Income from hybrid seeds is agricultural if produced under the company's supervision.

Income from hybrid seeds is agricultural if produced under the company’s supervision.

Issue

Can the income a company earns from selling hybrid seeds be considered “agricultural income” exempt from tax, even if the seeds are grown on land owned and tilled by third-party farmers?

Facts

The assessee, a company in the business of producing and selling hybrid seeds, claimed its income was exempt from tax as agricultural income under Section 10(1) of the Income-tax Act, 1961.
The company’s business model involved entering into agreements with farmers. It would supply them with “foundation seeds” to be grown on their land.
While the farmers performed the basic agricultural tasks, the entire process was conducted under the close supervision and control of the assessee-company.
Crucially, the assessee bore the costs and risks of the cultivation and played an active role in monitoring and nurturing the plants.
The Assessing Officer (AO) disallowed the exemption. The AO’s view was that since the assessee did not own the land and the farmers did the physical work, the assessee was not directly carrying out agricultural operations.

Decision

The High Court ruled in favour of the assessee.

The court held that since the assessee was deeply involved in the production of the seeds through its constant supervision, control, and by bearing the costs and risks, it was effectively indirectly involved in the agricultural activity.
It found that the assessee’s role was not merely that of a buyer but an integral participant in the cultivation process.
Therefore, the income derived from the sale of these hybrid seeds qualified as agricultural income, and the assessee was entitled to the exemption under Section 10(1).

Key Takeways

Direct Land Ownership is Not Required: The definition of agricultural income does not strictly require the person earning the income to own the land on which the operations are performed.
Active Involvement is the Deciding Factor: The key test is the degree of involvement in the agricultural process. If a company exercises significant supervision and control, bears the operational risks, and actively participates in the cultivation, its income can qualify as agricultural.
Supervision vs. Simple Purchase: There is a clear distinction between merely buying a crop from a farmer (which is a trading activity) and actively managing the cultivation process through the farmer (which is an agricultural activity).
Bearing the Risk and Cost: The party that bears the financial risk of crop failure and the costs of cultivation has a much stronger claim that the resulting income is agricultural in nature.

HIGH COURT OF TELANGANA

Principal Commissioner of Income-tax

Nuziveedu Seeds Ltd.

P. Sam Koshy and NARSING RAO NANDIKONDA, JJ.

ITTA No. 288 of 2016

SEPTEMBER 8, 2025

J.V. Prasad, Sr. Standing Counsel for the Petitioner.

JUDGMENT

Narsing Rao Nandikonda, J.- This appeal is filed under Section 260A of the Income Tax Act 1961 (for short, ‘the Act’) against the order dated 20.03.2015 in CIT v. Nuziveedu Seeds Ltd. [IT Appeal No.1594(Hyd) of 2014] passed by the learned Income Tax Appellate Tribunal, Hyderabad Bench ‘B’, Hyderabad, for the Assessment Year 2011-2012.

2. The assessee is a company engaged in the business of production of Hybrid seeds and it claimed for an exemption of Rs.39.26 crores under Section 10 (1) of the Act and also Rs.1.53 crores under Section 14A of the Act,1961andaccordingly filed returns for the Assessment Year 2011-2012, for total amount of Rs.5,78,67,231/-. The Assessing Officer after considering the entire material on record, passed an order opining that the assessee is not directly involved in any agricultural activity and the income earned by it from the production of seeds was not in the nature of agricultural income. Therefore, the Assessing Officer required the assessee company to explain as to why its claim for exemption under Section 10 (1) Act should not be disallowed and after receiving the explanation offered by the assessee, Assessing Officer has held that the Assessee company could not be said to be either cultivating the seeds or deriving any agricultural income.

3. Accordingly, the Assessing Officer required the assessee to explain as to why its claim for exemption under Section 10 (1) of the Act should not be disallowed and directed the assessee to furnish reply. The assessee submitted its explanation on 26.03.2014, which was not found acceptable by the Assessing Officer and accordingly it was held that production of hybrid seeds was markedly different from normal agricultural crop production i.e., it involved elaborate scientific operations etc, by the assessee company. The assessee company used to yield hybrid seeds finally produced to undergo series of physical and chemical treatments before they sold in the open market as commercial hybrid seeds. Further, production of hybrid seeds on the land owned by other farmers could not be treated as agricultural operations carried on by the assessee company, going by the terms and conditions of the relevant agreements entered with the farmers. Therefore, the claim of the assessee for exemption of income earned from production and sale of seeds under Section 10 (1) of the Act was disallowed by the Assessing Officer vide order, dated 30.03.2014 under Section 143 (3) of the Act.

