tax presentation, k lakshmanan v. Commissioner of income tax. Agricultural income, Section 2(1A) of Income Tax Act. Parts of Agricultural Income

1. K LAKSHMANAN & CO. AND ORS.
V. COMMISSIONER OF INCOME
TAX
(1998) 9 SCC 537
Presented By:
Team 6
Shubhangi Chaudhary
Somya Singh
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2. FACTS
 Appellant- partnership firm formed for the purpose of carrying out
agricultural activities.
 During the course of its business it indulged in the activity of growing
mulberry leaves and rearing silkworms including purchase of silkworm
eggs, feeding plucked and cut mulberry leaves to worms and selling
the cocoons in market.
 Contention of Appellants: Income derived was Agricultural income
hence exempted from tax.
 IT Officer’s Contention: the part of the income which was attributable
to growing of mulberry leaves alone constituted agricultural income
and was exempt from levy of income tax but the income derived from
the rearing of silkworms on the leaves and selling of the cocoons was
not agricultural income.
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3. ISSUE
 Whether or not the income derived from business of
rearing silkworms is "agricultural income" as defined
under Section 2(1A) of the Income Tax Act, 1961,
(Section 2(1A)(b) precisely.
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4. TRAJECTORY OF THE CASE
 Appellate Assistant Commissioner: allowed and upheld the
appeals filed by the Appellant.
 ITAT- upheld the IT Officer’s contention and concluded that
the case falls beyond the definition of “agricultural
produce” (S. 2(1A)). Mulberry leaves were not sold in the
market; the cocoons were sold, which were not the
agricultural produce of the appellant.
 Hon’ble High Court: upheld ITAT’s view
 Further appealed to hon’ble SC.
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5. JUDGEMENT
 Hon’ble SC ruled in favour of the CIT.
 Opined: "agricultural income" would mean an income derived
from such land by the performance by a cultivator of any process
ordinarily employed by him to render the produce raised by him
fit to be taken to market.
 “Only produce from cultivation (either processed or
unprocessed) can be taken to the market to sell.”
 It does not include the sale of an item which is different from
what is cultivated and processed(in this case the cocoons).
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6. CONTD.
 Referred to Dooars Tea Co. Ltd V. CIT- interpreted the
definition of agricultural income as per Section 2(1A)(b) of
the Act.
 Requirements:
 Process (manual or by machine) + process employed with
the object of making the produce marketable.
 Character of Produce should not change.
 Sale of such processed produce is exempt from tax as it
comes under agricultural income.
 Not applicable in the current case.
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7. THANKYOU!!
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