1
PATNA
Project Topic: Topic:
AGRICULTURAL AGRICULTURAL INCOME INCOME
Taxation axati on Law Project submitted submitt ed to: Mr. Mr. G.P. G.P. Pandey [ Lecturer(law) ]
Project submitted by: POO!"M# $"!G% oll no:&'&
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TABLE OF CONTENTS
1) ACKNOWLEDGEME ACKNOWLEDGEMEN N T............. T........................ ...................... ....................... ....................... ..................3 .......3
2) RESEARCH METHODLOGY.........................................................4 3) INTRODUCTION..…………………………………………………5 4) MEANING OF AGRICULTURAL INCOME………………….6- 5) ESSENTIALS OF AN AGRICULTURAL INCOME………….!-11 6) TA" ON SALE OF AGRICULTURAL LAND…....................12-13 #) PRO$ISIONS OF FINANCE ACT……………………………….14 ) SOME IMPORTANT CASE LAWS ……………………..…...15-21 !) CONCLUSION…………………………………………………….22 1%) &I&LIOGRAPHY………………………………………………...23
ACKNOWLEDGEMENT ACKNOWLEDGEMENT
I feel highly delighted, as it gives me incredible pleasure to present a research work on income” I would like to enlighten my readers regarding this topic and I hope I “ Agricultural income
have tried my best to pave the way for bringing more luminosity to this topic
3
I am grateful to my faculty “!r"P Pandey” who has given me an idea and encourage me to venture this project I would like to thank librarian of #$%& for their interest in providing me a good back up material 'nd finally yet importantly I would like to thank my parents for their support and almighty god who helps me in all my endeavours
POORNIMA SINGH
't semester *t year
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RESEARCH METHODOLOGY A'( *+, O/0'/ The aim of the project is to present a detailed st udy of Agricultural income and to study the various aspects of agricultural income and its ta(ability
S0/ *+, L'('*'+ The four point on which special emphasis has been given in this research are: • • • •
)efinition of agricultural income in the act %imit of e(emption *ssentials of agricultural income #ase laws on this matter
S70/ 8 D** The following secondary sources of data have been used in the project+ 'rticles - .ooks / 0ebsites
M/9, 8 W7''+: The method of writing followed in the course of this research paper is primarily analytical
M,/ 8 C'*'+ The researcher has followed a uniform mode of citation throughout the course of this research paper
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CHAPTER 1-INTRODUCTION
'griculture income is e(empt under the Indian Income Ta( 'ct This means that income earned from agricultural operations is not ta(ed The reason for e(emption of agriculture income from #entral Ta(ation is that the #onstitution gives e(clusive power to make laws with respect to ta(es on agricultural income to the 1tate %egislature 2owever while computing ta( on non+agricultural income agricultural income is also taken into consideration 'gricultural income is e(empt from ta( by virtue of section 345 1ection -4'5 defines agricultural income as :+ •
'ny rent or revenue derived from land, which is situated in India and is used for agricultural purposes
•
'ny income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent+in+kind so as to render it fit for the market or sale of such produce
•
Income attributable to a farm house 4subject to some conditions5
•
Income derived from saplings or seedlings grown in a nursery
6
CHAPTER 2MEANING OF AGRICULTURAL INCOME Section ! "#A$ %agricultural income&mean'(
4a5 any rent or revenue derived from land which is situated in India and is used for agricultural purposes6
4b5 any income derived from such land by7 4i5 agriculture6 or 4ii5 the performance by a cultivator or receiver of rent+in+kind of any process ordinarily employed by a cultivator or receiver of rent+in+kind to render the produce raised or received by him fit to be taken to market 6 or 4iii5 the sale by a cultivator or receiver of rent+in+kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph 4ii5 of this sub+clause 6
4c5 any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent+in+kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs 4ii5 and 4iii5 of sub+clause 4b5 is carried on :
Provided that7
7
4i5
the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent+in+kind, by reason of his connection with the land, re8uires as a dwelling house, or as a
4ii5
store+house, or other out+building, and the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the "overnment as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated7
4'5 in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item 4'5, as the #entral "overnment may, having regard to the e(tent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the 9fficial "aette
4.5 in any area which is comprised within the jurisdiction of a municipality 4whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name5 or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year 6 or
E)*lanation #.— ;or the removal of doubts, it is hereby declared that revenue derived from
land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item 4a5 or item 4b5 of sub+clause 4iii5 of clause 4<5 of this section E)*lanation .7;or the removal of doubts, it is hereby declared that income derived from
