tenant in the

be
treated as eform of growing
crops AGRICULTURAL INCOME 85
UNIT -2(B) 4,2.2 Incomeefrom Agricultural agricultural income
instead
inthe handofofcash,,the value of crops will
CHAPTER
AGRICULTURAL INCOME On the basis of the IActivity Land India:owner).
guidelines
laid
from in
Kumar Sahas Roy 32 ITR 466 down by

4
(1957)
divided into two parts - (SC), the Supreme Court in CIT VS. Raja Benoy
Basic
agricultural activity or operation is
Operation:
the land before lIt refers to the application of
of plant i.e. human skill and labour upon
plantation, germination
irrigation and similar activities. tilling of land, sowing
, Due to of seeds,
sprouted and plants are grown. these activities seeds are
(ii) Subsequent Operation: refers to these operations which
arowth and preserve
It
4.1 Introduction: the market and the produce for
is performed rendering the produce fit faster
after the produce sprouts
the
for sale in
Agricultural Income is exempted from tax as per Sec.10(1) under the Income Tax
digging soil around the growths, removal of
of from the land i.e.,
as per Entry 82 of l: cutting, undesirable under growth
Act.1961. The Income Tax Act isa Central Tax Law and Government in India p harvesting, weeding, tending, pruning etc.
cannot be taxed by the Central
List, agricultural income Government Operations
agricultural income falls under State List (Entry 46) and State Activity (Agro or Non Agro)
to make laws with respect to taxes on agricultural income. Howe la) Mere Basic operation
exclusive power Agro Activity
is taken int
for computing tax on non-agricultural income, agricultural income (b) Mere subsequent operation
consideration which is known as "Scheme of Partial Integration of Agriculturst Subsequent operation together with Basic
Non-Agro Activity
Income"[as per the recommendations of K.N.Roy Committee]. operationAgroActivity
REMEMBER:
REMEMBER:
Any spontaneous growth from land itself i.e., without any human effort,
Agricultural income is not a part of Taxable Income but for determining tax liability, cannot be treated
as agricultural operation.
agricultural income is taken into consideration.
4,2.3 Income fromProcessing Activity or Sale:
4.2 Definition of Agricultural Income [Sec.2(1A)]: Some process has been applied to make the agricultural product grown fit for
(0)
Agricultural income means - market.
4.2.1 Any Rent or Revenue derived from Land-tt90lC0t z iqSx Such process has been performed by the cultivator or receiver of rent in Kind.
(1)
(0) The land is situated in India
(i) "Processing" implies conversion ofthe produce or rent in kind from raw form in
(i) The land is directly or indirectly used for agricultural activities or purposes. marketable form.
(i) The assessee may be the owner or tenant of the land [i.e.,the revenue REMEMBER:
derived by agricultural operations from land by tenant and rent received the income
OHLHO by the owner of the land from tenant willbe treated as If the produce sold in the market in raw form not in marketable form, then
in the hands of both tenant and agricultural income derived fromsuch product willbe treated as partly agricultural &partly non-agricultural
(iv) owner)CHIOCB08
The assessee need not be engaged in the
income.

Remuneration received by a partner fromagricultural operations (Example:

