Agricultural income classification turns on whether processing is only market-preparatory, not a distinct manufacturing operation.

Income from the sale of latex converted into sole crepe retained its character as agricultural income because the process was found to be only that ordinarily employed to make the produce fit for market. The Court accepted the Tribunal's factual finding that the conversion was not a distinct manufacturing operation and did not go beyond what was necessary for marketing. On that basis, the income was held to fall within agricultural income under the Act and the issue was answered in favour of the assessee.

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Issues: Whether the income from the sale of latex after its conversion into sole crepe constituted agricultural income under section 2(1)(b)(ii) of the Indian Income-tax Act, 1922.

Analysis: Agricultural income under the Act covers income derived from land only where the agricultural produce is subjected to a process ordinarily employed by a cultivator to render it fit to be taken to market. The crucial inquiry was whether the conversion of latex into sole crepe was merely a market-preparatory process or a manufacturing process going beyond what was necessary for marketing. The Tribunal treated the process as one for making the produce marketable and applied the principle that latex converted into a saleable rubber product may still retain its agricultural character. The Court accepted that the Tribunal's finding, on the material before it, was that the process used was not more than what was necessary to render the produce fit for market.

Conclusion: The income from the sale of latex after conversion into sole crepe was held to be agricultural income, and the question was answered in the affirmative in favour of the assessee.

Ratio Decidendi: Where the process applied to agricultural produce is found, on the facts, to be ordinarily employed to render the produce fit to be taken to market and not to amount to a distinct manufacturing operation, the resulting income retains the character of agricultural income.

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