Rubber replantation subsidy linked to agricultural operations was treated as agricultural income and kept outside central income-tax.

Subsidy paid by the Rubber Board for rubber replantation was treated as agricultural income because it was linked directly and proximately to agricultural operations on rubber land, including felling, clearing, terracing, weeding, manuring, planting, maintenance and plant protection. Although the receipt was revenue in character, its immediate and effective source was the agricultural use of the land. The absence of a specific exemption comparable to the tea subsidy provision did not change its character. On that basis, the subsidy was held not liable to central income-tax.

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Issues: Whether the subsidy received from the Rubber Board for rubber replantation was a taxable revenue receipt or an agricultural receipt exempt from central income-tax.

Analysis: The subsidy was granted only when the assessee carried out agricultural operations such as felling, clearing, terracing, weeding, manuring, planting, maintenance and plant protection on rubber land. The receipt was held to be revenue in character, but its immediate and effective source was the agricultural use of land and the performance of agricultural operations. The absence of a specific exemption comparable to the tea subsidy provision did not alter the character of the receipt. The nexus between the subsidy and agricultural operations was held to be direct and proximate.

Conclusion: The subsidy was an agricultural receipt and was not taxable to central income-tax.

Final Conclusion: The departmental appeals failed, and the assessee's claim that the Rubber Board subsidy was not liable to central income-tax was accepted.

Ratio Decidendi: A subsidy received for carrying out agricultural operations on land has the character of agricultural income when its immediate and effective source is the agricultural use of the land and the receipt is directly linked to those operations.

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