4. Against the order passed by the Assessing Officer, an appeal was preferred by the assessee before the learned Commissioner of Income Tax (Appeals) seeking exemption under Section 10 (1) in respect of income earned from production of sale of seeds. The learned CIT(A) found merit in the submissions made by the assessee relying on the decision of the Tribunal in the case of Prabhat Agri-Biotech Ltd rendered vide order, dated 14.01.2013 passed in ITA No.1288 and 1289/Hyd/2010 for the assessment years 2008-09 and 2009-2010, as affirmed by the High Court of Andhra Pradesh, which was held that the operations of the assessee of the company involved in production of seeds was in the nature of agricultural activity and the income earned from such activity was in the nature of agricultural income and eligible for exemption under Section 10 (1) of the Act.

5. Being aggrieved by allowing of the appeal by the CIT (A), the Revenue preferred an appeal on the ground that the learned Commissioner Income Tax (Appeals) did not appreciate that the assessee has departed from the basic agricultural operation and indulged in production of parent seeds by planned scientific and specialized procedure. It has also raised one of the grounds that the assessee itself is not carrying on any agriculture operations, but only procuring the multiplied hybrid parent seed from the farmers, as such, the activity of assessee does not fall under the agricultural operations so as to qualify the income as exempt under Section 10 (1) of the Act, 1961. Further, on the ground that the learned Commercial Tax Officer (Appeals) ought to have appreciated the Board’s Clarification vide Circular No.5 of 2014 that even if there is no exemption, exempt income provisions of Section 14 (A) that this Section (a) to(b) of the Rules will apply and the resilience under Section 14 (A) is in order.

6. Having gone into the merits of the case and uphold the impugned order of the learned Commissioner of Income Tax directing disallowance of Rs.1,48,00,979/- made by the Assessing Officer on account of interest under Section 14A of the Act read with Rule 8D of the Rules following the ratio laid down by the High Court of Bombay and keeping in you the facts of the assessee held that investment of Rs.20.30 crores having been presumably made with assessee out of its own funds, no disallowance on account of interest, expenditure under Section 14A can justifiably be made.

7. It is further held by learned Commissioner of Income Tax (Appeals) that it is not justified in deleting the disallowance made by the Assessing Officer and therefore, modified the impugned order of the Assessing Officer on the issue, and restored disallowance made by the Assessing Officer under Rule 14(A), read with 8D to the extent of Rs.5,07,695/-which is made by the Assessing Officer on account of other common expenses by applying Clause (iii)Rule 8 (D).It was further held that the common expenses incurred by the assesses, such as office and administrative expenses, etc, can reasonably be attributed to some extent to the activity of making investment and further held that the same are liable to be disallowed by applying the formula given in Clause (iii) of Rule 8 (D) and also upheld the impugned order of the learned CIT (A) deleting the disallowance of Rs.1,48,00,979/- made by the Assessing Officer on account of interest under Section 14 ‘A’ rad with 8D of the Act.

8. Being aggrieved by the said judgment of learned Tribunal, the present appeal filed by the Revenue on the ground that the learned Tribunal has treated the hybrid seeds as income obtained from agriculture income without considering the facts of the case;that the activity of the assessee is development of high yielding seeds through research and development and marketing of the said product for commercial gain was not appreciated. It is also further stated that the activity of the asessee is composite in nature and production of hybrid seeds was with the ultimate aim of selling the seeds in which commercial element is involved. The other ground raised is production of hybrid seeds by the assesses is not by way of traditional and conventional methods, but the production of seeds involves extensive scientific knowledge and technical input, research, and development, and the final commercial exploitation of the same. He further contented that deleting the addition made under Section 14A of the Act is an error committed by the learned Tribunal so also expenses incurred in connection with an expenditure does not form part of total income and is not allowable as per the provisions of Section 14A of the Act.

