Agricultural income test for tobacco processing fails where post-curing grading and re-drying are commercial, not normal cultivator operations.

Post-flue-curing operations on tobacco, including re-drying, stripping and grading, did not qualify as agricultural income because they were not shown to be processes ordinarily employed by cultivators generally or necessary to make the produce fit for market. The court found that tobacco was already marketable after flue-curing, and the later commercial processing was undertaken mainly to meet export requirements. Income attributable to those operations was therefore not exempt agricultural income and was assessable as business income.

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Issues: Whether the income attributable to re-drying, stripping and grading of tobacco after flue-curing constituted agricultural income exempt from tax under the relevant provisions.

Analysis: The statutory test required that the process must be one ordinarily employed by a cultivator and must be necessary to render the produce fit to be taken to market. Tobacco after flue-curing was already marketable, and the subsequent operations of re-drying, stripping and grading were found to be commercial processes undertaken mainly for export requirements and not normal agricultural operations. Since these operations were not shown to be ordinarily employed by cultivators generally or necessary to make the tobacco marketable, the income attributable to them did not fall within agricultural income.

Conclusion: The income arising from the post-flue-curing operations was not agricultural income and was assessable as business income.

Final Conclusion: The reference was answered against the assessee and in favour of the department.

Ratio Decidendi: For a process to qualify as part of agricultural income, it must be ordinarily employed by cultivators generally and be necessary to make the produce marketable; commercially advantageous or export-oriented processing is insufficient.

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