Standing crop resale profit is taxable business income, not agricultural income, when the trader lacks any land interest.

Profit from the purchase and resale of a standing crop is not agricultural income where the trader has no interest in the land. Agricultural income under the Act must be derived from land by agriculture, and the relevant enquiry is the effective source of the income. A buyer of standing tobacco acquires only contractual rights to enter, harvest and remove the crop; those incidental operations do not create an agricultural nexus. The gain arises from trading activity, namely purchase at a favourable price and resale at a higher price, so it is taxable business income rather than exempt agricultural income.

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Issues: Whether profit earned by a trader who purchased a standing crop of tobacco, harvested and cured it, and resold it at a higher price constituted agricultural income exempt under the Indian Income-tax Act.

Analysis: Agricultural income under the Act is income derived from land by agriculture, and the enquiry must stop at the effective source of the income. The exemption applies to persons having an interest in the land, such as an owner, tenant, lessee, or usufructuary mortgagee, who derive income by reason of that interest. A merchant who merely purchases a standing crop acquires no interest in the land; the right to enter and remove the crop is only incidental to the contract of purchase. The profit in such a case arises from trading operations, namely purchase at a favourable price and resale at a higher price, and not from the land itself. The fact that some ancillary agricultural or harvesting operations were performed does not convert the trader's business profit into agricultural income.

Conclusion: The sum realised on resale of the tobacco was not agricultural income and was liable to tax; the answer to the referred question was against the assessee.

Ratio Decidendi: Income from the purchase and resale of a standing crop by a person having no interest in the land is business profit, not agricultural income, because the immediate and effective source of such profit is the trading transaction and not the land.

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