Agricultural income test applied to specialised grass cultivation, with receipts treated as non-taxable agricultural income.

Income from growing and supplying specialised grass on agricultural land was treated as agricultural income where the operations involved cultivation activities such as irrigation, soil preparation, planting, weeding, levelling and repeated growth cycles. Applying the Supreme Court's test for agriculture, the relevant enquiry was whether basic and subsequent agricultural operations were carried out on the land, and those facts supported agricultural character. The specialised nature of the crop, the land's earlier use for another project, and the assessee's initial description of the receipts did not change that character. The receipts from the growth and sale of the grass were therefore not taxable as business or other income.

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Issues: Whether the income derived from growing and supplying specialized grass on agricultural land constituted agricultural income within the meaning of section 2(1A) of the Income-tax Act, 1961.

Analysis: The statutory definition of agricultural income covers income derived from land by agriculture and by processes ordinarily employed to render produce fit for market. Applying the test of agriculture laid down by the Supreme Court, the relevant enquiry is whether basic operations such as tilling, sowing, planting and allied cultivation activities were carried out on the land, followed by subsequent operations necessary for growth and preservation of the crop. On the facts, the land was subjected to cultivation activities including irrigation, soil preparation, planting, weeding, levelling and repeated growth cycles of the specialized grass. The fact that the grass was a specialized crop, that the land was earlier associated with another project, or that the assessee had initially described the receipts differently did not detract from the agricultural character of the operations. The existence of grass on the land at the time of takeover did not establish absence of agricultural operations.

Conclusion: The receipts from the growth and sale of specialized grass were agricultural income and were not taxable as business or other income.

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