Agricultural income excludes statutory interest on rent arrears, since the receipt arises from tenant default rather than land itself.

Interest on arrears of rent from agricultural tenants was held not to be agricultural income, because the decisive source of the receipt was the tenant's default and the resulting debt, not the land itself. Rent remains consideration for the use and occupation of agricultural land, but statutory interest under the Bengal Tenancy Act is only recompense for delayed payment and does not convert the amount into rent or revenue derived from land. The receipt was therefore assessable to income-tax as income other than agricultural income.

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Issues: Whether interest realised on arrears of rent from agricultural tenants under section 67 of the Bengal Tenancy Act, 1885 constituted rent or revenue derived from agricultural land so as to amount to agricultural income under section 2(1)(a) of the Income-tax Act.

Analysis: Rent was treated as income arising from the landlord's proprietary interest in agricultural land and paid as consideration for its use and occupation. Interest on arrears of rent, by contrast, arose only on the tenant's default and represented statutory recompense for withholding money due as rent. The Court held that section 67 of the Bengal Tenancy Act, 1885 did not convert such interest into rent. The decisive test was the source of the receipt: the amount was derived from the debt created by default, not from the land itself.

Conclusion: The interest on arrears of rent was not agricultural income within section 2(1)(a) of the Income-tax Act, 1922 and was therefore assessable to income-tax.

Final Conclusion: The reference was answered against the assessee and the receipt was held taxable as income other than agricultural income.

Ratio Decidendi: A receipt is agricultural income only if it is rent or revenue derived from land used for agricultural purposes; statutory interest arising from default in paying rent is not so derived.

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