a firm engaged in agricultura 4.2.4 Income from Farm Building:
the
operations) or in the immediate vicinity of
() The building must be situated on
Rent may be in cash or in kind (i.e., rent agricultural land situated in India.
received by the owner of land trom
(84]
 86 D1rect Tax-1 Rent received by the
dwelling or storing purpose of other (3
(ü) The building should be used as
building.
sub-tenants.
mortgagee in possession of the AGRIagricultural
CULTURAL INCOME87
land from the
cultivator or receiver of rent in kis. 4) Income earned theby
(ii) The building should be occupied by the in his garden after beingowner of tea garden by
and packed.selling tealeaves grown by him
processed
The land must be either assessedto larnd revenue or alocal rate orr situated
(iv) (5) Profit made on sale of
in urban Area. owner or tenant of landstanding crop or
from
produce after harvest by cultivating
NOTE: (6) Income sale of
Urban area refers to any area - Income from sale of
tobacco leaves after being dried to them fit
Cantonmen. (7)
jaggery, make for sale.
Which is situated within the jurisdiction of any Municipality or produced by the in its where no market is there for the
(1)
board which has a population of not less
than 10,000 and
Income from
ecultivator natural condition. sugarcane
Within 8 kms. from the notified local limits.
(8) growing trade or commercial
(2) agroincome. products like jute, cotton, etc. is an
Area within the distance from local lim
| Populationof the Municipality or Can (9) Income from growing flowers aand
tonment board its of such municipality or Cantonment
(10) Plants soldlin pots are an agro
creepers is an agro income.
board treated as Urban area.
income provided basic operations areeperformed.
More than 10000 but upto 1,00,000 Upto 2 kms. (11) Any remuneration (salary, commission, etc.)
More than 1,00,000 but upto 10,00,000 Upto 6 kms. engaged in agricultural operation received by a partner from afirm
is an agro income.
More than 10,00,000 Upto 8 kms. (12) Interest on capital Ireceived by a
operation is an agro income. partnerfrom afirm engaged in agricultural
4.2.5 Income from Saplings or Seedlings:
(12) Share of profit from such firm is taken as
Any income derived from saplings or seedlings grown in a nursery is treated as agricultural income.
'Agricultural Income' (14) Income arising by sale of trees grown
on denuded parts of the forest after
Notes:
replanting and by carrying on subsequent operations is an agro income.
(15) Compensation received from insurance company for damage caused by
(1) Profit on transfer of agricultural land shall not be treated as agricultural income.
(CIT Vs. Carew &Co. Ltd.]
hailstorm tothe green leaf of the assessee's tea garden is agricultural income.
Further, no part of such compensation consists of manufacturing income
(2) Income derived from land being let out for storing agricultural produce shal as suchcompensation cannot be apportioned under Rule 8 between
not be treated as agricultural income. manufacturing income and agricultural income.
(3) Income derived from such land or building which is used for non-agricuitural (16) Any fee derived from land used for grazing of cattle, being used for agricultural
purpose (including letting for residential purpose or for the purpose of any operation, is an agro income.
business or profession) shallnot be treated as agricultural income.
(4) The land holder must be the owner or occupier of the building in case he 4.4 Instances of Non-Agricultural Income:
receives rent or revenue from the land. However, in case of cultivator or receiver 1. Profit earned from sale of agricultural land.
of rent in kind it is enough that the building was occupied by him.
ulupe 2. Receipts from TV serial shooting in farm house.
(5) There should be aclose nexus between the agricultural produce and marketable rice.
product. Income from sale of produce being entirely different from what is 3. Income by way of purchasing paddy, huling it and selling the resultant
on customers land.
raised &processed is not an agricultural income. 4. Sum received from taking care of plants transplanted
out of sugarcane.
4.3 Instances of Agricultural Income: 5. Profit made by sale of sugar manufactured
the lease of agricultural land.
(1) Income derived from the sale of seeds when the
mother plant is grown on land. en 6. Fees paid by tenant for renewal of
(2) Income from sale of coffee after being dried and 7. Income from land used for brick
making.
cured.
 88 Direct Tax-I Segregationoof
8. Income derived from
9. Salary received by an
letting out land or godown for storing
employee from any business (having
income.
income) is non agro
crops.
agricult.
4.5
Thereare
the
certain
producess marketable
Income-
or
P ar
saleablethe
tly &
be sold
AGRICULTURAL INCOME89
agricultural produces whichAgrcannoticultural Partly Non-Agricultural:
y
without
operations processi ng required. This processinofg-
as non-agricultural
treated is To make
in agricultural operation : is i.e., business
10. Dividend received from acompany engaged tea, coffee.
rubber other
or processingincomeproduces
non-agro income.
saleof
incomeand| business i.e. produces- after processioperat
incomesegregation ng ion, Therefore, from
11. Income from salt produced by flooding
the land with Sea-Water is ne 1961providethe following composite incomes. Rules 7&8 ofestheof both hagricultural
compri s
agro incCome. Income IncomeTax Ruies,
Rule Nature of
12. Income from fisheries is non-agro income.
13. Income from poultry farming is non-agro income.
Agricultural Business
Growing & manufacturing of tea
sold in In- Income Income
14, Income from dairy farming, butter &cheese making etc. is non-agro income. dia 60% 40%
15. Breeding &rearing of livestock is non-agro income. 7A Growing &manutacturing of rubber sold in
India 65% 35%
16. Interest received by a money lender in the form of agricultural produce is
non-agro income. 7B(1) Sale offcoffee grown &cured by seller in In-
17, Profit on sale of standing crops after harvest, where such crops were dia 75% 25%
acquired through purchase is non-agro income. R/2)Sale of coffee grown, cured, roasted and
60% 40%
18. Royalty income from mines is non-agro income. arounded by the seller with or without mix
19. Remuneration to a Director or Managing Director from a company engaged ing chicory in India.
in agricultural businessis non-agro income. The provision holds well even 7 For other composite Business (e.g.
when such remuneration is on the basis of certain percentage of net profit. grow-| [Market Value of| Sale value of f
ing sugarcane and manufacturing of sug-|
20. Remuneration to amanaging agent, on the basis of certain percentage of ar, growing cotton manufacturing
Agricultural pro- nal Product )
net profit, from a company(engaged in agricultural business) is non-agro textiles,duce (-) cost ofmarket value of
income. growing jute, manufacturing jute bags,|growing agricul-agricultural pro
growing of tomatoes and manufacturing of tural produce] duce (-) other
21. Income earned by a cultivator from conversion of sugarcane (raised on own
land) to jaggery is non-agro income to the extent to which income is related tomato sauce, growing potato & manufac expenses.
to such conversion only. This is because sugarcane itself is
marketable. turing potato chips, etc.
22. Interest on arrears of rent receivable in respect of
agricultural land is non 4.5.1 Agricultural Income &Tax Treatment
agro income.
ILLUSTRATION 1:
23. Income from a land situated outside India is
under the head"Income from other non-agro income and taxable State with reasons whether the following are agricultural income:
sources"
24. Annuity received by a person in (a) Income from the sale of replanted trees where the denuded parts of the forest are
