Actual rental receipt and nursery income test the scope of agricultural income under tax law.

For agricultural income-tax purposes, rent is assessed on actual realisation after statutory deductions, not on the full rental demand raised; the deeming language operates only to compute the amount actually received within the statutory scheme, so notional demand cannot replace receipt. Income from a nursery was treated as outside the statutory definition of agricultural income unless it is shown to arise from cultivation of land and basic agricultural operations; on the facts noted, nursery receipts did not satisfy that test. The note states that both questions were answered against the revenue and in favour of the assessee.

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Issues: (i) Whether agricultural income from rent under the U.P. Agricultural Income-tax Act, 1948 was to be assessed on the basis of actual realisation or the entire rental demand; (ii) Whether income from a nursery constituted agricultural income.

Issue (i): Whether agricultural income from rent under the U.P. Agricultural Income-tax Act, 1948 was to be assessed on the basis of actual realisation or the entire rental demand.

Analysis: Section 5, read with the definition of agricultural income, was construed as requiring computation on the basis of rent actually realised, subject to the statutory deductions, rather than on the basis of the demand raised. The deeming language was held to operate only for the purpose of arriving at the sum realised after deductions, and not to substitute notional demand for actual receipt.

Conclusion: The assessment had to be made on actual realisation and not on the total rental demand, in favour of the assessee.

Issue (ii): Whether income from a nursery constituted agricultural income.

Analysis: The definition of agricultural income was treated as technical and restricted, requiring a real connection with cultivation of land and the basic operations of agriculture. Applying that test, the maintenance of a nursery was held not ordinarily to amount to agricultural operation, since it may be run as an independent business and does not necessarily involve cultivation of fields or produce raised by basic agricultural operations. On the material before the authorities, there was nothing sufficient to show that the nursery income satisfied the statutory definition.

Conclusion: Nursery income did not constitute agricultural income on the facts found, in favour of the assessee.

Final Conclusion: Both referred questions were answered against the revenue, and the assessee succeeded in the reference.

Ratio Decidendi: For agricultural income-tax purposes, rent is taxable on actual receipt after statutory deductions, and income from a nursery is not agricultural income unless it is shown to arise from cultivation of land in the statutory sense.

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