Agricultural income from trust property is not automatically exempt under the State Act merely because section 11 relief exists under the Central Act.

Exemption for agricultural income from trust property under section 4(b) of the Tamil Nadu Agricultural Income-tax Act, 1955, must be construed independently of section 11 of the Income-tax Act, 1961. Section 11 governs exemption of non-agricultural trust income under the Central Act and does not, by itself, extend to agricultural income taxable under the State Act. The Tribunal misdirected itself by treating a section 11 exemption certificate as sufficient to grant relief under section 4(b). The agricultural income of the trust was therefore not automatically exempt on that basis, and the exemption order was set aside with the matter remitted for fresh consideration.

---

---

Issues: Whether exemption under section 4(b) of the Tamil Nadu Agricultural Income-tax Act, 1955, could be claimed for agricultural income derived from property held under trust for charitable or religious purposes merely because the trust had obtained exemption under section 11 of the Income-tax Act, 1961.

Analysis: Clause (b) of section 4 was introduced to tax agricultural income derived from trust property and its scope had to be read in the light of the constitutional scheme dividing taxing fields between the Union and the States. Agricultural income is constitutionally referable to the State List, while income other than agricultural income falls within the Union field. The phrase in section 4(b) referring to income not included under the Income-tax Act, 1961, was held to mean that the extent of exemption under the State Act must correspond to the manner in which non-agricultural income from trust property is exempted under the Income-tax Act. The Court held that section 11 of the Income-tax Act, 1961, governs only non-agricultural income from charitable or religious trusts and cannot be used to deny taxability of agricultural income under the State Act. The Tribunal had therefore misdirected itself in treating the Income-tax exemption certificate as sufficient to grant exemption under section 4(b).

Conclusion: The exemption granted by the Tribunal was unsustainable, and the agricultural income of the assessee-trust was not automatically exempt under section 4(b) on the basis of section 11 of the Income-tax Act, 1961.

Final Conclusion: The revision succeeded for the Revenue, the exemption order was set aside, and the matter was sent back for fresh consideration by the assessing authority.

Ratio Decidendi: A State provision taxing agricultural income from trust property must be construed independently of section 11 of the Income-tax Act, 1961, and exemption available for non-agricultural trust income under the Central Act does not, by itself, exempt agricultural income under the State Act.

---