Voluntary lease receipts and agricultural income exemption failed where land was not actually used for agriculture.

A voluntary lease payment received for temporary non-agricultural use of waste land was treated as assessable income because there was no compulsory acquisition, forcible taking, or conversion of the land's corpus into money, so it was not a capital receipt or compensation. The claim to agricultural-income exemption also failed because the decisive test was the actual use of the land during the relevant accounting period, and the land was not used for agricultural purposes. Both the salami and rent were therefore taxable.

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Issues: (i) Whether the sum of Rs. 50,000 received as salami was a capital receipt by way of compensation or assessable income; (ii) Whether the sums received as salami and rent constituted agricultural income and were exempt from tax.

Issue (i): Whether the sum of Rs. 50,000 received as salami was a capital receipt by way of compensation or assessable income.

Analysis: The payment arose out of a voluntary contractual lease of waste land for a temporary refugee camp. There was no compulsory acquisition, no forcible taking of possession, and no unusual user of the land. The land remained the assessee's property and the transaction did not amount to conversion of the corpus into money. On those facts, the sum could not be treated as compensation or a capital receipt.

Conclusion: The sum of Rs. 50,000 was assessable as income.

Issue (ii): Whether the sums received as salami and rent constituted agricultural income and were exempt from tax.

Analysis: The decisive test under the Act is the actual use of the land during the relevant accounting period, not the purpose of the lease. The parties had admitted that the land was not used for agricultural purposes during that period. Accordingly, the receipts could not fall within the exemption for agricultural income.

Conclusion: The sums were not agricultural income and were not exempt from tax.

Final Conclusion: The reference was answered against the assessee and both amounts were held taxable.

Ratio Decidendi: A voluntary lease payment is not compensation or capital receipt merely because land is temporarily put to non-agricultural use, and agricultural income exemption depends on the actual agricultural use of the land in the relevant period.

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