land is non-agro income. consideration of transfer of agricultural replanted and subsequent operations in forestry are caried out.
25. Income on supply of water for (b) Income from sale of trees of forest which are of spontaneous growth and in relation
The provision holds good even agricultural operation is non-agro income.
when such income is received of which forestry operations alone are performed.
of agro-income. in the form cattle required for agricultural
() Income derived from lease of land from grazing of
26. Income from sale of operations.
trees and grasses grown
human effort) is non-agro income. spontaneously (without any
 90 |Dret Tax-!
Particulars
G Solution bJDividend received by Nature of Income AGRICULTURAL INCOME91
Reasons shareholder from a aNot
an
Particulars
(a Income from the sale of An
Nature of Incomne
agricultural income Income from replanted tree
arises by some basic agri ny
compa- income
engaged in agricultural
lactivities.
agricultural|Cause
tis not an
its
Reasons
agriculturalandincome be
immediate
income is hiseffective
replanted trees
cultural performance, not of SOurce of
spontaneous growth. |holding the company, not theshareag
in
b) ncome from sale of for-Not an agricultural income No basic agricultural (cAnnuity received by a ricultural land of the
est trees which are of spon
taneous growth land, sowing of seeds etc
oper
ations like preparation of personin consideration
Non-agricultural| Annuitransferty receivedagriculturalcompany.
lagricultural land transferredofincome for
es out of an
of
in consideration
land aris
were being performed for to another person.
agreement. It has
no immediate
the growth of trees. connection with land.
Q income derived from An agricutural income It is agricultural income as it
(dJAmount received by
lease cf and for grazing of is purely incidental to agri aNot an agricultural The process of
attle required for agricul culture.
cultivator from sale of jag- | income converting from
gery converted from sugar- Sugarcane to jaggery would not be
tural operations
cane raised on own land agricultural process and income
LLUSTRATION 2: attributable to the process of con
Sate with reasons which of the following incomes are agricultural in nature: verting sugarcane to jaggery would
not be an agricultural income.
(a) Salary received by an acting partner from a firm the entire income of which is ILLUSTRATION 3:
agricultural income. Gtate with reasons which of the following
(b) Dividend received by ashareholder from a company engaged in agricultural incomes are agricultural in nature:
(a) Dividend received from an Indian company
activities whose entire income is derived from
agricultural operations.
(c) Annuity received by a person in consideration of agricultural land transferred to (b) Income received as interest on arrears of rent receivable in respect of
another person. agricultural
land.
(d) Amount received by a cultivator from sale of jaggery converted from sugarcane
raised on own land. (c) Income derived from lease of land for grazing of cattle required for agricultural
operations.
O Solution) O Solution
Particulars Nature of Income Reasons Reasons
(a)Salary received by an An agricultural Nature of Income
Salary received by acting partner immedi
acting partner from a firm income (a) Not anagricultural incomeIt is not an agricultural income because hishis share
from a firm come from agricultural ate and effective source of income is
related with agricultural op operations and salary to partner holding in the company, not the
agricultural land of
eration.
represents a special share of the the company.
because it is neither
profit of the firm Not an agricultural income It is not an agricultural income
(9) derived from land.
rent nor revenue
 92DirectTax-1 it isspurely (a) Intereston arrears of
income It is
agricultural income as
incidental to Compensation
rent payable in
respect of
AGRICULTURAL INCOME93
green leaves of1received frominsurance co.for agricultural land.
(c) Anagricultural agriculture (b)
assessee'ssteeagarden. damages caused by hailstorm to the
in nature: Agricultural income from
ILLUSTRATION4: incomes are agricultural land situated in
State with reasons
which of
received
the following
by a shareholder
from a company engaged in
agricultural
OSolution Bangladesh.
(a) Dividend
income. at Nepal. Nature of Income
product from a land situated
(b) Profit on sale of agricultural (a) Not an agricultural lincome It is not an Reasons
(c) Income from growing flowers
and creepers.
(d) Salary received by an active partner from afirm the entire income of which comes nor revenueagricultural
derived
income as it is neither rent
An agricultural income from land.
from agriculture operations.
(b)
Compensation
for
is received from
insurance company
village in India. damages caused byhailstorms to the
le) Profit on sale of agro-land in a leaves following part of the green
() Rentreceived by way of leasing ofalandfor grazing of cattle requiredfor agricultural
Notan agricultural inCome As per Sec. assessee's tea-garden.
2(1A) of Income Tax Act, land should be
operations. situated in India. Otherwise the income will not be
O Solution) treated as agricultural income.
APartial integration of agricultural and
Nature of Income Reasons
OR,Impact of Agricultural Income fornon-agriculturalofincome
(a) Not an agricultural income. His immediate and effective source of income is hie Non-Agricultural Income:
Computation Tax on
shareholding in the company not the agricultural Anricultural income from Indian land is fully exempted from tax as per Sec.10(1). But if an
land. Ccessee has non-agricultural income as wellas agricultural income, then such agricultural
(b) Not anagricultural income As per section 2(1A) of Income Tax Act, land should income is to be included in Taxable Income or, Total Income for the purpose of computation
be situated in India, otherwise the income will not of tax on non-agricultural income. This is known as 'Partial integration of agricultural
be treated as agricultural land. income with Non-Agricultural income' or indirect way of taxing agricultural income. This
is done only if the following twO conditions are satisfied
(c) Agricultural income |As it is agricultural activity.
(d) Agricultural income Salary received by an acting partner from a firm (1) Agricultural income exceeds Rs.5,000 and
comes from agricultural operation and salary to (iü) Non-agricultural income of the assessee (in case of Individual, Hindu undivided
partner represents aspecialshare of profit if the firm. family, AsSSOciation of person or, Body ofindividuals, Artificial Juridical person)
(e) Not anagricultural income Land is capital asset in nature. Sale of any exceeds the maximum exemption limit then the following steps should be
capital followed to calculate the tax:
asset is chargeable under the head' Capital Gains. calculate the tax on
() Agricultural income
Rent received by way of leasing of a land for graz Step l: Add Agricultural income with non-agricultural income and Non-Agricultural
theaggregate as if it is the total income, i.e. Tax on (Agricultural lncome +
ingof cattle required for agricultural operations Income)
is an agricultural income as it is purely related to maximum exemption limit available in the case of
agriculture Step ll: Add Agricultural income to the Tax on
amount as if it is the total income i.e.
ILLUSTRATION 5: theassessee and compute tax or such
limit)
(Agricultural Income + Maximum Exemption
Can the following items be
treated as agricultural income? Step lll: Tax of step 1-Tax of step 2
Step lV: Add Health &Education Cess 4%.
 AGRICULTURAL INCOME95
4 DirectTax Particulars
agricultural land in Punjab
ILLUSTRATION6: alsoan
factory. He has availablefor the previous year which is |Profit &gains of Business or profession
Amount(Rs.) Amount(Rs.)

