About Arricultural income

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Kintu (Querist)
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20 February 2008 how to treat the tree cutting compensation received from company on our own land.Whether Capital Gain or AgriculturalIncome

CA. Kirti S. Ganatra

CA. Kirti S. Ganatra (Expert)
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20 February 2008 If there was seperate payment for amount purchased for tree and second for tree than tree payment is agricultural and second is business income. For treating as agricultural income it must full fill condition of agricultural as required in income tax act

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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20 February 2008 Agriculture’/‘Agricultural operations’ is an integrated activity of basic operations, followed by subsequent operations - The primary sense in which the term agriculture is understood is agar - field and cultura - cultivation, i.e., the cultivation of the field, and if the term is understood only in that sense, agriculture would be restricted only to cultivation of the land in the strict sense of the term meaning thereby tilling of the land, sowing of the seeds, planting and similar operations on the land. They would be the basic operations and would require the expenditure of human skill and labour upon the land itself. There are, however, other operations which have got to be resorted to by the agriculturist and which are absolutely necessary for the purpose of effectively raising the produce from the land. They are operations to be performed after the produce sprouts from the land, e.g., weeding, digging the soil around the growth, removal of undesirable undergrowths and all operations, which foster the growth and preserve the same not only from insects and pests but also from depredation from outside, like tending, pruning, cutting, harvesting, and rendering the produce fit for the market. The latter would all be agricultural operations when taken in conjunction with the basic operations described above, and it would be futile to urge that they are not agricultural operations at all.

However, the mere performance of these subsequent operations on the products of the land, where such products have not been raised on the land by the performance of the basic operations described above, would not be enough to characterise them as agricultural operations. In order to invest them with the character of agricultural operations, these subsequent operations must necessarily be in conjunction with and in continuation of the basic operations which are the effective cause of the products being raised from the land. It is only if the products are raised from the land by the performance of these basic operations that the subsequent operations attach themselves to the products of the land and acquire the characteristic of agricultural operations. The cultivation of the land does not comprise merely of raising the products of the land in the narrower sense of the term like tilling of the land, sowing of the seeds, planting and similar work done on the land but also includes the subsequent operations set out above, all of which operations, basic as well as subsequent, form one integrated activity of the agriculturist and the term ‘agriculture’ has got to be understood as connoting this integrated activity of the agriculturist. One cannot dissociate the basic operations from the subsequent operations and say that the subsequent operations, even though they are divorced from the basic operations, can constitute ‘agricultural operations’ by themselves. If this integrated activity which constitutes ‘agriculture’ is undertaken and performed in regard to any land, then that land can be said to have been used for ‘agricultural purposes’ and the income derived therefrom can be said to be ‘agricultural income’ derived from the land by agriculture - CIT v. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466 (SC).

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