any building or land referred to in sub+clause 4c5 arising from the use of such building or land for any purpose 4including letting for residential purpose or for the purpose of any business or profession5 other than agriculture falling under sub+clause 4a5 or sub+clause 4b5 shall not be agricultural income E)*lanation +!( ;or the purposes of this clause, any income derived from saplings or
seedlings grown in a nursery shall be deemed to be agricultural income6
8
's per Income Ta( 'ct income earned from any of the under given three sources meant 'gricultural Income:
4i $
An, rent recei-e. /rom lan. 01ic1 i' u'e. /or agricultural *ur*o'e 'ssessees do not
have to pay ta( on rent or revenue from agricultural land 1uch land should, of course, be assessed to land revenue in the country or be subject to a local rate ;urther, there must be a direct link between the agricultural land and the receipt of income by way of rent or other revenue 4for instance, a landlord could receive revenue from a tenant5 4ii5 'ny income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent in kind so as to render it fit for the market, or sale of such produce 4iii5 2ncome attri3uta3le to a /arm 1ou'e subject to the condition that building is situated on or in the immediate vicinity of the land and is used as a dwelling house, store house etc Income from such farm houses is considered agricultural income The definition of =farm houses> covers buildings owned and occupied by both cultivators of agricultural land and assessees who receive rent or revenue from agricultural land The sole purpose of such farmhouses should be for use as dwellings for the cultivators or use as store houses $ormally, the annual value of a building is ta(able as =income from house property> 2owever, in the case of a farm house, the annual value would be deemed agricultural income and would, thus, be e(empt from ta( (iv) Income earned from carrying nurery o!era"ion i a#o conidered a agricu#"ura# income and $ence e%em!" from income "a%.
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CHAPTER 3ESSENTIALS OF AN AGRICULTURAL INCOME 4i5 There must be a ;*+,
4ii5 T9/ ;*+, ' /'+: /, 87 *:7'0;7*; /7*'+- 'gricultural operation means that efforts have been induced for the crop to sprout out of the land The ambit of agricultural income also covers income from agricultural operations, which includes processing of agricultural produce to make it fit for sale %ike the people who receive passive agricultural income in the form of rent or revenue, the people who actually carry out agricultural operations are also eligible for ta(+free agricultural income
4iii5 L*+, 0;'*'+ ' ( + 1ome measure of cultivation is necessary for land to have been used for agricultural purposes The ambit of agriculture covers all land produce like grain, fruits, tea, coffee, spices, commercial crops, plantations, groves, and grasslands 2owever, the breeding of livestock, a8ua culture, dairy farming, and poultry farming on agricultural land cannot be construed as agricultural operations
4iv5 If any rent is being received from the land then in order to assess that rental income as agricultural income there must be agricultural activities on the land
4v5 In order to assess income of farm house as agricultural income the farm house building must be situated on the land itself only and is used as a store house?dwelling house
<') O=+/79' ' + //+'*;. In the case of rent or revenue, it is essential that the
'ssessee have an interest in the land 4as an owner or mortgagee5 to be eligible for ta(+free income 2owever, in the case of agricultural operations it isn>t necessary that the person conducting the operations be the owner of the land - 2e could be just a tenant or a sub+tenant In other words, all tillers of land are agriculturists and enjoy e(emption from ta( In some cases, further processes may be necessary to make a marketable commodity out of
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Institute of #hartered 'ccountants of India 4-35Ta%a"ion I1.$ @AB+B+B<<+-@3+ - C"rowth of Income Ta( revenue in IndiaC Detrieved E $ovember -3-
agricultural produce/ The sales proceeds in such cases are considered agricultural income even though the producer>s final objective is to sell his products
C/7*'+ '+0(/ =9'09 ' 7/*/, * A:7'0;7/ I+0(/>
4a5
Income from sale of replanted trees
4b5 Dent received for agricultural land 4c5
Income from growing flowers and creepers
4d5 1hare of profit of a partner from a firm engaged in agricultural operations 4e5
Interest on capital received by a partner from a firm engaged in agricultural operations
4f5
Income derived from sale of seeds
C/7*'+ '+0(/ =9'09 ' + 7/*/, * A:7'0;7*; I+0(/>
4a5
Income from poultry farming
4b5 Income from bee hiving 4c5
Income from sale of spontaneously grown trees
4d5 Income from dairy farming 4e5
Purchase of standing crop
4f5
)ividend paid by a company out of its agriculture income
4g5 Income of salt produced by flooding the land with sea water 4h5 Doyalty income from mines 4i5
Income from butter and cheese making
4j5
Deceipts from TF serial shooting in farm house is not agriculture income
schemes that offer ta(+free agricultural income
Income Ta( India
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G E
http:??wwwtheta(infocom?-3/?-?income+ta(+rebate+of+-333+calculation+sec+BAa? The Indian upper class grew rapidly during the $oughts
investor I+ 9/ */+0/ 8 =+/79' 7 ;/*/9;, 7':9@ '+0(/ 87( ;*+*'+ 0(*+'/ ' /'9/7 0+',/7/, '+/7/ 7 ++-*:7'0;7*; '+0(/ 09*7:/*;/ *.
