Lease rent from agricultural land qualifies as agricultural income when land retains agricultural character and statutory conditions are met

Lease rent derived from land in India used for agricultural purposes falls within agricultural income under section 2(1A) of the Income-tax Act, 1961, even where the land is leased, because ownership is not a statutory requirement. The record showed the land retained its agricultural character and that agricultural operations had been carried on on it; the fact that the crops were commercial, aromatic or medicinal did not exclude the receipt from the statutory definition. The lease rent was therefore treated as agricultural income, and the addition was deleted.

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Issues: Whether lease rent received from agricultural land used for agricultural purposes is assessable as agricultural income under section 2(1A) of the Income-tax Act, 1961.

Analysis: The land in question was found to be agricultural land, and the statutory definition of agricultural income covers rent or revenue derived from land situated in India and used for agricultural purposes. Ownership of the land is not a condition for this definition. The record also showed that agricultural operations had been carried on on the land and that the subsequent lease was of land already used for such purposes. The nature of the crops as commercial or aromatic and medicinal plants did not, by itself, take the receipt outside the statutory definition, since the provision does not limit agricultural income to any particular crop.

Conclusion: The lease rent received from the agricultural land was held to be agricultural income, and the addition was deleted in favour of the assessee.

Final Conclusion: The assessee's lease rental from agricultural land retained the character of agricultural income and was not taxable as income from other sources.

Ratio Decidendi: Rent received from land situated in India and used for agricultural purposes falls within agricultural income even if the land is leased, provided the land retains its agricultural character and the statutory conditions are satisfied.

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