Agricultural income exemption: rents from land remain tax-exempt even if received by a money lender carrying on business.

The article examines whether rents and profit-rental received under a zarpeshgi lease and usufructuary mortgage qualify as agricultural income and are therefore excluded from tax. It applies the principle that receipts which are by statute defined as agricultural income fall outside the charge of the Income-tax Act regardless of the recipient's commercial character; statutory exemptions operate notwithstanding the taxpayer's engagement in a money lending business. The analysis distinguishes cases where characterization depends on business purpose, and concludes these receipts retain their agricultural character and remain exempt from income tax.

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Issues: Whether the sum of Rs. 91,283 received under the zarpeshgi lease and usufructuary mortgage is "agricultural income" within the meaning of the Income-tax Act and therefore exempt from income tax, or whether it is taxable as business profits of the money-lending business.

Analysis: The receipts in question consist of rents and profit-rental derived from land used for agricultural purposes and assessed to land revenue; such receipts fall within the definition of "agricultural income" in Section 2(1)(a) of the Income-tax Act and are prima facie excluded from the operation of the Act by Section 4(3). The contention that the exemption is lost because the recipient carries on a money-lending business and received the rents in the course of that business is examined against Section 4(1) and Section 6, both of which are expressly qualified by "save as hereinafter provided" or "save as otherwise provided by this Act." The Court notes that the Act confers an absolute exemption on agricultural income irrespective of the character of the recipient; income which is by statute excluded from taxation remains exempt even if received by a person engaged in a taxable business. Analogous authorities are considered only to distinguish cases where the nature of receipt (income v. capital) depends on the recipient's business; here the item is admitted to be agricultural income and is therefore outside the charge to tax.

Conclusion: The sum of Rs. 91,283 is agricultural income and is exempt from income tax; the appeal is dismissed.

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