C/7*'+ '+ / 7/(/(/7/,>
4a5
'gricultural income is considered for rate purpose while computing ta( of
Individual?2&;?'9P?.9I?'rtificial Hudicial PersonA 4b5 %osses from agricultural operations could be carried forward and set off with agricultural income of ne(t eight assessment years 4c5
'griculture income is computed same as business income
E0/'+ B If a person just sells processed produce without actually carrying out any
agricultural or processing operations, the income would not be regarded as agricultural incomeB %ikewise, in cases where the produce is subjected to substantial processing that changes the very character of the product 4for instance, canning of fruits5, the entire operations cannot be regarded as agricultural operations The profit from the sale of such processed products would have to be apportioned between agricultural income and business income@ ;urther, the income from trees that have been cut and sold as timber is not considered agricultural income since there is no active involvement in operations like cultivation and soil treatment
A
The Indian upper class grew rapidly during the $oughts
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B .usiness Income @ The institute of #ost accountants of India 4Han -3-5 A!!#ied direc" "a%a"ion )irectorate of 1tudies,The Institute of #ost accountants of India p -/B
CHAPTER 4TA" ON SALE OF AGRICULTURAL LAND
.efore @A3, profit on the sale or transfer of all agricultural land was considered rent or revenue derived from the land 1uch profit was, therefore, ta(+e(empt as agricultural income There were several favorable judgments of various 2igh #ourts on the issue 2owever, via a retrospective amendment that took effect from 'pril , @A3 %'$) 8ualifies to be agricultural land if it is not situated in any area which is comprised within the jurisdiction of a municipality 4whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name5 or a cantonment board, and which does not have a population of 3,333 or more according to the last preceding census which has been published before the st day of the previous year in which the sale of land takes place, and it is not situated less than eight kilometers from the local limits of any municipality or a cantonment board If, by the test above, the land is agricultural land, it will not form part of the definition of a capital asset and so there will be no capital gains on the sale of such land 'gricultural land not forming part of the above will be a capital asset and sale of which will attract capital gains ta( subject to 1ection G<., which is e(plained below
S/0'+ 54& #apital gain on transfer of land used for agricultural purposes not to be
charged in certain cases The agricultural land should have been used for agricultural purposes It must have been used either by the assessee or his parents in the two years immediately preceding the date on which the transfer of land took place The assessee should have purchased another land, which is being used for agricultural purposes, within a period of two years from the date of sale
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The whole amount of capital gain must be utilised in the purchase of the new agricultural land If not, the difference between the amount of capital gain and the new asset will be chargeable as capital gains and the ta( will be computed accordingly The new asset purchased should not be sold within a period of three years If sold, the cost of the new asset will be reduced by the amount of capital gain for the purpose of computing capital gains ta( 0here the amount of capital gain is not utilised by the assessee for the purchase of the new asset before the due date of furnishing his return of income, he may deposit it in the #apital "ains 'ccount 1cheme 4#"'15 of any specified bank 3 The return of income of the assessee should be accompanied by the proof of such deposit In such a case, the cost of the new asset shall be deemed to be the amount already utilised by the assessee for the purchase of the new asset together with the amount deposited in the #"'1 If the deposited amount is not utilised for the purchase of the new asset within the specified period, then the unutilised amount shall be charged in the year in which the period of two years from the date of sale of the original asset e(pires-
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3 The institute of #ost accountants of India 4Han -3-5 A!!#ied direc" "a%a"ion )irectorate of 1tudies,The Institute of #ost accountants of India p -/B http:??wwwta(fintotalcom?1ections?B3*+Ta(+Debate?G@/?EB - http:??wwwta(fintotalcom?1ections?B3TT'+Ta(+Debate?E--?EB
CHAPTER 5-PRO$ISIONS OF FINANCE ACT@1!#3
T* *8/7 '+0;,'+: *:7'0;7*; '+0(/ '+ *; '+0(/
