1968 (8) TMI 29 - HC - Income Tax

Court denies exemption claim for income as agricultural under Income-tax Act; income source deemed coconut trees, not land.

The court ruled against the assessee, denying the claim for exemption of income as agricultural income under section 4(3)(viii) of the Income-tax Act, ... Agricultural Income - exemption under section 4(3)(viii) of the Income-tax Act, 1922 Issues:Character of income derived by assessee for assessment years 1958-59 and 1959-60 - Whether exempt agricultural income under section 4(3)(viii) of Income-tax Act, 1922Rs.Analysis:The judgment delivered by Justice Veeraswami pertained to the character of income derived by the assessee for the assessment years 1958-59 and 1959-60, determining whether it qualified as agricultural income exempt under section 4(3)(viii) of the Income-tax Act, 1922. The revenue and Tribunal agreed that the assessee might be entitled to the exemption, leading to this reference under section 66(1) initiated by the Commissioner of Income-tax. The primary question was whether the sums of Rs. 8,962 and Rs. 8,835 were agricultural income exempt under section 4(3)(viii). The assessee, a dealer in coconuts, engaged in transactions involving leases of coconut thopes from various parties. Some leases were registered, others supported by acknowledgments, and a third category involved fixed annual payments for enjoying coconut tree fruits for specific periods. The Tribunal's decision that the income constituted agricultural income was based on the extended right to cut coconuts over a long period, indicating a future commitment to the crops and the necessity to maintain the land for the lessee's benefit. The Tribunal also referenced a relevant case to support its stance.The claim for exemption relied on section 2(1)(a) defining 'agricultural income' as rent or revenue from land used for agricultural purposes. The judgment emphasized the need for a nexus between income, land, and agricultural operations to qualify as agricultural income. While the land's agricultural use was evident, the crucial aspect was whether the income derived directly from the land. The assessee argued that the right to exploit coconuts constituted an interest in immovable property due to the sustained period of sustenance from the land. However, the judgment disagreed, highlighting a case distinction between a lease of land and immovable property for agricultural purposes. The Privy Council's interpretation of 'derived' in section 2(1)(a) was cited to emphasize the income's immediate source, which was deemed to be the coconut trees rather than the land itself.The judgment further discussed cases cited by the revenue, notably Yagappa Nadar v. Commissioner of Income-tax, which concluded that income from toddy was not agricultural when the recipient did not have an interest in the land. This decision aligned with the court's view on the present case. Another case, Commissioner of Income-tax v. Maddi Venkatasubbayya, was distinguished as it involved a different type of transaction not amounting to an interest in immovable property. Ultimately, the court ruled in favor of the revenue, rejecting the claim for exemption as agricultural income. The judgment concluded with costs awarded to the revenue and counsel's fee specified.