Leasing Land for conducting Research on Hybrid varieties does not amount to Contract Farming, not Taxable: ITAT [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that Leasing land for conducting research on hybrid varieties does not amount to contract farming and is not taxable.

Profarm Seed India Private Limited, the assessee engaged in the business of producing foundation seeds, by conducting agricultural operations on agricultural lands and have been selling the same which are sold to various seed Companies like Godrej Seeds, Nath Seeds, Super Agri Seeds etc.

The assessee produces both foundation seeds and hybrid seeds and for the production of such hybrid seeds, the assessee carries out research and development activities which involve the scientific study of the parent seed and hybridisation of different varieties of parent seeds to evolve the high-yielding variety of hybrid seeds.

A perusal of the assessment order shows that it was submitted by the assessee before the Assessing Officer that the assessee takes the agricultural lands on lease by entering into the lease agreements with the landlords and develops the foundation seeds, the germ-plasm procured from the public institutions during the start of research activities by the assessee and then those are regularly developed by the assessee itself in its research forms over the years of time and different product and breeder seeds are developed.

The assessee produced a voluminous record to show the engagement of labour and the payment of salaries to the supervisors apart from producing the agreements with the landowners.

Shri Rama Kanta Panda, accountant member & Shri K Narasimha Chary, judicial member have observed that merely because the assessee took the land on lease for conducting their research operations to produce the foundation seeds of the hybrid varieties, such a lease cannot ipso facto make the operations of the assessee as contract farming.

The CESTAT observed that the assessee while explaining the modus operandi of their agricultural operations, invited the Assessing Officer to visit their farm and look at their activities so that the Assessing Officer can get clarity on the issue and differentiate the operations conducted by the assessee with those conducted by other seed companies in the industry. The appeal for the Revenue was dismissed. Shri Kumar Pal Tated appeared for the assessee and Shri KPRR Murthy appeared for the revenue.

To Read the full text of the Order CLICK HERE

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