'lthough agricultural income is fully e(empt from ta(, the ;inance 'ct, @A/, introduced a scheme whereby agricultural income is included with non+agricultural income in the case of non+corporate assessees who are liable to pay ta( at specified slab rates / The process of computation is as follows: 4a5 Income ta( is first calculated on the net agricultural income plus the assessee>s total income from non+agricultural sources 4b5 Income ta( is then calculated on the basic e(emption slab increased by the assessee>s net agricultural income 4c5 The difference between 4a5 and 4b5 is the amount of ta( payable by the assessee This process of computation is, however, followed only if the assessee>s non+agricultural income is in e(cess of the basic e(emption slab #learly, despite agricultural income being ta(+e(empt, assessees have to be e(tra careful while dealing with such income < They must make sure that they aggregate agricultural income with their total income to avoid interest payments and possible penalties for concealment of incomeG 'ssessees must also maintain credible records to provide the ta( authorities with proof of ownership of agricultural land and evidence of having earned agricultural incomeE
15
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CHAPTER 6-SOME IMPORTANT CASE LAWS
+aca ,. Gu-dar . /.".T. +ombay [#" 01&& $/ '*] 'gricultural income as defined in the 'ct is obviously intended to refer to the revenue received by direct association with the land which is used for agricultural purposes and not by indirectly e(tending it to cases where that revenue or part thereof changes hands either by way of distribution of dividends or otherwise A In fact and truth dividend is derived from the investment made in the shares of the company and the foundation of it rests on the contractual relations between the company and the shareholder )ividend is not derived by a shareholder by his direct relationship with the land There can be no doubt that the initial source which has produced the revenue is land used for agricultural purposes but to give to the words “revenue derived from land” the unrestricted meaning, apart from its direct association or relation with the land, would be 8uite unwarranted ;or e(ample, the proposition that a creditor advancing money on interest to an agriculturist and receiving interest out of the produce of the lands in the hands of the agriculturist can claim e(emption of ta( upon the ground that it is agricultural income within the meaning of Income Ta( 'ct 1ection is not tenable The policy of the 'ct appears to be to e(empt agricultural income from the purview of Income Ta( 'ct The object appears to be not to subject to ta( either the actual tiller of the
16
soil or any other person getting land cultivated by others for deriving benefit therefrom B .ut to say that the benefit intended to be conferred upon this class of persons should e(tend to those into whosoever hands that revenue falls, however remote the receiver of such revenue may be is hardly warranted A Income Ta( 'ct, ta( rates for foreign companies B ;inance 'ct -33
' shareholder ac8uires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder ac8uires any interest in the assets of the company It cannot be said that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company ' shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them
C.I.T. . M*,,'$/+?**** <1!51) 2% ITR 151
17
P7/('/7 C+70'+ C. L,. . C.I.T.@ &(* C' <1!4) 16 ITR 3%
C.I.T. . &/+ K(*7 S*9* R AIR 1!5# SC #6
It is agreed on all hands that products which grow wild on the land or are of spontaneous growth not involving any human labour or skill upon the land are not products of agriculture and the income derived therefrom is not agricultural income
--
There is no process of agriculture involved in the raising of these products from the land There are no agricultural operations performed by the assessee in respect of the same, and the only work which the assessee performs here is that of collecting the produce and consuming and marketing the same$o agricultural operations have been performed and there is no 8uestion at all of the income derived therefrom being agricultural income within the definition given in 1 -4'5 of the Indian Income+ta( 'ct0here, however, the assessee performs subse8uent operations on these products of land
18
@ http:??wwwta(fintotalcom?1ections?B3&+Ta(+Debate?G@E?EB -3 http:??wwwtheta(infocom?-3
