In ITA No.1689/Ahd/2018 -ITAT- ITAT (Ahmedabad) rules that nursery activities are agricultural, not commercial
Members Annapurna Gupta (Accountant) & Suchitra Kamble (Judicial) [25-08-2023]

Read Order: Talshibhai B Narola v. The Income Tax Officer, Ward – 1(2)(3), Baroda

Chahat Varma

New Delhi, October 3, 2023: The Ahmedabad bench of the Income Tax Appellate Tribunal has allowed an appeal filed by a nursery owner, determining that the activities carried out by the nursery, which involved the cultivation of lawns, flower plants, and vegetable plants, should be classified as agricultural in nature and not as commercial activities.

The case in question involved the assessee who had filed his income tax return, declaring total income of Rs.1,97,520, along with agricultural income amounting to Rs.75,42,750. Subsequently, the case underwent scrutiny by the Income Tax Department. During the assessment proceedings, the assessee clarified that there was an inadvertent error in the return, and the correct agricultural income was Rs.85,42,750, not Rs.75,42,750 as originally stated. The Assessing Officer (AO) reviewed the submissions made by the assessee and made several additions to their income, including Rs.2,60,305 under the head of income from other sources, Rs.18,625 under the same category, and Rs.8,90,040 as business income. Additionally, the AO treated a portion of the agricultural income, specifically Rs.85,42,750, as business income or income from other sources, assessing it at Rs.73,73,780. Dissatisfied with the assessment order, the assessee appealed to the Commissioner of Income Tax (Appeals) or CIT(A), but his appeal was dismissed.

The assessee contended that they were primarily engaged in agricultural activities, particularly the cultivation of flower plants, vegetable plants, and various types of lawns, during the relevant year. They argued that they were not involved in any other business activities and were not required to maintain books of accounts. The agricultural income earned, Rs. 85,42,750, was claimed as exempt income but had been inadvertently understated in the return.

The two-member bench of Annapurna Gupta (Accountant) and Suchitra Kamble (Judicial) considered all arguments and evidence presented by both parties. They concluded that the addition of Rs. 2,60,305 was not justified as the transactions appeared genuine. Similarly, the addition of Rs. 18,625 was deemed unnecessary as it was due to a delay in booking bills.

As for the additions related to business income, the bench found that the activities were agricultural in nature and should not be treated as commercial activities for taxation purposes.