Agricultural income test for latex sales: receipts from tapping standing rubber trees were treated as non-agricultural income.

Income from sale of latex from standing rubber trees was held not to be agricultural income under section 2(1A) because agricultural income must arise from land used in an integrated agricultural process involving basic cultivation operations and connected subsequent operations. The assessee had acquired rights to cut standing trees and only permitted tapping during the intervening period, but the activity was not shown to involve cultivation of the land itself. The authorities were therefore justified in treating the receipt as non-agricultural income, and the reference was answered against the assessee.

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Issues: Whether income from sale of latex/tapping operations from standing rubber trees constituted agricultural income under section 2(1A) of the Income-tax Act, 1961.

Analysis: Agricultural income requires income to be rent or revenue derived from land used for agricultural purposes. The governing test is that agriculture involves cultivation of land through basic operations such as tilling, sowing, planting, and similar human skill and labour applied to the land itself, with subsequent operations counting only when they are in continuation of those basic operations. On the facts, the assessee had acquired rights to cut standing trees and, during the intervening period, permitted tapping of latex. The activity was not shown to involve the integrated agricultural process required by the statutory definition. The authorities were therefore justified in treating the receipt as non-agricultural income.

Conclusion: The income from sale of latex was not agricultural income and the answer to the reference was against the assessee.

Ratio Decidendi: Income is agricultural only when it is derived from land used in an integrated agricultural process involving basic cultivation operations and connected subsequent operations; activities divorced from such cultivation do not qualify.

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