Company supplying seeds to farmers under agreement income derived by company is not agricultural income

The assessee company is in the business of cultivation, production and marketing of open-hybrid seeds both for the domestic and international market and entered in to agreement with the farmers for production of pen –hybrid seeds for its own benefit or on behalf of its overseas principals. Assessee Company supplied the seeds & supervised the cultivation of seeds. After harvesting, the company purchased from farmers at fixed price. Assessee company has done the process of cleaning, grading and converting into certified seeds. Assessee has claimed entire income as exempt under section 10(1). Assessing Officer denied the exemption. On appeal before the Tribunal the tribunal opined that 10 percent of the net profit should be treated as business income and balance 90 percent of the net profit as agricultural income exempt from tax. On appeal to High Court by revenue the court held that the income is not agricultural income.( A.Y. 1998-99 to 2004-05) CIT v. Namdhari Seeds P. Ltd ( 2012) 341 ITR 342 (Karn.) (High court)