Mr. Royis
usedfor
theowner of a chipsfollowingdata are
potato.The
producing
ofchips
2023-24.
- Rs.9,00,000
BusinessIncome
Grosstotalincome 5.95,000
Saleproceeds
forproducing
Cultivationexpenses
Market value ofexpenses
Manufacturing
potato

forproducing
chips transferred
chips -Rs.2,00,000
- Rs.70,000
tofactory and used.as raw material - Rs.2,50,000
Less:Deduction as per Chapter VIA
TaxableIncome-
5,95,000
Nil
5,95,000
Calculationfor
Workings:Cal Agro Income& Non- Agro
for
income of Mr. Roy the A/yr. Income:
Compute both agro
income & non -agro 2024-25. Basis of
Agro Income
Business
Particulars
OSolution) splitting Details (in Rs.)
Income
income of Mr. Roy for the A
Computation of agro-income &non-agro 2024-25, Tea
(in Rs.)

relating to P/Y2023-24. Sale Price

Amount(Rs.) 12,00,000
Particulars Amount(Rs.) Growing and Manufacturing
Income 4,00,000
Non-AgroIncome Business expenses
9,00,000
|Sale proceeds ofchips ) Selling expenses L00,000
to factory 2,50,000
Less: Market value of chips transferred Net Income Rule 8
Z0,000 3,20,000 7,00,000 4,20,000 2,80,000
Manufacturing expenses
5,80,000 Rubber (60:40)
Business Income
Sale Price 15,00,000
Agricultural Income
Market value of chips transferred to factory 2,50,000 ) Growing and manufacturing 5,00,000
expenses
Less: Cultivation Expenses 2,00,000
() Selling expenses 1.00,000
Agro Income- 50,000
Net Income Rule 7A 9,00,000 5,85,000 3,15,000
ILLUSTRATION Z:
(65:35) 10,05,000 5,95,000
Ms. Panja, engaged in growing and manufacturing of tea &rubber, furnished the following Taxable
information for the P/Y 2023-24. Compute taxable income for the AY 2024-25. Fully exempted
Income
as per Sec. 10(1)
Tea Rubber
Sale Price
Rs.12,00,000 Rs.15,00,000 ILLUSTRATION 8:
Growing and manufacturing expenses tomato sauce. From the following information
Rs.4,00,000 Rs.5,00,000 Mr. Das grows tomato for manufacturing A/Y 2024-2025.
Selling expenses
Rs.1,00,000 Rs.1,00,000
Compute his income (both agro &non-agro) for the Rs.50,00,000
Sale price of tomato sauce
O Solution) Cost of cultivation of tomato (10,000 kgs.)
Rs.12,00,000

