Agricultural income test for dairy enterprises turns on whether cattle derive material sustenance from land produce.

Income from a dairy enterprise is agricultural income only where the cattle derive a material part of their sustenance from the produce of the land; wholly stall-fed cattle in an urban setting point to trade rather than an agricultural operation. On the materials before the taxing authority, substantial expenditure on oil-cake supported the finding that the dairy income was not exempt as agricultural income. The reference was also treated as raising a question of fact, because the real inquiry was whether there was material for the Income-tax Officer to reach that conclusion on pasturage, stall-feeding, and the evidentiary record. The finding was left undisturbed.

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Issues: (i) Whether the income from the dairy was agricultural income within the meaning of the Act and therefore exempt from taxation; (ii) Whether the reference raised a question of law or only a question of fact incapable of review in the proceedings.

Issue (i): Whether the income from the dairy was agricultural income within the meaning of the Act and therefore exempt from taxation.

Analysis: The determinative inquiry was whether the cattle were kept and fed in a manner that made the activity agricultural in character. Where cattle are wholly stall-fed in an urban setting, the activity is trade and not an agricultural operation. Where they are mainly pastured on the land and only supplemented by feed such as oil-cake, the income from milk may be agricultural. The decisive test is whether the cattle derived sustenance to a material extent from the produce of the ground. On the materials before the taxing authority, there was evidence of substantial expenditure on oil-cake supporting the conclusion reached.

Conclusion: The income from the dairy was not shown to be agricultural income exempt from taxation, and the conclusion against exemption was sustained.

Issue (ii): Whether the reference raised a question of law or only a question of fact incapable of review in the proceedings.

Analysis: The framed question was treated as one of fact because the real inquiry was whether there was material on which the Income-tax Officer could find that the income was not agricultural income. The assessment turned on the degree to which the cattle were pastured or stall-fed and on the evidentiary material before the officer. Such a determination was for the officer to make and was not open to review in this Court on the reference as framed.

Conclusion: The matter was held to be a question of fact, and the Court declined to interfere with the finding.

Final Conclusion: The application failed, the assessment authority's conclusion was left undisturbed, and the applicant was ordered to pay costs.

Ratio Decidendi: Whether income from a dairy enterprise is agricultural income depends on the factual degree to which the cattle derive sustenance from the produce of the land, and that assessment is ordinarily a question of fact for the taxing authority when supported by material evidence.

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