Income From Seed Sales Through Farmers Treated as Agricultural | HC

Case Details: Principal Commissioner of Income-tax v. Nuziveedu Seeds Ltd - [2025] 178 taxmann.com 486 (Telangana)

Judiciary and Counsel Details

• P. Sam Koshy and Narsing Rao Nandnikonda, JJ.
• J.V. Prasad, Sr Standing Counsel for the Petitioner

Facts of the Case

The assessee was a company engaged in the business of research, production, and sale of agricultural/hybrid seeds. It entered into agreements with farmers to utilise their lands, under which the farmers performed normal agronomic practices for the production of seeds from foundation seeds supplied by the assessee under its supervision and control.
For the relevant assessment year, the assessee claimed exemption under section 10(1). During the assessment proceedings, the Assessing Officer (AO) disallowed the exemption on the ground that the assessee was not directly involved in agricultural activity. On appeal, the CIT(A) allowed the assessee’s claim. The Tribunal also allowed the claim, and the matter reached the High Court.

High Court Held

The High Court held that the parent seeds were produced through agricultural cultivation. The company undertook cultivation under its supervision and at its own cost and risk.
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 a 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 farmers.
Although the assessee may not be directly involved in the cultivation activity, it was indirectly involved through farmers in the production of hybrid seeds yielding high yields for various types of hybridisation, which were used in agriculture to produce high-yielding seeds. Therefore, the assessee was indirectly involved in the said activity.
Accordingly, the Tribunal was justified in allowing deduction under section 10(1) of the Income-tax Act by taking the income of the assessee as agricultural income.

List of Cases Referred to

• CIT v. Maddi Venkatasubbayya [1951] 20 ITR 151 (Madras) (para 22)
• Advanta India Ltd. v. Deputy CIT [2010] 5 ITR(T) 57 (Bangalore) (para 22)
• CIT v. Prabhat Agri-Biotech Ltd. [ITT Appeal No. 88 of 2014, dated 21-2-2014] (para 28)
• CIT v. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466 (SC) (para 29).