which are of wild or spontaneous growth, the nature of those operations would have to be determined in the light of the principles enumerated above 'pplying these principles to the facts of the present case, we no doubt start with the finding that the forest in 8uestion was of spontaneous growth If there were no other facts found, that would entail the conclusion that the income is not agricultural income .ut, then, it has also been found by the Tribunal that the forest is more than G3 years old, though portions of the forest have from time to time been denuded, that is to say, trees have completely fallen and the proprietors have planted fresh trees in those areas and they have performed operations for the purpose of nursing the trees planted by themIt cannot be denied that so far as those trees are concerned, the income derived therefrom would be agricultural income In view of the fact that the forest is more than G3 years old, the areas which had thus become denuded and re+planted cannot be considered to be negligible The position therefore is that the whole of the income derived from the forest cannot be treated as non+agricultural income If the en8uiry had been directed on proper lines, it would have been possible for the Income+ ta( authorities to ascertain how much of the income is attributable to forest of spontaneous growth and how much to trees planted by the proprietors.ut no such en8uiry had been directed The e(penditure shown by the assessee for the maintenance of the forest is about Ds A,333 as against a total income of about Ds G,3332aving regard to the magnitude of this figure, it can be assumed that a substantial portion of the income must have been derived from trees planted by the proprietors themselves 's no attempt has been made by the )epartment to establish which portion of the income is attributable to forest of spontaneous growth, hence it is nothing but agricultural income
19
&. N*:' R/,,' CIT <<2%%2) 125 T*(*+ 2%). Income from &i#m '$oo"ing on Agricu#"ura# #and i no" Agricu#"ura# Income 1upreme #ourt of India in the case of CIT v Ra*a +enoy ,umar 'a$a Roy (- ITR /00) laid down the following three propositions to decide as to what constitutes agricultural income
<*) some basic operation, prior to germination, involving e(penditure of human skill and
labour on the land itself and not merely on the growths from the land, is essential to constitute agriculture Illustrative instances of such basic operations are tilling of the land, sowing or disseminating of seeds, and planting6 -/ <) subse8uent operations, ie, operations performed after the produce sprouts from the land,
eg weeding, digging the soil around the growth, removal of undesirable undergrowths, tending, pruning, cutting, felling and preservation of the plants from insects, pests and other animals by themselves would not constitute agriculture-< 2owever, in cases where the subse8uent operations are combined with basic operations, the subse8uent operations would also constitute part of the integrated activity of agriculture6 <0) activities not involving any basic operation on the land would not constitute agriculture
merely because they have relation to or connection with the land This point was considered by the !adras 2igh #ourt in B! Nagi Re..i - C2T ""77$ #8 Ta)man 7$! In this case, the assessee had shown certain income from film+shooting in his premises, which was known as Fijaya "ardens, and he used to recover charges for the same -G The assessee claimed that those charges amounted to agricultural income as the said premises were used for agricultural activities also The assessing authority, however, treated it as business income The assessee, therefore, filed three separate appeals before the Tribunal The Tribunal held against the assessee on the basis of the earlier orders passed that the income earned by the assessee by way of film+shooting charges did not amount to agricultural income 9n a reference, the 2igh #ourt observed that the assessee used to grow agricultural produces like paddy and derived income from fruit+yielding trees,etc2e earned income from rice, vegetables, fruits, etc, and, incidentally, he had also permitted film+producers to shoot their films in the said garden on payment of hire charges-EIt was the case of the assessee
20
-/ .usiness Income -< The institute of #ost accountants of India 4Han -3-5 A!!#ied direc" "a%a"ion )irectorate of 1tudies,The Institute of #ost accountants of India p -/B -G http:??wwwta(fintotalcom?1ections?B3*+Ta(+Debate?G@/?EB 26. http:??wwwta(fintotalcom?1ections?B3TT'+Ta(+Debate?E--?EB
that had it not been for the vegetation, there would not have been any occasion for the producers to shoot films in the garden and, it was because of that, that the income earned from those shooting charges amounted to agricultural income The 2igh #ourt considered whether the income earned by the assessee by permitting film producers to shoot their flms in his garden could amount to agricultural income within the meaning of section -4+'5 of the Income+ta( 'ct, @E The #ourt referred to the aforesaid decision of the 1upreme #ourt in the case of Daja .enoy Lumar 1ahas Doy in which it was emphasied that certain basic operations should be carried out alongwith subse8uent operations The 1upreme #ourt observed that if the integrated activity of the agriculturist, vi, agriculture, which