Computationto of taxable income of Ms. Panja, aresident Tomato used for manufacturingsauce (7000 kgs) Rs.6,00,000
25 relating PAY 2023-24. individual, for the AY 202 Tomato sold in the market (3000 kgs) Rs.6,00,000
Cost of processing
 96 Drect Tax-!

OSolution Computation of
taxable income of Mrs. Pan,
Computation of lncome of Mr..Das aresident Individual, for the A/Y 2024-25 for the AN AGRICULTURAL INCOME97
to PY 2023-24.
relating Particulars
Business
2024-25, relating tooPY 2023-24.
Manufacturing/ Agricultura Saleofsugar
Income( Agricuitural Income
6,00,000Rs.)
Particulars Details Business Income
(in Rs.) Income
(in Rs.)
|NotionalI sale or market
transferred to factory
cprice of sugarcane (Rs.)

Sales 50,00,000 Total revenue --- 1,00,000

Notional sale of tomato used in| (6,00,000 X7000)
6,00,000 Less: Total expenses
the process of manufacturing of sauce 3000 14,00,000 Market price of sugarcane
6,00,000 1,00,000
Total Revenue
transferred
50,00,000 factory for use as raw material 1,00,000
Less:Total Expenses 20,00,000 Conversion cost
Cost of cultivation Cultivation expenses 1,00,000
Cost of processing 12,00,000 50,000
Market value of tomato used for
6,00,000 4,00,000 50,000
(600000 X7000) 14,00,000 Taxable Income Exempted from tax
manufacturing sauce
3000 ILLUSTRATION 10: Sec.10(1)
Income
Me Rose (50 years)
30,00,000 furnished the following information for the PY
8,00,000 taxable income for the A/Y 2024-2025. 2023-24. Compute his
ILLUSTRATION 9:
Income from growing &manufacturing of tea
Mrs. Pan (40years) who is the owner of asugar Rs.3,00,000
India, furnishes the following particulars factory and also theproducer of sugarcane in Income from growing &manufacturing of Rubber
Rs.2,00,000
of Mrs. Pan for the A/N relating to P/Y 2023-24. Compute taxable Short term Capital gain by transfer of
2024-25. income building Rs.90,000
Sale of sugar O Solution
Market price of sugarcane transferred to Rs.6,00,000 Computation of Taxable Income of Mr. Bose, aresident individualfor the A/Y 2024-25.
factory for use as raw material relating to PY 2023-2024.
Cultivation expenses Rs.1,00,000
Rs.50,000 Particulars Amount(Rs.) Amount(Rs.)
Conversion cost Profits &gains from Business or Profession
Rs.1,00,000
OSolution) Income from growing and manufacturing of tea[3L X40%]
|Income fromgrowing and manufacturing of Rubber(2L X35%0)
1,20,000
70,000 1,90,000
Capital gains:
STCG 90,000
2,80,000
Gross Total Income
Nil
Less; Deduction as per chapter VIA
2,80,000
Taxable income
 AGPICULTURAL INCOME99
Particulars
Income
Non-agro
Nature of Income Reasons
ofKolkata earns an in-|Not an agricultural income
Agroand
Caculatonfor
Workings:
Basisof
splitting
Agro
Business
Income(lRs.)Income(R
(c)P
come
of from agricultural Land is situated outside
India
owned by him and sit-
1,80,000 land
Particularns
manufacturing
Rule&
130,000
1,20,000 uatedin Bangladesh.

