Agricultural Income

Sec 10(1) exempts agricultural Income from Income

Tax Act -1961.
By virtue of sec-2(1A) , The Expression Agricultural
Income means:
a)Rent or revenue should be derived from land.
b)Income derived from agricultural land by
agricultural operations.
c)Income derived from farm building.
NOTE: Agriculture is not merely includes food &
grains but also the performance of basic &
subsequent services

Basic Concepts as per sec 2(A)
Rent or revenue should be derived from land(cash
or kind)
The land is one which is situated in India(if the
land is situated in a foreign country , this condition
is not applicable)
The land is used for agricultural purpose.
Agriculture & Agricultural purpose has not been
defined in the act.
But some basic operations like tilling land , sowing
seeds , planting and similar kind of operations
have been dealt with in the sec 2(1A).


Subsequent Operations like procedures done after
sprouts arise like weeding , digging the soil around
the growth , and other such activities /operations
which foster & preserve the growth for marketability
is dealt in sec 2(1A).
Any income derived by agriculture from land situated
in India & is used for agriculture.
Any income derived by a cultivator or receiver of rent-
in-kind of any process ordinarily employed to render
the produce raised or received by him to make it fit to
be taken to market.
Any income derived by land by sale by 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 mentioned as
above.
FACTS OF CASE 1
A is cultivator sold his standing crop to B for
R.s.25000.
B sold it to C for R.s.35000.
C harvested the crop but couldn't render the
produce to market due to illness and sold it to D.
D render the produce fit to be taken to the
market
and earned the profit.

Question:
Whether the incomes of A,B,C and D are subject to
income Tax?






Solution:
A exempted from tax according to sec-
10(1).Because A done basic operation
according to sec-2(1A).
B is not exempted because the profit doesnt
comes under sec-2(1A).
C is exempted from tax according to sec-
10(1).Because by harvesting he performed
subsequent operation according to sec 2(1A)
D is also exempted because he rendered the
produce fit to be taken to the market.


Facts of case -2
ABC limited carried on to business of
manufacturing and selling of tea.
For purpose of affording shade to its tea
business company use to grow grevillea trees
in its tea estates.
Some trees became useless.
Company felled those useless trees and sold
the timber as firewood .

Question:
Do the sale proceeds constitute agriculture
income?

Solution:
It is notconsidered as agriculture income.this
income is considered as capital gain income as
per sec2(47).because these were grown for
longer period of time for the purpose of
providing shade to tea plantation.