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This document discusses the definition and treatment of agricultural income under Section 10(1) and 2(1A) of the Indian Income Tax Act of 1961. It notes that agricultural income is exempt from income tax and defines it as income derived from land used for agricultural purposes, including rents, revenue, and income from farm buildings. It provides examples of basic agricultural operations like tilling land and subsequent operations after harvest. The document then analyzes two case studies - in the first, incomes from the sale of a standing crop are exempt except for one party; in the second, income from felling trees is considered capital gains not agricultural income.
This document discusses the definition and treatment of agricultural income under Section 10(1) and 2(1A) of the Indian Income Tax Act of 1961. It notes that agricultural income is exempt from income tax and defines it as income derived from land used for agricultural purposes, including rents, revenue, and income from farm buildings. It provides examples of basic agricultural operations like tilling land and subsequent operations after harvest. The document then analyzes two case studies - in the first, incomes from the sale of a standing crop are exempt except for one party; in the second, income from felling trees is considered capital gains not agricultural income.
This document discusses the definition and treatment of agricultural income under Section 10(1) and 2(1A) of the Indian Income Tax Act of 1961. It notes that agricultural income is exempt from income tax and defines it as income derived from land used for agricultural purposes, including rents, revenue, and income from farm buildings. It provides examples of basic agricultural operations like tilling land and subsequent operations after harvest. The document then analyzes two case studies - in the first, incomes from the sale of a standing crop are exempt except for one party; in the second, income from felling trees is considered capital gains not agricultural income.
Tax Act -1961. By virtue of sec-2(1A) , The Expression Agricultural Income means: a)Rent or revenue should be derived from land. b)Income derived from agricultural land by agricultural operations. c)Income derived from farm building. NOTE: Agriculture is not merely includes food & grains but also the performance of basic & subsequent services
Basic Concepts as per sec 2(A) Rent or revenue should be derived from land(cash or kind) The land is one which is situated in India(if the land is situated in a foreign country , this condition is not applicable) The land is used for agricultural purpose. Agriculture & Agricultural purpose has not been defined in the act. But some basic operations like tilling land , sowing seeds , planting and similar kind of operations have been dealt with in the sec 2(1A).
Subsequent Operations like procedures done after sprouts arise like weeding , digging the soil around the growth , and other such activities /operations which foster & preserve the growth for marketability is dealt in sec 2(1A). Any income derived by agriculture from land situated in India & is used for agriculture. Any income derived by a cultivator or receiver of rent- in-kind of any process ordinarily employed to render the produce raised or received by him to make it fit to be taken to market. Any income derived by land by sale by cultivator or receiver of rent-in-kind of the produce raised or received by him in respect of which no process has been performed other than a process mentioned as above. FACTS OF CASE 1 A is cultivator sold his standing crop to B for R.s.25000. B sold it to C for R.s.35000. C harvested the crop but couldn't render the produce to market due to illness and sold it to D. D render the produce fit to be taken to the market and earned the profit.
Question: Whether the incomes of A,B,C and D are subject to income Tax?
Solution: A exempted from tax according to sec- 10(1).Because A done basic operation according to sec-2(1A). B is not exempted because the profit doesnt comes under sec-2(1A). C is exempted from tax according to sec- 10(1).Because by harvesting he performed subsequent operation according to sec 2(1A) D is also exempted because he rendered the produce fit to be taken to the market.
Facts of case -2 ABC limited carried on to business of manufacturing and selling of tea. For purpose of affording shade to its tea business company use to grow grevillea trees in its tea estates. Some trees became useless. Company felled those useless trees and sold the timber as firewood .
Question: Do the sale proceeds constitute agriculture income?
Solution: It is notconsidered as agriculture income.this income is considered as capital gain income as per sec2(47).because these were grown for longer period of time for the purpose of providing shade to tea plantation.