includes the basic operations and the subse8uent operations, is undertaken and performed in regard to any land, that land can be said to have been used for agricultural purposes and the income derived therefrom can be said to be agricultural income derived from the land by agriculture In the very same judgment, the 1upreme #ourt also considered the other activities in relation to the land or having connection with the land including breeding and rearing of live+stock, dairy+farming, butter and cheese+making, poultry+farming, etc The 1upreme #ourt observed and considered that this e(tension was based on the dictionary meanings of the term and the definitions of “agriculture” in 0hartons %aw %e(icon The 1upreme #ourt then went on to hold that the mere fact that an activity has some connection with or is in some way dependent on land is not sufficient to bring it within the scope of the term “agriculture” 'pplying the aforesaid principles, the !adras 2igh #ourt held in $agi Deddi>s case that income earned by the assessee by way of shooting+hire charges by permitting film producers to shoot their films in his garden was not agricultural income The shooting of films is an activity which has no ne(us whatsoever with agricultural operations, or with the land, e(cept that the shooting is done on land which may be or has been agricultural land yielding some agricultural income The ne(us, as claimed by the assessee, was non+e(istent, far+fetched and
21
illusory To conclude, there is enough scope for ta(ing income from activities which are non+ agricultural in nature In fact, it is well known that agriculturists themselves do not have ta(able income, taking into account the fact that when it is divided amongst family members who are involved in agricultural operations, each one of them would have income within the e(emption limit 2owever, there are hundreds of thousands of middlemen like wholesalers, retailers, distributors, etc who earn substantial income from trading in agricultural produce as well as fruits, flowers, etc 1uch income or profits are fully ta(able under the present law and, therefore, if concerted efforts are made by the Ta( )epartment to recover ta( from them, the need for widening the ta( base to rope in agriculturists and farmers, would be eliminated
22
CHAPTER #-CONCLUSION 'gricultural income is e(empt from income ta( no matter agricultural operations are done by an industrial organisation or an individual If any industrial organisation grow crops and sale half of the goods as raw material in market and remaining further processed and sold as finish goods the income earned on first half of produce which is sold in market as raw material is totally e(empt from ta(The second half of the produce which is further processed in this case scheme of presumptive ta(ation is applicable Dule A,A',A. M B of Income ta( rules deals with such type of income Dule A' deals with Income from manufacture of rubber, A. deals with Income from manufacture of coffee and Dule B deals with Income from manufacture of tea Dule A deals generally wich says that in cases in which income is partially agriculture and partially from business the market value of the agricultural produce which has been raised by the assessee or received by him as rent in kind and which has been utilised as a raw material shall be deducted from the sale receipts and will be treated as agriculture income Demaining will be treated as non agricultural income 'ny processing done on 'gricultural produce to make it marketable is a part of agricultural operations and such amount recoved will be treated as agricultural income only 1ay for e(ample trashing of wheat, mustard, etc is part of agricultural operations only and the amount recoved will be treated as agricultural income only no matter processing takes place on on the land itself or some other place .ut in certain cases like in the case of tea, coffee, sugarcane where a major processing is being done then some part of the processed produce 4tea, coffee M sugar5 is ta(ed as non+ agricultural income and rest is e(empt as agricultural income 's per the Income Ta( 'ct 'griculture Income means income derived from land which is used for agricultural purpose If no land is being used for agriculture purpose in hydroponic system Therefore prima facie income derived from hydroponic system is not an agriculture
23
income .ut as per the latest amendment in Income Ta( 'ct in -33B “Nany income derived from saplings or seedlings grown in a nursery shall be deemed to be agriculturral income” $o !atter whether the land is urban or rural agricultural land If agricultural operations are carried out on land the income derived from sale of such agricultural produce shall be treated as agricultural income and will be e(empt from ta(
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