DEFINE AGRICULTURAL INCOME
Q.1. Define agricultural income. Give examples of such incomes which are not agricultural income Though connected with land.
What is agricultural income ? How is it treated for income tax purpose ? Explain with the help of suitable examples.
Ans. According to of the Act, agricultural income means:
(i) Any rent or revenue derived from land which is situated in India and is used for agricultural Purpose.
(ii) Any income derive from such land by agricultural operations including processing of the Agricultural produce, raised or received as rent or sale of such produce.
(iii) Income derived from any building owned and occupied by the receiver of the rent or revenue of any such land provided.
Such house is situated one or in the immediate vicinity of agricultural land and is used by the cultivator or receiver of tent is king as a dwelling house or as a store house or as out house; and
The land is assessed to land revenue or local rate in India.
If the land is not assessed to land revenue or local rate than income from such building will be treated as agricultural income if such land is situated within the jurisdiction of a municipality or a cantonment board having a population of not less than 10,000 or if the land is situated beyond a distance of 8 Kms. From the local limits of a municipality or a cantonment board.
In simple words, if such land is not subject to land revenue or local rates assessed by the government, the land must be situated in a rural area.
From the definition of agricultural income following important points are to be noted:
I. Agricultural land must a situated in India.
II. Rent received or process received from agricultural land is known as agricultural income.
III. Income from any process which is ordinarily employed by the cultivator to render the produce fit for marketability, e.g., ginning of cotton. It should be remembered that is the produce is saleable in its original from, then income received from sale of such produce only will be considered as agricultural income.
IV. Land is question is used for agricultural purpose. The use of land will be treated for agricultural purpose only if all the basis operation are performed on land which are necessary for agricultural, e.g., Tilling of land, sowing of the seeds, planning and similar kind of operations on the land. In this connection judgement give by superme court in CTI v/s Raja Benoy Kumar sashas Roy is very important. According to this judgement tiling of land, weeding digging the soil around the growth termed agricultural operations. Agricultural does not merely producing food grains, but is also includes commercial crops like, just, cotton etc.
Products which wild on the land or are of spontaneous growth not involving any human labour or skill upon the land are not products of agriculture. Therefore, income from sale of wild grass, bamboo cannot be treated as agricultural income as no agriculture operations is involved in raising these products.
V. income received from building situated on or in the immediate vicinity is agriculture income, whether the building is used as a house.
KIND OF AGRICULTURE
1. Any rent or revenue derived from land used from agricultural purpose.
2. Income derived from cultivation of such land.
3. Income received by performance of some process to render the produce saleable e.g., Tobacco leaves cannot be sold as it is. First they have to be dried up formarketing ginning of cotton.
4. Income from sale of produce raised on it.
5. Income derived from building used agricultural
6. Income from growing flowers and creepers.
7. Compensation received from an insurance company on account of damage caused to the crop. An activity which is connected or dependent on land will not automatically come under the scope of the term ‘agriculture’, for example, dairy farming, poultry farming are not termed as agricultural operations. But vegetable or fruit growing or growing of commercial crops such as cotton, jute, tea, coffee etc. are covered by the term ‘agriculture’.
NON- AGRICULTURE INCOMES
There are certain income which are, though related to land and appear to be agricultural but, they are not agricultural any basis operations of agriculture. These incomes are called non-agricultural incomes.
The following incomes are held as non-agricultural incomes:
1. Income from sale of forest trees, wild grass, fruit and flowers grown spontaneously and without human effort.
2. Income from land used as stone quarries.
3. Income from land used for brick making.
4. Income from markets and fisheries.
5. Income from supplying water for irrigation purpose.
6. Income from land used for storing agricultural produce.
7. Income from dairying or poultry farming.
8. Remuneration received by landlord for selling of produce of his tenant.
10. Income from butter and cheese making.
11. Income of salt produced by flooding the land with sea water as it is not derived from land used for agricultural purposes.
12. Income from mining royalties.
13. Income of money lender either received in cash or in kind on the loans given for agricultural purposes.
14. Compensation for acquisition of land for-non-agricultural purposes.
15. Divided received by a shareholder from a company engaged in agriculture.
16. With effect from assessment year 2003-2004, any income from such building or land arising from the use of the building or land for any purpose other than agriculture, shall not be included in the definition of agricultural income. For example, if a person lets out his building or land for residential purpose or for the purpose of any business or profession, then such income shall not be treated as agricultural income.
Q.2. What is meant by partly agricultural income ?
Ans. There are certain income which are party agricultural and party non-agricultural income in such cases, only non-agricultural income is subject to tax. If a person produces tea or using the agricultural produce produced at his own land, as raw material, such income is partly agricultural produce produced at his own land, as raw material, such income is partly agricultural and partly non-agricultural income.
To calculate agricultural income, the market value of agricultural produce is deducted from total business incomes. Market value, for this purpose, means average market value of previous year. If such produce is not ordinarily saleable, then the expenses of cultivation, rent of the land, assessing officer, added together shall be the market value.
INCOME OF SUGAR FACTORIES
The market value of the agricultural produce i.e, sugarcane, which has been utilized as a raw material, shall be deducted from the total income of the factory. The balance will be taxable business incomes.
INCOME FROM CULTIVATION OF TEA
According to rule 8, when a person produces tea leaves himself and sells them in the market after performing necessary operations, then 60% of such income is treated as agricultural income and the rest 40% is treated as business income. Salary and profit received by a partner from a firm engaged growing tea leaves and manufacturing tea is taxable in his hands to the extent of 40% of such receipt as business income, the emaining 60% is exempted from tax being agricultural income (CIT vs. R.M. Chnduambran pillai).
Q.3. Give five example of agricultural income.
Ans. Example of agricultural income are as follow: -
(i) Income derived for growing wheat, rice etc. On agricultural land by cultivator.
(ii) Income from growing flowers and creepers.
(iii) Income from sale of trees in a forest, which had been planted the owner and where subsequent operations of forestry are carried out.
(iv) Rent for agricultural land received from tenant who uses the land for agricultural purposes.
(v) Income from sale of standing crops after harvesting by a cultivating owner or tenant of land.
Rate of TDS: - The rate of TDS is 30% + surcharge if any + education cess No tax is to be deducted at source if winnings from horse race does not exceed Rs. 2,500.
Q.4. From the following information, calculate tax liability of X. a resident and ordinarily resident in India, for the assessment year 2014-15:
|Income from house property||1,60,000|
|Income from growing and manufacturing tea in India||1,00,000|
|Share of profit from a firm carrying agricultural business in India||1,20,000|
|Donation to Prime Minister's National Relief Fund||40,000|
Ans. Gross Total Income 2,00,000 Total Income 1,60,000.
Q.5. For the assessment year 2014-15, Mrs. X (date of birth: 1-9-1947 furnishes the following information:
|Gross agricultural income||12,21,000|
|Expenditure on earning agricultural income||90,000|
|Non-agricultural income (Gross Total Income)||4,00,000|
Determine the tax liability of Mrs. X for the assessment year 2014-15. on the assumption that she contributes Rs. 60,000 towards Public Provident Fund and pays insurance premium of Rs. 90.000 on her life insurance policy (sum assured: Rs. 1.50.000)
Ans. Non agricultural income 4,00,000 Total Income 3,10,000.