Income from growing

and (60:40)
3,10,000
70,000 () Qa partner of a tea plan-| () 60% of such Composite| As per Rule &
tation firm receives a salary income shall be treated as
oftea
and
manufacturing
Rule 7A
(65:35)
1,90,000 offromthe firm besides hisagricultural income and
Income from growing
in the frm
ofrubber share of prohts
4.7MasterProblems: reasons. determined after deducting (i) the balance 40% shall be
Give
agricultural incomes? treated as taxable business
folowing incomes sellingtea manufactured
suchsalary.
Prob.No.1;Are the
garden in Darjeeling
and earns by from the income.
(a) Yowns atea receives on account | Not an Agricultural Income The assessee iss not perform-
produced in the garden. (e) R
green leaves whose entire income
is
derived from loan on the ing any agricultural proce
dividend from a
company of interest on
(b) Zrecerves a
agricutural operation only. mortgage of land belonging dures.
owned by him and situated used for
from agricultural land to borrower and
(c) Pof Kolkata earns an income of
agricultural purpose.
in Bangladesh. firm besides hi. Searns an income from Agricultural Income It is purely incidental to
firm,receives a salary of from the
(d) Qa partner of a tea plantation deducting such salary.
share of profits in the firm determined
after lease of land for grazing of agriculture
belonaing to
(e) Rreceives on acCOunt of interest
on loan on the mortgage of land cattle required for agricul
borrower and used for agricultural purpose. tural operations.
It is neither rent nor revenue
cattle required for agricultural (a) Treceives on account of| Not an Agricultural Income
(9 Searns an incomefrom lease of land for grazing of derived from land.
operations. interest on arrears of rent
( Treceives on acCount of interest on arrears of rent payable
by tenants in respect of payable by tenants in re
land used by them for agricultural operations. spect of land used by them
|foragricultural operations.
O Solution manufactures coffee in India. From the following
Prob, No.2: Mr. Dutta grows and
Dutta for the AY 2024-2025.
Particulars Nature of Income Reasons information compute Gross Total income of Mr.
growing and manufacturing of coffee in India
iaj Y ownsatea garden in ()60% of income will be ag-|As per Rule 8 Income from (Cured, Roasted) business of
|Darjeelingarnd earns by sel- ricultural income, 5,00,000
ing tea manufactured from Rs.2,00,000
Income from garment business
the green leaves produced|) 40% should be non -ag Rs.3,00,000
in the garden. ricultural. Loss from stationery business
(b) Z receives a dividend Rs.50,000
Not an agricultural income His effective source of in Income from house property
from a company whose en Rs.40,000
come is his shareholding in Rent from vacant land
tire income is derived from
|agricultural operation only the company, not the agri Interest from savings bank account Rs.15,000
cultural land.
 AGRICULTURAL INCOME 101
Rs10,000(includinglastyear'ssinterest Rs2,000)
Particulars Amount
Amount Amount
100|Dredl a (Rs.) (Rs.) (Rs.)
issue) Rs40,000 Incomefrom salaries
NSC(Vl 4,00,000
Interestfrom property
issue) Rs30,000 Incomefrom house 2,00,000
NSC(VI Rs.23,000) Incomefrom business 3,00,000
Purchaseaf
agroincomeof gain
ContibutiontoPPF
(out of term capital
Long-Transfer of securities 50,000
-Transfer of gold 10,000 60,000
gain
O Solution resident Individual, for thhe Shortterm capitalsecurities (1l|A)
of Mr.
Dutta, a AN -Transfer of 20,000
Total income -Transfer ofjewellery 30,000 50,000 1,10,000
Computationof Gross 2023-2024. sources
Amount(Rs.) Income from other
202425,relating
toPY Amount(Rs.) (a) Winning from house
race 30,000
Purticuars
50,000 (b) Bank interest 8,000 38,000
70,000
property |Agriculturalincome from Indian land
Incorsefrom bocse
Businessor profession 2,00,000
Préts &gainsof manufacturing O Solution
conefron busipess of growing&
5,00,000) Camputation of Gross Total income of Mr. Naga resident individual for the AY 2024
a cofee(0% of 2.00.000 2023-24.
basiness 25 relating to the previous year
Prot rom 2rment 4,00,000 Amount (Rs.)
Particulars Amount (Rs.)
3,00,000 1,00,000 4,00,000
business Income under the head salaries
Loss from stationery 2,00,000
Income from house property
IcoEe om oter sources 3,00,000
40,000 Profit/gains from business or profession
Reat irom Vacant land
15,000 |Capital gains:
Interest from savings bank Alc Long-term capital gain
10,000 65,000
Irterest from NSC --Transfer of securities 50,000
Gross Total Income 2,15,000 10,000 60,000
-- Transfer of gold
NOTES: Short-term capital gain
---Transfer of securities (IIIA) 20,000
Since agricutural income is exempted from tax as per Sec.10 (1), any amount 30,000 50,000
ivested in PPF out of thisincome will not avail the benefit of deduction U/S 80C. --Transfer from jewellery
The proportion of income from sale of growing and manufacturing coffee
Income from other sources
(cured, roasted etc) be (6040) ie. agro income 60% andnon-agro income 400. 30,000
Winning from horse race
Prob. No.3: Mr. Nag (Age 40 years) provides the 8,000 38,000
year 2023-24. Compute Gross Total following information relating to prev Bank Interest
10,48,000
income for AY 2024-25. Gross Total Income
Solved (Calcutta Unlversity)
4.8 Past Years' Honours Course Paper
following incomes are treated as agricultural
DNO.1: Discuss,with reasons, whether the
cOme for the purpose of income tax. [2006]
 earned from the sale of AGRICULTURAL INCOME103
purchased by (e) Profit
102| Drect Tax-! selling rice produced fromthe paddy
assessee. OSolution agricultural land.
()
Income by way of agriculturalland.
from the sale of spontaneous growth.
Profitearned Particulars
from the sale of wild grass of Nature of Income
Profit earmed and manufactured bythe Incomeearned from the (i)
(ii)
Income earned from
the sale of tea
grown
landsituated.at
assessee. (a)
grown and
60% of such
com-As
Reasons
per Rule 8
(v) agricultural producefrom a Bangladesh. salee of tea man-posite income shall be treat-
Profitearned by selling ufactured by the assessee ed as
(v)
and
agricultural income
G Solution (i) The balance
Reasons 40% shall be
Nature of Income
Particulars
No agricultural operations treated as taxable business
an agricultural income
) Income by way of sell- Not are involved here. income.
ing rice produced from (b)
Income from growing Agricultural income Basic andsubsequent oper
the paddy purchased fAowers and creepers
ations are involved
by the assessee. from agriculture Not an agricultural income
agricultural income Profit not derived from Agri (c)Income The land is situated outside
() Proft earned from sale Not an in Ban
of agricultural land.
cultural land from a land situated India