9. Heard Sri Sudhakar Reddy, learned Standing Counsel for Income Tax, and Sri S Ravi, learnedSenior Counsel representing CKR Associates, appearing for the respondent-assessee.

10. Having heard the submissions made by learned counsel on either side, the following substantial questions of law were framed for consideration:

“1.

Whether on the facts and in the circumstances of the case, the order of the Tribunal is not perverse?

Whether on the facts and in the circumstances of the case, the Tribunal was justified in allowing deduction u/s.10(1) of the Income-tax Act, 1961, without appreciating that the activity of development and marketing of seeds is purely a commercial activity bereft of carrying of agricultural activity?

Whether, on the facts and in the circumstances of the case, the Tribunal was correct in not appreciating the fact that assessee itself did not undertake any agricultural operations but procured hybrid seeds from farmers and as such the activities carried by the farmers can only be said to the agricultural activities and not that of the assessee?

Whether on the facts and in the circumstances of the case, the Tribunal was covered in deleting the addition u/s. 14A of the Act ignoring the clear mandate of law and rules.?

11. Learned counsel for the appellant argued that the activities carried out by the assessee are not natural but series of scientific and stress less process as the assessee enter into the business of production of hybrid seeds as they carry out research and development activity which involves scientific study of parent seed and hybridization of different varieties of parent seeds so as to evolve the high yielding variety of hybrid seeds and these hybrid seeds are sold in the market for agricultural production by the farmers. Learned counsel further submits the hybrid seeds are so engineered that when the crops from it are used as seeds for subsequent cultivation by farmers the yields are much less. This indicates that the hybrid seeds are generated by certain involved process, which the farmer cannot perform suo moto and it has to revert back to the producer of the hybrid seeds for every season, if similar results of high production are desired in subsequent crops. He further argued that there is an agreement between the farmer and the assessee and as per the terms and conditions imposed by the assessee on the farmers that the agreement specifies assessee has entered into certain seed production agreements with the farmers for utilizing the lands owned by them and from such agreements, the assessee company is being utilizing lands for production of hybrid seeds on mass scale from the foundation seeds on payment of certain compensation.

12. He further argued that as per the terms and conditions imposed by the assessee on the farmers though the agreement specifies for raising the crops as desired by the assessee company, the whole process is in the nature of procuring agricultural produce through contract.

13. He further contended on the ground that the assessee is not directly involved in agricultural activity and it is also not deriving income from agriculture, as such a show cause notice was issued on 21.03.2014 as to why exemption under Section 10 (1) of the Act should not be disallowed. In response to the same, reply was submitted. He further argued that the assessee was carrying as scientific and technological process to the seeds and multiplying them in the farmers fields so as to derive income commercially from sale of such modified and processed seeds. To aid the process of such multiplication in larger quantity, the assessee enter into the agreement with the farmers for carrying out such specialized job through contract and argued that assessee is neither cultivating seeds or derived income from agriculture.

14. Learned counsel for the Revenue argued that the basic operation lacking agricultural activity and he further pointed out and contended that as the entire activity of the respondent is a business of hybrid seeds and it is in the lab and not on the ground. He further argued and contended that primarily the term agriculture is understood as ‘Agra-field’ and ‘culture-cultivation’, i.e., the cultivation of the field, and if the term is understood only in that sense agriculture would be restricted only to cultivation of the land and in the strict sense of the term meaning thereby tilling the land, sowing of the seeds, planting and similar operations on the land,which are the basic operations which require the expenditure human skill and labour upon the land itself. He further pointed out that there are however other operations which have got to be resorted to by the agriculturist and which are absolutely necessary for the purpose of effectively raising the produce from the land. These are operations to be performed after the seed germinates from the land e.g., weeding, digging the soil around the growth, removal of undesirable undergrowths and all operations which foster the growth and preserve the same not only from insects and pests but also from degradation from outside, tending, pruning cutting, harvesting and rendering the produce fit for the market. The latter would also classify as agricultural operations when taken in conjunction with the basic operations described. It is only if the products are raised from the land by performance of the normal basic operations indicated above then it can be characterized as agricultural operations.

