is nothing but a product on which primary and basic operation of agriculture is carried insofar as in order to make the biological change in it, it had to make eligible continue to live within a limited area. This clearly indicates that the trees/plant uprooted from soil and taken to farm in pot or polythene bags filled with soil for sale or transportation will not affect or change the nature of agricultural operations. Bonsai plants have been prepared on the land by the assessee and there are several agricultural operations, as explained in brief and observed in the order of the authorities below, that transplanting in a suitable container including pots and kept at the proper place i.e., green house or in the shed and after performing several operations, such as weeding, watering, manuring etc., they are made ready for sale as bonsai plant. It was not necessary to plough the land which is a must for implanting a seed. The very nature of the plant ultimately nurtured, is such that it has to be taken care of independently. Once the plants are able to live or out grow the basic agricultural operation carried out and they are ready for sale insofar as the bonsai is to live the life of the original tree which fetches a value. It is not the case of ITA No.084/CTK/2012

and C.O.No.18/CTK/2012

4

the assessee that it is trading any plants but developing and growing plants from its birth to the point of sapling/nursing. Therefore, the assessee has been carrying on agricultural activities and its income is from agricultural operations carried out which fact was established in all the AYs under consideration. The authorities below therefore misdirected themselves to hold otherwise on the applicability of the citation of the Hon’ble Supreme Court simply because they had a firm belief that the bonsai trees grow not on land but from a cutting of the main branch of a tree which has spontaneously grown elsewhere. We do not find any infirmity in the contention of the learned Counsel for the assessee, as mentioned above, insofar as the learned CIT(A) has tried to justify the action of the Assessing Officer by invoking the proceedings for reassessment for the impugned Assessment Years. The very fact that a survey operation was carried out at the farm of the assessee, a nursery and the bonsai plant grown in the farm had been physically verified by the Assessing Officer was therefore only an exercise by the Assessing Officer and the learned CIT(A) to bring on record the case law to be distinguished by assessee before the authorities below. The substantial question therefore of the assessee having carried out agricultural operation in the impugned Assessment Years is merely on the basis of presumptions and assumptions in the minds of the assessing authorities to the extent that nature which is full of surprises and bounty has been subjected to consideration when income was proposed to be considered as non-agricultural. A farmer nurtures a plant or saplings which it gets after sowing seeds is also done by the assessee when it is to grow till such time it gets the fruit of labour as a miniature to be considered as carrying out agricultural operations for the produce to generate agricultural income and has been returned with appropriately by the assessee and is therefore, setting aside the impugned order of the learned CIT(A), direct the Assessing Officer to consider the same as exempt under the provisions of Section 10(1) of the Income-tax Act,1961.”

ITA No.084/CTK/2012

and C.O.No.18/CTK/2012

5

4. Issue in the present case being undisputedly identical and the learned

CIT(A) having followed the order of this Tribunal in assessee’s own case for

the earlier years as discussed in the foregoing paragraphs, we do not find any

merit in the present appeal filed by the Revenue. Therefore, we uphold the

same and dismiss the appeal of the Revenue and the C.O. stands allowed.

5. In the result, the appeal of the Revenue is dismissed.

Sd/- Sd/- (K.S.S.Prasad Rao) (K.K.Gupta) Judicial Member Accountant Member

Date: 25.06.2012

H.K.Padhee,

Senior Private Secretary.

Copy of the order forwarded to :

1. The Appellant: Income-tax Officer, Ward 1, Balasore.

2. The Respondent: Smt. Reena Panda, Ichhapur, Bhanaga, Balasore

3. The CIT,

4. The CIT(A),

5. The DR, Cuttack

6. Guard File (in duplicate)

True Copy, By order,

Senior Private Secretary.

APPENDIX XVII

SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE

SR. P.S./P.S. AFTER DICTATION IS GIVEN

1. Date of dictation ………20.06.2012………………………………………………………………..

2. Date on which the typed draft is placed before the Dictating Member …………25.06.2012………………Other Member ………………………….

3. Date on which the approved draft comes to the Sr. P.S./P.S. …………………

4. Date on which the fair order is placed before the Dictating Member for pronouncement………………………………………………………………………….

5. Date on which the fair order comes back to the Sr. P.S./P.S ………………….

6. Date on which the file goes to the Bench Clerk …………………………………

7. Date on which the file goes to the Head Clerk …………………………………..

8. The date on which the file goes to the Assistant Registrar for signature on the order …………………………………………………………………………………….

9. Date of Despatch of the Order ……………………………………………………..

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