Not an agricultural income Activities not involving any gladesh.

(ü) Profit earned from the
basicoperations on the land dlnterest on capital re-|Agricultural income In view of the Supreme
sale of wild grass of
spontaneous growth ceived bya partner from the Court judgement in CIT vs.
firm engaged in agricultural
R.M.Chidambaram Pillai, it is
composite As per Rule 8
(iv) Income earned from ) 60% of such now settled law that salary,
the sale of tea qrown income shall be treated as operations
interest, etc. received by the
and manufactured by agricultural income and
partners are nothing but
the assessee (i)the balance 40% shall be
part of the total profit of the
treated as taxable business
firm
income. Profit not derived from Agri
The land is situated outside (e)Profit earned from the Not an agricultural income cultural land
|() Income from Agricul-Not an agricultural income
ture from a land situat India. |sale of agricultural land. for
ed in Bangladesh. Prob.No,4: Mr. Rajnita Bose is 60 years old and furnished the following information
2024-25.
taxable income for the assessment year
Compute her
Prob.No.2: Give five examples of non-agricultural income which apparently seems to be tne previousyear 2023-24.
agricultural income. [2009] [2015]
manufacturingTea Rs.1,20,000.
Prob.No.3: State with reasons in brief whether the following incomes are agricultural Income from growing and
income or not: (2012] manufacturing Rubber Rs.2,00,000.
Income from growing and
(a) Income earned from the sale of tea grown and manufactured by the
assessee.
(b) Income from growing flowers and creepers. O Solution
(c) Profit earned from selling agricultural products from a land situated at
Bangladesh.
(d) Interest on capital received by a partner from the firm
operations. engaged in agricultural
 AGRICULTURAL INCOME 105
(b) Computation of taxable income
resident individual for thee fortthe A/Y 2024-25 relating to of Ms. Krishna Daripa,
P/Y 2023-24. a resident individual,
104/DirectTax-1 Rainita Bose, a AlY
incomeof Ms. Particulars
taxable
Computation of P/Y2023-24.
relatingto Particulars
Amount(Rs.) Profitsaand gains fromnbusiness or profession Amount(Rs.) Amount(Rs.)

