Agricultural income test for natural forests and pasture lands turns on real land use and livestock purpose.

Income from timber cut from forests of spontaneous growth was held not to be agricultural income because the land was not shown to be used for agriculture, cultivation, or forestry operations involving skill and labour, so the exemption failed. By contrast, letting pasture meadows could amount to agricultural income where the land was used for grazing agricultural livestock, because pasturage may satisfy the requirement that the land be used for agricultural purposes in substance. The grazing income was therefore exempt only to the extent that it arose from agricultural animals, and not where the pasturing related to non-agricultural animals.

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Issues: (i) Whether income derived from the sale of timber from forests of spontaneous growth is agricultural income within Section 2(1) of the Indian Income-tax Act, 1922. (ii) Whether income derived from letting out pasture meadows is agricultural income within Section 2(1) of the Indian Income-tax Act, 1922.

Issue (i): Whether income derived from the sale of timber from forests of spontaneous growth is agricultural income within Section 2(1) of the Indian Income-tax Act, 1922.

Analysis: Income from natural forests can fall within the exemption only if the land is used for agricultural purposes. Where the trees are of spontaneous growth and there is no evidence of regular forestry operations, cultivation, or expenditure of skill and labour on the land, the statutory condition is not satisfied. The definition of agricultural income in Section 2(1) requires a real agricultural use of the land and not merely income from its natural produce.

Conclusion: The timber income was not agricultural income and was not exempt from taxation.

Issue (ii): Whether income derived from letting out pasture meadows is agricultural income within Section 2(1) of the Indian Income-tax Act, 1922.

Analysis: Pasturage may constitute an agricultural purpose where the land is used for the rearing and management of agricultural livestock. The income is derived from land itself, and the statutory phrase "used for agricultural purposes" is capable of including land let for grazing of agricultural animals, even if the grass is of spontaneous growth. The decisive consideration is whether the land serves an agricultural purpose in substance. On the facts, the answer depended on the nature of the animals pastured, since pasturing non-agricultural animals would not satisfy the test.

Conclusion: The pasture-meadow income was agricultural income to the extent that it was derived from agricultural animals pastured thereon, and not otherwise.

Final Conclusion: The reference was answered against exemption for timber income, but the grazing income was held exempt only in so far as it arose from the pasturing of agricultural animals.

Ratio Decidendi: Land is not used for agricultural purposes unless there is some measure of cultivation or other expenditure of skill and labour on the land, but pasturage of agricultural livestock may qualify as an agricultural purpose where the land is employed for the rearing and management of such animals.

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