Agricultural income exemption can extend to a firm cultivating land through partners even without ownership of the land.

Agricultural income under section 2(1A) of the Income-tax Act is not confined to the owner of the land; income derived from agricultural land used for agricultural purposes may retain its character even when earned by a cultivator or other person carrying on agricultural operations. Ownership of the land is therefore not a mandatory condition, provided the income is shown to arise from agricultural operations on such land. On that basis, a firm may claim exemption for agricultural income cultivated through its partners even where the land is owned by the partners and not by the firm.

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Issues: Whether a firm can claim exemption for agricultural income when the agricultural land is owned by its partners and not by the firm itself.

Analysis: Section 2(1A) of the Income-tax Act, 1961 defines agricultural income as income derived from agricultural land situated in India used for agricultural purposes. The provision does not require that the income must necessarily arise only in the hands of the owner of the land. Agricultural income may be derived by a cultivator or other person carrying on agricultural operations on such land. The ownership of land is therefore not a mandatory condition for the character of income to remain agricultural, provided the income is shown to have been derived from agricultural operations on land used for that purpose.

Conclusion: The firm was entitled to exemption in respect of the agricultural income derived from the land cultivated by it through its partners, even though the firm was not the owner of the land.

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