Agricultural income exemption requires separate proof of application to charitable or religious purposes, failing which apportionment stands.

Agricultural income claimed as exempt under section 4 of the Agricultural Income-tax Act, 1950 must be shown by reliable and separate accounts to have been applied to charitable or religious purposes in the State. Where an assessee has both agricultural and non-agricultural income but fails to produce verifiable records identifying the exempt application of agricultural income, the taxing authority may adopt a reasonable apportionment from consolidated accounts. In the absence of proof of exclusive application to the exempt purposes, full exemption is not available and tax may be levied on the portion not established as exempt.

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Issues: Whether the assessee was entitled to full exemption of agricultural income under section 4 of the Agricultural Income-tax Act, 1950 on the plea that the income was applied to charitable or religious purposes in the State, notwithstanding the absence of separate and verifiable accounts showing the application of agricultural income.

Analysis: The exemption under section 4 extends only to agricultural income from property held under trust wholly for charitable or religious purposes to the extent that such income is applied to those purposes in the State, and to income accumulated or set apart within the statutory limit. The assessee had both agricultural and non-agricultural income, but did not maintain separate verifiable accounts to show how much of the agricultural income was actually spent for the exempt purposes. In that situation, the assessing authority and the appellate forums adopted an apportionment method based on the consolidated accounts, and the Tribunal found that the assessee had not furnished details to displace that approach. The absence of proof of exclusive application of agricultural income to the exempt purposes justified denial of full exemption.

Conclusion: The claim for full exemption was rightly rejected, and the apportionment of expenditure and consequential levy of tax were sustained.

Final Conclusion: The revisions failed because the assessee did not establish, through separate and verifiable accounts, that the agricultural income was wholly applied to charitable or religious purposes so as to attract complete exemption.

Ratio Decidendi: A claim for exemption of agricultural income under section 4 on the footing of application to charitable or religious purposes must be substantiated by reliable accounts showing the application of the agricultural income, and where such proof is absent, reasonable apportionment by the taxing authority is permissible.

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