Agricultural income from usufructuary mortgage land receipts upheld where income arose from possession and cultivation of the land.

Income received by a usufructuary mortgagee in possession from agricultural land is agricultural income where it is derived directly from the land and its cultivation. The assessee had advanced loans on usufructuary mortgage, obtained possession under registered mortgage deeds, and in some cases leased the land back to the mortgagors for cultivation in return for chokota. The decisive factor was that the receipts arose from possession of agricultural land and not from an independent contractual source. The income was therefore treated as agricultural income and not taxable revenue income, and the view in favour of the assessee was upheld.

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Issues: Whether income received from agricultural land held under a usufructuary mortgage and subsequently leased back to the mortgagors was agricultural income.

Analysis: The assessee advanced loans on usufructuary mortgage, obtained possession under duly registered mortgage deeds, and in many cases leased the same lands back to the mortgagors for cultivation, receiving chokota in return. The decisive factor was that the income was directly derived from cultivation of agricultural land in the assessee's possession. The distinction drawn from other authorities was that the source of the income here was the land itself and not an independent contractual arrangement. The principle applied was that rent received by a mortgagee in possession from agricultural land is agricultural income when it is earned by reason of possession and cultivation of the land.

Conclusion: The income was agricultural income and not taxable revenue income. The finding in favour of the assessee was upheld.

Ratio Decidendi: Rent or income received by a usufructuary mortgagee in possession from agricultural land is agricultural income when it is derived from the land and its cultivation.

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