Nursery sale proceeds treated as agricultural income where plants were raised through cultivation on land.

Income from plants raised in a nursery on land was treated as agricultural income because agriculture is not limited to conventional food crops and includes cultivation involving human skill and labour. Where nursery produce is nurtured and raised through operations connected with use of the land, the sale proceeds are referable to agricultural purposes and fall within the wider meaning of agricultural income. On that basis, the nursery sale proceeds were held not liable to tax under the Income-tax Act, and the Tribunal's view was upheld against the Revenue.

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Issues: Whether the sale proceeds of plants raised in a nursery on land constituted agricultural income.

Analysis: Agricultural income must be derived from land used for agricultural purposes. The expressions "agriculture" and "agricultural purposes" are not confined to conventional food crops and include cultivation involving human skill and labour. Income from trees or plants nurtured and raised on land, including nursery produce, falls within the wider meaning of agricultural income where the activity is connected with cultivation of the land.

Conclusion: The nursery sale proceeds constituted agricultural income and were not liable to tax under the Income-tax Act.

Final Conclusion: The reference was answered against the Revenue and in favour of the assessee, with the Tribunal's view upheld.

Ratio Decidendi: Income derived from plants raised on land through cultivation and nurturing operations is agricultural income when it is referable to land used for agricultural purposes.

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