2024-25
SaleofTea
[1,20,000x 40%] 48,000 15,00,000
from business
manufacturingofTea [2,00,000x 35%] 70,000 Growing and Manufacturing expenses
Profitsandgains of 5,00,000 10,00,000
Less:
growingand
manufacturing of
Rubber 1,18,000
Incomefrom &
tea. 6,00,000
growing
Incomefrom Nil Loss: 60%as agricultural income 4,00,000
GrossTotalIncome
ChapterVIA 1,18,000 Income ---
asper Gross total Ni
Less:Deduction the following are Chapter VIA
TaxableIncome brief whether agricultural Less: Deduction as per 4,00,000
State with reasons in Taxable income ---
Prob.No.5: (a) income:
agriculturalland.
from sale of
(0 Profit earned situated in Banaladesh
NOTE:
Imanufactured in India shall be
Income from agriculture from a land 8, 60% ofFthe income from sale of tea grown and
Under Ruleagricultural
(i) from the paddy income and balance 40% shall be treated as business income.
of selling rice produced treated.as
(ii) Income by way assessee. the following incomes are treated as agricultural income
for the
purchased by the Prob.No.6: State whether
manufacturing of fea purpose of Income
tax: [20191
Krishna Daripa, engaged in growing and 2023-24: requisition of land which has
(b) Ms. for the previous year Compensation received from the Government for the
furnished the following information (a) purposes.louotsbde
been used for agricultural
Sale of Tea- Rs. 15,00,000 major income constitutes agricultural
expenses of tea - Rs.5,00,000 (hl Dividend received from a company whose
Growing and manufacturing income.
Krishna Daripa for the A.Y.2024 spontaneous growth.
You are required to compute the taxable income of Ms. (c) Profit earned from the sale of wild grass
of
25. (2017] of tea grown and manufactured by the assessee.
(d) Income earned from the sal- assessee.
O Solution) al from the paddy purchased by the
(e)lncome by way of selling rice produced
Reasons
Particulars Nature of Income
Profit not derived from agri
Solution
Profit earned from sale of Not an agricultural income
ricultural land. Cultural land (a) Agricultural Income eluiupltotiotboviseshsbi
Income from Agricul |Not an agicultural income The land is situated outside (b) Non-Agricultural Income
efrom a land situated in India. (c) Non-Agricultural Income
Income- 40%
gladesh. -60% &Non- Agricultural
ncome by way of sell |Not an agricultural income No agricultural operations (d) Agricultural Income
ce produced from the are involved here. (e) Non- Agricultural Income [2021]eestotsb
vpurchased by the income.
Prob.No.7: Define agricultural and also the percentage of
ee.
Partially Agricultural Income'
Prob.No.8: Mention any one income! [2022]o
income to be treated as 'agricultural
 received afrom AGPICULTURAL INCOME 107
106|Direct Tax-1
Examination Problems
Interest
liv)agricultural purpose. defaulting tenant to whorm an agricultural land is let
Access to Income earned by sale of forest out for
4.9 Ready University of Calcutta Problem No, v) trees not grown
with reasons in brief whether the
Particulars
Non-agro In
(Year)
2006 1
3.State

) Income
from fisheriee following arespont aneouslyincome.
agricultural .
Identification of Agroand 2012 3 Income from growing off flowers
(i)
come 2017 5(a) Income from growing and
2019 6 (iüi)
Income from sale of fruits and manufacture of coffee
flowers
4
(iv) grown spontaneously in the
2015 growing of tea garden.
Determination of Taxable
Income w) Income from
2017 5(b) AFromthefollowinginformation compute total agricultural and non-agricultural income
2009 2
Theoretical questions
of Mr.Pyne.
7 from
2021
() Income selling out agricultural land which is used to
2022 Rs.10,000 setting up a factory-
from sale of agricultural product grown by the
(i) Income assessee---Rs.15,000
4.10 Exercise: (Do It Yourself!) Gii) 0ncome from poultry farming--Rs.9000
Theoretical Area:
agricultural income. (iv) Income from mines-Rs.20,000
1. What is Agricultural Income? Give examples of fromn land used for brick
2, What are the conditions for treatment of an income as
an agricultural inCome? (v) Income
Rs.15,000, Non-agro income- Rs.51,000]
making-Rs.12,000[ANS:-- Agro income-
3. What is partly agricultural income?Give examples. Mr. Nag furnishes the following information for the P.Y 2023-24.
5.
4. State the taxability of agricultural income. Amount(Rs.)
5. "Agricultural income is fully exempt from tax u/s 10(1). However it is taken for Income from H.P 2,00,000
aggregation with other income for the purpose of calculating tax"Discuss.
Growingand manufacturing of tea from Indian land 4,00,000
6. Give examples of non-agricultural income
Practiçal Area: Compute taxable income for the Assessment Year 2024-25. [ANST- Rs.3,60,000]
P.Y 2023-24. Compute taxable
1. State with reasons in brief whether the following are agricultural income: 6. Mr. Jana furnishes the following information for the
income for the assessment year 2024-25.
(i) Income earned by sale of jaggery converted from sugarcane raised and grown in LTCG-Rs.30,000,
own land.
(ii) Share of profit received from a firm in which the assessee is a partner. Winning from camel race- Rs.20,000,
(ii) Dividend received from anagriculturalcompany. STCG(111A)- Rs.10,000,
Rs.2,10,000
(iv) Income from setting out land for grazing of cattle used for agricultural operation. Income from stationery business- Rs.2,70,000]
Land- Rs.50,000. [ANS--TI-
(v) Income received by selling out land for grazing of cattle used for diary firming. Agro incomefrom Indian the P/Y 2023-24. Compute
taxable
2. Can the following incomes be treated as the following information for
agricultural income? 1. Mr. Ghosh furnishes
() Compensation received by the assessee from the insurance 2024-25.
income for the assessment Year
green tea leaves due to hailstorm. company for damage or Rubber-Rs.5,00,000,
0 Manufacturing of cured-Rs.3,50,000
(i) Income from growing and and
manufacture of tea (i) Manufacturing of coffee grown
(iii) Income from growing and
manufacture of rubber (i) Manufacturing of tea-- Rs.7,00,000 [ANS-TI-
Rs.5,42,500]
(iv) Sale of f plants from
nurseryy-Rs.1,00,000