15. It is clear that the process to be performed by the cultivator to render the produce raised by him fit to be taken to market must be one which is ordinarily or usually employed by a cultivator and nothing else. It is further argued and contended by the respondent-assessee that in the instant case, the assessee receives income from sale of hybrid seeds and for production of such seeds, the assessee carries out Research and Development activity which involves scientific study of the parent seed and hybridization of different varieties of parent seeds so as to evolve high yielding varieties of hybrid seeds.

16. The assessee-company collects germplasm and some inbred lines of different field crops and vegetable crops, which are evaluated and maintained subsequently for selections out of them. This process of collection of germplasm, evaluation, maintenance, utilization in hybridization, testing the hybrids/varieties in yield trials, testing in multi location mini kits is being continued so as to release the best ones for marketing and which are commercially produced and marketed by the assessee. In addition to that the basic agricultural operation made a major effort in terms of the resources for generating the parent seeds. The very process undertaken by the assessee does not satisfy the test enumerated in sub-paras (i) (ii) and (iii) of clause (b) of Section 2 (1A). The assessee company is not selling kapas but is commercially selling seed obtained after elaborate processing which is neither a process of the nature nor is a process ordinarily employed by a cultivator.

17. It is stated that the agreement between the company and the farmers are under supervision, technical guidance and control of the company is in agreement for production of the hybrid seeds. As per Section 1 of the Agreement, it is noticed that the effective control, ownership and management lies always with the farmers and the Company has entered into seed production AgreementMaster, Agreement with the farmers for the purpose of producing of the hybrid seeds on the land owned and possessed by the company.

18. Learned counsel for the assessee argued and contended that the Research and Development expenses incurred during the relevant Assessment Year is Rs.21.97 crores which works out to approximately 1% of its turnover. Besides this, the assessee-company has also developed new hybrids/varieties, which are commercially produced and marketed. The activity carried out by the company is not in nature of purchase of produce and that the Act does not restrict use of technology in agricultural process. It is further stated that the learned Commissioner of Income Tax and the learned Tribunal erred in coming to the conclusion in allowing deduction.

19. Learned counsel for the appellant/Revenue further argued that the basic operation in allowing agricultural activity, pointed out and contended that as the entire activity of the respondent is a business of hybrid seeds which is and not on the ground. He further argued that change so brought by the assessee to produce crops originally produced or raised by it by using them as seed in the next crop and so on through regenerating of the produce over number of times to obtain desired level of traits in one seed does not come under the ambit of ‘agriculture’ or the process which is ordinarily employed by a cultivator to render the produce raised by it fit to be taken to market. Therefore, the very process undertaken by the assessee does not satisfy the test enumerated in sub-paras (i)(ii)(iii) of clause (b) of Section 2 (1A) of the Act.

20. Learned Senior Counsel appearing for the respondent-assessee had argued that who does cultivation is immaterial. Section 2(1)(a) of the Income Tax Act, 1961 reads as follows:

Definitions.—In this Act, unless the context otherwise requires,—

1[(1) “advance tax” means the advance tax payable in accordance with the provisions of

Chapter XVII-C;]

2[(1A)] “agricultural income” means—

3[(a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes;]

(b) any income derived from such land by—

(i) agriculture; or

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause ;

(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on:

4[Provided that—

(i) the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and

(ii) the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated.”

21 He also argued and contended that any revenue derived from the land and which is used for agricultural purpose and the activities carried on by the company was in the nature of ‘agricultural activities’ and the income arising there from falls within the ambit of ‘agricultural income under provisions of Section 2 (1) (a) the Act, 1961 and the company is entitled for claim of exemption under Section 10 (1) of the Act, 1961. Since the company cannot carry out the agricultural operations on its own throughout the Country, it takes the land on lease from the farmers and through them the Company supplies to the farmers, who carry out the cultivation of the seed under the supervision of the Company and the expenses incurred by the farmers in connection with are reimbursed by the company. It is stated that apart from leasing out the lands to the Company, the farmers also carry out the agricultural operations for enriching themselves with additional income, since the company compensates them for their personal involvement in the operations carried out by them. Further, when the farmers paid lease rentals for their lands and also compensate for carrying out the agricultural operations, it cannot be construed as job work executed by the farmers and terming it as procurement of the produce through Contract.

