Law:

Section:

Section 2(1A) of the Income-tax Act, 1961 - Agricultural income - Assessment years 1998-99 to 2004-05 - Whether every amount accrued to a person in whose hands agricultural produce passes through cannot become agricultural income and it is only when owner, landlord or farmer or persons having derivative interests in such land receives income from above persons, that income from land by performance of agricultural operations on it can be termed as agricultural income - Held, yes - Whether profit earned by assessee by sale of standing crop is different in its character from income derived by way of rent or revenue or by performance of agricultural operations by a person having an interest therein as owner, tenant or mortgagee with possession, etc., and profit in such case is not agricultural income - Held, yes - Assessee-company was in business of cultivation, production and marketing of open-hybrid seeds both for domestic and international market and it entered into agreement with farmers for production of open-hybrid tomato seeds for its own benefit or on behalf of its overseas principals - By virtue of this agreement, farmers agreed to demarcate a particular acreage of land earmarked for purpose of cultivation of particular seeds during fixed period and to carry on cultivation of open-hybrid seeds in land so earmarked under guidance, specifications and supervision of assessee-company - Terms of agreement showed that except supplying foundation seeds and giving scientific advice from time-to-time, either at time of sowing or pollination or harvesting, none of normal activities of agriculture were undertaken by assessee-company - Preparation of bed, sowing of seeds, cultivation and harvesting of hybrid seeds was done by farmers and they were entitled to price fixed by assessee per quintal for all such seeds which would qualify specification indicated by assessee - Seeds which did not qualify specification were also not sold by farmers, but by company and sale consideration, if any, was given to farmers - Entire reading of terms of agreement would only indicate that assessee-company was interested only to have healthy foundation seeds grown for process of…

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