Nursery Income

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 January 2010 Sir,

My query is regarding Nursery Income.

I have come across the case "SUDHISHA FARM NURSERY vs. INCOME TAX OFFICER" ITAT, Delhi 'A' Bench, K.C.Singhal, J.M. & Sikander Khan, A.M. (2003) 81TTJ (Del) 714 : (2004) 88 ITD 638. The said case pertains to A.Y. 1998-99.

In the same case, the conclusion is finalised as -
" When no basic operations were carried out with plants, the profits on sale thereof would be trading profits even though such plants were maintained by the nursery for the some time."
In the said case, the scope of basic operations are restricted to tiling, sowing of seeds, planting and almost all remaining operations are referred as "Subsequent Operations". The stress is given much upon application of human labor and skill upon land and not on the growth factor.

Then Finance Act, 2008 has introduced an explanation 3 to Section 2(1A), that any income from sapplings and seedlings grown in nursery shall be recognised and treated as an agriculture income. The focus is on "growth".

Now question comes as what should be defined as growth. Should it be in continuance of basic operations or not? Should there be human labour and land, as concluding elements for recognition of agricultural income ?

Growth also continues after plant sprouts from the land. Then if nursery purchases some plants, maintains i.e. grows them by labour and skill for due period. Then as to how profit on the sale of same, should be recognised ?

Agricultural Income or Non Agricultural Income ?

CA Vijay Kumar Gupta

CA Vijay Kumar Gupta (Expert)
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02 January 2010 In my opinion, The amendment made wef 2009-10 , soeing of seeds and grown in nursery denotes growth . Purchases of plants and selling thereof after maintenance for some time should not cover under growth and therefore is a non agricultural income.

Querist : Anonymous

Querist : Anonymous (Querist)

04 January 2010 I agree with you, Sir. Still doubt remains as to what should be defined as "grown in nursery". If its meaning is linked to performance of basic operations, what was the intention behind Explanation 2 to Section 2(1A) as introduced by Finance Act, 2008 ?

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