22. In CIT v. Maddi Venkatasubbayya [1951] 20 ITR 151 (Madras) wherein it was held ” In view of such discussion, foundation seeds or Hybrid, seeds produced in own land or lands taken on lease i.e., on contract farming will be the result of agricultural operations and the profit arising out of such activities shall be treated as agriculture income ” and also considering the Judgment of Advanta India limited v. CIT (2010) 5 ITR (Trib) 57 ITAT (Bang) and also considering the decision of coordinate bench in cases of Indo American Exports and Namadhari Seeds (P) Ltd. Vide order dated 14 07.2006 passed in [ITA No. 1040/Bang?2002 and ITTA 3102 /Bang/2004], extracted therein and for the sake of convenience re extracted here:

15. The Honble Supreme Court in the case of CIT v. Raja Benoy Kumar Sahasroy (1957) 32 ITR 466 has considered comprehensively the concept of agricultural income for the purpose of the income tax Act. The Court held that agriculture in its primary sense denotes the cultivation of the field and is restricted to cultivation of the land in the strict sense of the term meaning there by tilling of the land, sowing of the seeds, planting and similar operations on the land. These are basic operations and require the expenditure of human skill and labour upon the land itself The court further held that the performance of subsequent operations like tending, pruning, cutting, harvesting, etc., would not be enough to characterize them as agricultural operations. In order to invest them with the character of agricultural operations, subsequent operations must necessarily be taken the conjunction with and in continuation of the basic operations which are the effective costs of the produce being raised from the land.

16. If we examine the operations carried out by the assessee in the previous year relevant to the assessment year in appeal, we find that the production of basic seeds as well as hybrid seeds are the results of basic agricultural operations carried on by the assessee company in its own land as well as in leasehold land. The method of contract farming does not take away the character of the basic operations carried out by the assessee company which are agricultural in nature. The assessee-company procures germ plasma and sows it in its own fields, and carries on all agricultural operations and produces the basic seeds. The basic seeds so harvested are again put through agricultural operations intimately connected with leasehold land for finally bringing out the hybrid seeds. Only for the reason that the basic seeds are sown in leasehold land and the manpower required is arranged through contract farming, it does not mean that the operations carried out by the assessee-company are not agricultural operations. As a matter of fact, it is to be seen that the assessee-company has carried out basic as well as secondary agricultural operations. There for, without any fear of contradiction, It is possible for us to hold that such entire income of the assessee is agricultural in nature which is to be excluded from the nature of total income.

17. The assessee is successful in its appeal:

18. As the main ground of the assessee itself is decided in its favour, we have not considered the alternative contention regarding application of rule 7 and proportionate exemption of income.

19. The reasons pointed out by the assessing authority to deny the claim of exemption made by the assessee company are that the assessee is following international technology, marketing, expertise, integrated scientific and commercial activity, etc. These are all matters strange to the strict code of Income tax. Those premises do not have any role in deciding the nature of income within the fame work of the Income tax Act 1961. The reasons pointed out by the assessing officer are by and large issues to be decided by the policy makers in the Government.”

23. He further contended that the Company generates the hybrid seed by certain involved process by the Processing Division of the company, which falls within subclause (ii) of clause (b) of Section 2 (1A) of the Act, 1961 and processing carried on by the company is ordinary process employed by the cultivator to be fit for marketing. He also contended that the activities carried on by the company are in the nature of agricultural activities and sale agricultural produce fall within the ambit of agricultural income. Thus agricultural activity and agricultural income of the company as above fall within the ambit of sub-clause (ii) of clause (b) of section 2 (1A) of the Act, 1961. Therefore, the company is entitled for exemption under Section 10(1) of the Act.

24. For the purpose of clarity Section 10 (1) of the Act, 1961 is extracted:

10. Incomes not included in total income.—In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

(1) agricultural income;

25. After hearing the rival contentions of the both counsel and seeing the entire grounds the following substantial question of law that arises for consideration in the present appeal is “whether on the facts and circumstances of case the Tribunal was justified in allowing the deduction under Section 10(1) of the Act without appreciating that the activity of development and marketing of seeds is purely a commercial activity bereft of carrying out the commercial activity.”

