Agricultural income depends on actual land use; spontaneous forest produce and malikana were taxable, but rent from agricultural land stayed exempt.

Agricultural income requires land to be actually used for agricultural purposes; spontaneous forest growth without cultivation or agricultural operations does not qualify, so proceeds from forest trees were taxable. A fixed malikana arising from historical surrender of proprietary rights, and payable irrespective of agricultural use or profits, was also not agricultural income. By contrast, rent from agricultural land retained its character as agricultural income in the hands of a mortgagee in possession who was entitled to collect it, because the exemption attaches to the income itself rather than the recipient's status. The legal position distinguished taxable forest produce and malikana from exempt rent collected from agricultural land.

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Issues: (i) Whether income from the sale of forest trees growing spontaneously on land was agricultural income exempt under the Income-tax Act. (ii) Whether malikana received under the tenure in question was agricultural income. (iii) Whether rent received by the mortgagee in possession under the mortgage and lease arrangement was agricultural income exempt from tax.

Issue (i): Whether income from the sale of forest trees growing spontaneously on land was agricultural income exempt under the Income-tax Act.

Analysis: For income to fall within the definition of agricultural income, the land must be used for agricultural purposes. The expression "such land" in the relevant definition links the sub-clauses together, so the foundational requirement of agricultural user applies whether the claim is under rent or revenue derived from land or income derived from such land by agriculture. Mere spontaneous forest growth, without cultivation, skill, labour, or other measure of agricultural operation, does not satisfy that requirement.

Conclusion: The income from the sale of forest trees was not agricultural income and was assessable.

Issue (ii): Whether malikana received under the tenure in question was agricultural income.

Analysis: The malikana was a fixed annual cash payment arising from historical relinquishment of proprietary rights and not from any subsisting relationship of landlord and tenant. It was payable irrespective of whether the land was used for agriculture or yielded profits, and was enforceable in civil courts rather than revenue courts. Its source was the prior surrender of rights, not the land itself as rent or revenue derived from it.

Conclusion: The malikana was not agricultural income.

Issue (iii): Whether rent received by the mortgagee in possession under the mortgage and lease arrangement was agricultural income exempt from tax.

Analysis: Rent from agricultural land retains its character as agricultural income in the hands of the person who receives it if that person is in possession and entitled to collect it, whether as mortgagor or mortgagee. The exemption attaches to the income itself and does not depend on the character of the recipient. The rent received under the arrangement was rent of agricultural land and therefore within the exempt category.

Conclusion: The rent so received was agricultural income and was exempt from tax.

Final Conclusion: The consolidated appeals failed overall, but the legal position was that spontaneous forest produce and malikana were taxable while rent collected in possession from agricultural land retained its exempt character as agricultural income.

Ratio Decidendi: Income is agricultural only if it is derived from land actually used for agricultural purposes, and rent from agricultural land remains agricultural income in the hands of the person who receives it if that person is in possession and entitled to collect it.

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