Remission of waived interest was not agricultural income absent a statutory deeming fiction under tax law.

Remission of interest previously allowed as a deduction under the Kerala Agricultural Income-tax Act did not itself constitute agricultural income when the creditor later waived the liability and the amount was credited in the assessee's accounts. The Supreme Court held that a mere remission is not a receipt arising from agricultural operations and, in the absence of a statutory deeming fiction, cannot be taxed as agricultural income. The assessee's mercantile method of accounting did not change the character of the waived sum. The remission amount was therefore not assessable to agricultural income-tax, and the issue was decided in favour of the assessee.

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Issues: Whether the remission of interest, earlier deducted under the Kerala Agricultural Income-tax Act, 1950 and later waived by the creditor, constituted agricultural income in the hands of the assessee for the relevant assessment year.

Analysis: The amount had been allowed as a deduction in computing agricultural income under the statutory deduction provisions. When the creditor subsequently waived the interest and the sum was credited in the assessee's accounts, the question was whether that remission could itself be treated as agricultural income. The Court held that a remission is not the same as a receipt arising from agricultural operations and that, absent a statutory fiction similar to those found in income-tax legislation, the waived amount could not be brought to tax as agricultural income. The fact that the assessee maintained mercantile accounts did not alter the character of the receipt.

Conclusion: The remission amount was not agricultural income and could not be assessed to agricultural income-tax; the question was answered in favour of the assessee.

Ratio Decidendi: A mere remission of a liability, without a statutory provision deeming it to be income, does not constitute agricultural income unless it arises from agricultural operations or is otherwise brought within the charging provisions by legal fiction.

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