26. Admittedly, the assessee herein is a company engaged in the business of research, production and sale of agricultural seeds. The activity which is carried out by the assessee was for the purpose of research and development activity which involves scientific study of the parent seed and hybridization of different varieties of the parent seeds so as to evolve the high yielding of hybrid seeds. The hybrid seeds are generated by certain involved process, which the farmer cannot perform suo moto and that the hybrid seeds are sold in the market different varieties of the parent seeds so as to evolve high yielding variety of hybrid seeds. It is also stated that the assessee would enter into agreements with the farmers for utilization of lands owned by them, wherein the farmer agreed to perform certain agricultural operations including but not limited to normal agronomic practices required for raising a good crop like irrigation, fertilization, pest/disease combat, weeding, harvesting, threshing etc, for the purpose of production of seeds from the said foundation seeds.

27. It is evident from the terms and conditions imposed on the farmers that the farmers raised crops as desired by the assessee and the whole process is in the nature of production through contract.

28. The learned Tribunal considering the decision of the then High Court of Andhra Pradesh in case of CIT v. Prabhat Agri-Biotech Ltd, Hyderabad [ITTAppeal No. 88 of 2014, dated 21-02-2014] wherein similar issue which arose for consideration and while considering the said issue, the Co-ordinate Bench took a decision in assessee’s own case for the earlier order by recording as follows:

“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 assessee is admittedly claiming exemption/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 definition of the Tribunal for assessment year 2001-2002 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 18.01.2008, we held 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 identical we respectfully follow the aforesaid decisions of the Tribunal and hold that the income generated from sale of basic seeds agricultural income is exempt u/s 10 (1) of the Act. Accordingly, we dismiss the ground raised by the department.”

29. In CIT v. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466 (SC) the Hon’ble Supreme Court held as follows:

“.land is used for agricultural purposes or agricultural operations performed on it. Agriculture is the basic idea underlying the expressions ‘agricultural purposes’ and agricultural operations’ and it is pertinent therefore to enquire what is the connotation of the term ‘agriculture’. As we have noted above, the primary sense in which the term agriculture is understood is agar-field and culter-cultivation, i.e., the cultivation of the field, and if the term is understood only in that sense agriculture would be restricted only to cultivation of the land in the strict sense of term meaning thereby, tilling of the land, sowing of the seeds, planting and similar operations on the land.”

30. Having considered judgment of the Hon’ble Supreme Court and having considered the entire material placed on record, the parent seeds are produced by way of agriculture and cultivation. As the company gets the cultivation done under its supervision and at its own costs and risks, the production of these seeds, and the farmer wherein under the supervision, technical guidance and control of the company is in agreement for the production of the Hybrid seeds, since they have direct nexus with the land owned by it or on the leased lands by supplying seeds to the farmers and getting them cultivated under its supervision and control and the company plays an active role of action of monitoring and nurturing the plants by the assessee cultivated by the farmersAs there is an element of involvement of assessee by entering into an agreement with the farmers for utilizing the lands owned by them and from such agreements, the assessee company is being utilizing for production of hybrid seeds on mass scale from the foundation seeds on payment of certain compensation. Though the assessee may not be directly involved in the activity of cultivation but it is being involved through farmers for production of hybrid yielding seeds for different types of hybridization and which are used for the purpose of agriculture for deriving high yielding seeds. Therefore, this bench is of the opinion that though the assessee is not directly involved into the agricultural activity, but indirectly they are involved in the said activity.

31. Therefore, for the afore said reasons, this Bench is of the opinion that the Tribunal was justified in allowing disallowance under Section 10 (1) of the Act by taking the income of the assessee as an a agricultural income and this Bench is of the opinion that there is nothing is wrong to interfere with the said finding of the Commissioner of Income Tax (Appeals) and the Tribunal.

32. Hence, for the said reasons, the substantial questions of law framed are answered in favour of the respondent-assessee and against the appellant-revenue.

33. Accordingly, the appeal is dismissed confirmingthe order dated 20.03.2015 in ITA No.1594/Hyd/2014 passed by the learned Income Tax Appellate Tribunal, Hyderabad Bench ‘B’, Hyderabad. There shall be no order as to costs.

Miscellaneous petitions, if any, pending in this appeal shall stand closed.