Agricultural income treatment of milk sales where cattle are pasture-fed and linked to land-based husbandry

Income from the sale of milk is treated as agricultural income where it is derived from cattle maintained on agricultural land and sustained by its produce. The note explains that "agriculture" is construed broadly to include husbandry and the rearing and management of livestock drawing sustenance from the soil. On the stated facts, the assessee owned substantial agricultural land, the cows were pasture-fed, and there was no material to show that the milk was divorced from the land's produce. Commercial scale of sales did not alter the character of the income. The milk income was therefore described as exempt from income-tax.

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Issues: Whether the income from the sale of milk received by the assessee during the accounting year was agricultural income within the meaning of the Income-tax Act.

Analysis: The statutory definition of agricultural income required the income to be derived from land used for agricultural purposes, and the expression "agriculture" was construed in a wide sense to include husbandry and the rearing and management of livestock drawing sustenance from the soil. On the facts, the assessee owned substantial agricultural land, the cows were pasture-fed, and the record did not show that they were stall-fed or that the milk was divorced from the produce of the land. The commercial scale of milk sales did not determine the character of the income if the milk itself was agricultural produce. The Tribunal had proceeded on considerations that were not material to the real question and there was no adequate basis to deny the agricultural character of the milk income.

Conclusion: The milk-sale income was agricultural income and was exempt from income-tax, so the finding was in favour of the assessee.

Ratio Decidendi: Income from the sale of milk is agricultural income where the cattle are primarily maintained on agricultural land and derive their sustenance from the produce of that land, so that the milk is the product of husbandry and agricultural operations.

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