Conversion of grapes into raisins held as agricultural activity

Conversion of grapes into raisins using traditional ways held as agricultural activity

In a recent judgment, ITAT Bangalore has held that conversion of grapes into raisins by traditional ways is an agricultural activity.

ABCAUS Case Law Citation:
4711 (2025) (08) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A), NFAC in upholding that activity of conversion of grapes into raisins was not an agricultural activity. 

The appellant assessee was an individual carrying out agricultural activities.  For the year under consideration, the assessee has filed his return of income which was selected for scrutiny.

During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee has claimed agricultural receipts on the sale of raisins.  The Assessing Officer was of the view that the conversion of grapes into raisins is not an agricultural activity.  Accordingly, the Assessing Officer sought an explanation of the assessee as to why the income from sale of raisins would not be taxed as non-agricultural income.

In response to the Assessing Officer query, the assessee replied that the assessee is a simple farmer and engaged in cultivation of grapes and many a times, certain quantity of grapes remains unsold and the assessee converts those grapes into raisins by applying traditional methods. 

However, the Assessing Officer did not find any force in the explanation of the assessee and bifurcated the agricultural receipts by applying 60:40% ratio and treated 60% receipts as business income and 40% receipts as agricultural income.

Before the CIT(A), the assessee inter alia argued that in the preceding assessment year, the department itself has treated the activity of selling of raisins as agricultural activity and the assessee was not deploying any machine or labour for conversion of grapes into raisin and, therefore, the income of the assessee should be treated as agricultural income.

However, the CIT(A) upheld the addition.

The Tribunal observed that the asessee was an agriculturist and deriving income by selling grapes.  The assesse was using traditional methods for converting the grapes into raisins.  The Assessing Officer was not able to controvert the factual aspect that the assessee was not using traditional methods for conversion of grapes into raisins. 

The Tribunal further observed that the judgment relied upon by the revenue was not applicable to the facts of the present case as that was a case of agro farm of partnership firm, which was engaged in trading of various agricultural produce as well as engaged in conversion of grapes into raisins by deploying scientific methods. 

The Tribunal further noted that in a preceding assessment year, the revenue itself had accepted the activities of conversion of grapes into raisins as agricultural activities. Further, in a GST Circular, it had been categorically clarified that an agriculturist supplying raisins is not liable to be registered under section 23(1) of the CGST Act and is exempt from GST. 

The Tribunal held that the activities of conversion of grapes into raisins carried out traditionally constituted agricultural activity.

Accordingly, the Tribunal directed the Assessing Officer to delete the addition made.

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