Page 94 - DCOM301_INCOME_TAX_LAWS_I

Unit 4: Exemptions and Deductions - I

3. Income from sale of spontaneously grown trees. Notes
4. Income from dairy farming.
5. Purchase of standing crop.

6. Dividend paid by a company out of its agriculture income.
7. Income of salt produced by flooding the land with sea water.
8. Royalty income from mines.
9. Income from butter and cheese making.

10. Receipts from TV serial shooting in farm house are not agriculture income.
4.1.1 Conditions to be Satisfied for Agricultural Income

According to the definition of Agricultural Income as per Section 2(1A) of the Act, the income
which satisfies following conditions is treated as agricultural income.

1. Rent or revenue derived from land: For any income to be considered as agricultural income,
the rent or revenue should be derived from land. Following things need to be kept in
mind:

The word rent denotes the payment of money either in cash or in kind by one person
to another (owner of the land) in respect of grant of right to use land.

The recipient of rent or revenue should be the owner of the land.
The expression revenue is used in the broader sense of return, yield or income, and
not in the sense of land revenue.

Income is said to be derived from land only if the land is the immediate and effective
source of the income and not the secondary and indirect source. Thus interest on
arrears of rent payable in respect of agricultural land is not agricultural income
because the source of income (interest) is not from land but it is from rent which is
a secondary source of income and is taxable under the head Income from other
sources.
2. Land must be situated in India: Land must be situated in India but it is immaterial whether
the agricultural land in question has been assessed to land revenue or local taxes assessed
and collected by the Officers of the Government in India.

3. Land must be used for agricultural purpose: The land must be used for agricultural purposes.
There must be some measure of cultivation on the land, some expenditure of skill and
labour upon it, to have been used for agricultural purposes within the meaning of the Act.
The operations on the land for agricultural purposes can be:
Basic operation: These include tilling of the land, sowing of seeds, planting or an
operation of a similar kind such as digging pits in the soil to plant a sapling etc.
Subsequent operations: These include weeding, digging the soil around the growth,
nursing, pruning, cutting, etc.

!
Caution Please note that here agriculture connotes all the products of vegetable kingdom
(food for human beings and animals, fruits, commercial crops, flowers, medicines, bamboo,
timber, fuel material) but it does not include the products of animal kingdom (dairy
farming, butter and cheese making, poultry farming, breeding of livestock etc.).

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