Agricultural income test distinguishes spontaneous natural growth from statutory interest on arrears of agricultural rent.

Agricultural income under the Income-tax Act, 1922 requires rent or revenue derived from land used for agricultural purposes, so income from fisheries and the sale of toddy, grass, moonj, patawar, forest trees and spontaneously growing mangoes was not treated as agricultural income where no cultivation or human contribution was shown. By contrast, interest recovered on arrears of rent of agricultural land was treated as part of revenue derived from land, because it arose as a statutory incident of the agricultural tenancy and the rent arrears. The article therefore distinguishes spontaneous natural produce from income traceable to agricultural land through the rent relationship.

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Issues: (i) Whether income from fisheries and from sale of toddy, grass, moonj, patawar, forest trees and mangoes growing spontaneously in land assessed to land revenue was agricultural income within the meaning of Section 2(1)(a) of the Income-tax Act, 1922 and exempt under Section 4(3)(viii) of the Income-tax Act, 1922. (ii) Whether interest realised on arrears of rent of agricultural land was agricultural income within the meaning of Section 2(1)(a) of the Income-tax Act, 1922 and exempt under Section 4(3)(viii) of the Income-tax Act, 1922.

Issue (i): Whether income from fisheries and from sale of toddy, grass, moonj, patawar, forest trees and mangoes growing spontaneously in land assessed to land revenue was agricultural income within the meaning of Section 2(1)(a) of the Income-tax Act, 1922 and exempt under Section 4(3)(viii) of the Income-tax Act, 1922.

Analysis: Agricultural income must be rent or revenue derived from land used for agricultural purposes. The mere fact that land is assessed to land revenue is insufficient unless the income is shown to be derived from land used for agricultural purposes. Income from trees and grass of spontaneous growth, without human contribution by way of cultivation, is not income derived from land used for agricultural purposes.

Conclusion: The question was answered in the negative and against the assessee.

Issue (ii): Whether interest realised on arrears of rent of agricultural land was agricultural income within the meaning of Section 2(1)(a) of the Income-tax Act, 1922 and exempt under Section 4(3)(viii) of the Income-tax Act, 1922.

Analysis: Interest on arrears of rent is part of the larger concept of revenue derived from land because it is a statutory incident of the arrears of agricultural rent. In the absence of the tenancy and the arrears, no such interest would arise, and the income is traceable to land through that statutory relationship.

Conclusion: The question was answered in the affirmative and in favour of the assessee.

Final Conclusion: The reference was answered on one question against the assessee and on the other in his favour, resulting in a mixed outcome with no order as to costs.

Ratio Decidendi: Income is agricultural income only if it is revenue derived from land used for agricultural purposes, and spontaneous natural growth without cultivation does not satisfy that test, whereas statutory interest on arrears of agricultural rent forms part of revenue derived from land.

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