The Exemption of Agricultural Income under Income Tax Act : A method Of tax evasion

Author: Abhishek Mishra

Himachal Pradesh National Law University, Shimla.

ISSN: 2582-3655


Agricultural income has been exempted from the income tax liability. Initially, an exemption was allowed to protect small and marginal farmers as the majority of a population of India was involved in agriculture and depends largely on monsoon for cultivation thus it became imperative to grant a certain exemption to farmers to boost production and protect them from incurring debts. However, the exemption given to protect small farmers has become a tool by companies and rich farmers to evade tax liability and to gain benefits from legislation defying its purpose. The provision which aims to reduce the income gap among farmers has been used by corporate and big farmers to further increase the income gap and to employ farmers at marginal or low wages. The present paper is an attempt to analyze the contours of agricultural income and why agricultural income must be taxed by allowing certain exemption or deduction to small and marginal farmers. The paper further analyses definition of agriculture under income tax act and “Direct Tax Code” along with case law and analyze how did exemption of agricultural income from income tax benefits rich farmer and companies more rather than farmers who are involved in the primary and subsequent operation of agriculture.


The levying of tax on agricultural income has been exempted under the income tax act 1961 primarily to facilitate privilege to small farmers but it acted as a blanket for companies and big farmers to evade taxes and earn a profit on agricultural produce. According to the 2011 census 54.6% of the total workforce was engaged in agriculture and depends largely on monsoon for cultivation thus it became imperative to grant a certain exemption to farmers to boost production and protect them from incurring debts. During the last three-decade, the shift has been seen in the agriculture process, the cultivation of crops is not restricted only to consumption but has become a source of income or emerged as a business opportunity for farmers holding large chunks of land, BOI, Companies, corporation, etc. Companies are earning huge profits through agro products and claim most of their Income as Agricultural income because until now income tax act doesn’t make any distinction company and individual and exempt income as agricultural income alike. According to the report published by NABARD on shares of mechanization of field activities in 2017 almost 60 to 70% of harvesting and threshing for wheat has been mechanized, 40% of soil working and seedbed preparation has been mechanized, 40% of irrigation is mechanized (See table below). The sale of tractors is increased at 6% over 12 years from 2005-06 to 2016-17. The number of tractor and agricultural machinery per 100sq Km arable land is 130.[1]

Table 1. Share of Mechanisation of field activities in 2016-17.

Type of operationPercentage of operation mechanized
Soil working & seedbed preparation40
Seeding and planting29
Plant protection34
Harvesting and Threshing60-70 for wheat and rice and <5% for others.

Source:  NABARD Sectoral Paper on Farm mechanization.

Statement of Problem

The Income-tax Act 1961 exempt agricultural income from income tax and thus exempting income tax liability of farmers, companies, partnership firms from paying of tax on Income earned through agriculture. However agricultural income does not include income arising after changing the character of agricultural produce. The literature on income tax do not often refer to how exemption to agricultural income from income tax benefits more to big companies, corporation, partnership firm, farmers holding a vast amount of land rather than too small farmers but there are sufficient literature and debate to argue that agricultural income must be taxed within income tax. This paper uses data and reports to show why it is necessary to include Agricultural income under income tax by allowing certain deduction or even exempting agricultural income of small farmers.

Objective and LIMITATION:

The present paper is an attempt to analyze the contours of agricultural income and why agricultural income must be taxed by allowing certain exemption or deduction to small farmers. The paper further analyses definition of agriculture under income tax act and “Direct Tax Code” along with case law and analyze how did exemption of agricultural income from income tax benefits rich farmer and companies more rather than farmers who are involved in the primary and subsequent operation of agriculture. However, the scope of the paper is restricted only to the law of land and does not refer to the law of other nations where agricultural income is taxed and does not incorporate any policies introduced by the government. But the paper took the help of reports of Raj committee, Comptroller and Auditor General of India (CAG) report and reports or studies conducted by other organization or institution.

Research question:

The present paper tends to examine “Why it is necessary to impose a tax on agricultural income?  Whether the marginal and small farmers (or to its contrary companies, partnership firm, BOI) are benefitted by such exemption?

Significance of study:  

The research for the imposition of a direct tax on Agricultural income within income tax is required because it can increase revenue receipt of government and the nature of agriculture has been changed from production for self-consumption to earning of profit. Besides, the exemption also provides an opportunity to underreport taxable income, therefore, undermining the revenue from taxable sources. Furthermore, it will help in the reduction of inequality of taxes between non – agricultural and agricultural sectors and also the tax exemption of agricultural income is benefitting more to big farmers, partnership firms, companies, corporations rather than small farmers. However, it is cautioned that the exemption must be given to farmers having marginal, small, semi-small operational landholding and certain relief or deduction must be given to farmers holding operational land between 4 to 10 hectares. The research will be taken following and in consonance of existing literature.

Research Methodology

This paper is based on doctrinal research and no data has been collected through empirical research. Secondary data has been collected for research. The secondary data has been collected by CBDT report, report of Law commission, Agricultural census of 2015- 2016, Comptroller and Auditor General of India (CAG) report, Indian Economic survey 2018. Online sources such as SCC, Political and Economic Weekly, Indian Kanoon, Newspaper article of the Hindu, the Economic times and certain books has also been referred to collect data for research.

Taxation of Agricultural Income

Constitutional provision

Section 10(1) exempts Agricultural income, not from taxable income but also the “Total income” of the assessee. Article 245 of the constitution provides for legislative competence for union and state legislature to legislate law. The item over which union and state legislature power to make law has have been given in three lists mentioned in the 7th schedule. Entry 82 of list 1 i.e. union list excludes the power of parliament to impose a tax on agricultural income and by Entry 46 list ii the power to impose a tax on agricultural income is given to the state. For entry 82 of list 1 and entry 46 of list ii means agricultural income as defined for purpose of enactment relating to income tax act vide article 366 of the constitution. That definition indicates that it is open to income tax enactment to define agricultural income from time to time and that would be meaning not only for tax enactment but also for the constitution. Rule 8 of the income tax act 1962 is integrated with the income tax act, therefore, it became necessary to taken such rule into account while considering the meaning of agricultural income in article 366(1) of the constitution.[2]

Legal Framework

Section 2(1A) of the Income-tax Act defines Agricultural Income under cl. A as any rent or revenue derived from land which is situated in India and is used for agricultural purposes i.e. land situated outside India is excluded. Cl b incorporates three types of income as agricultural income is derived from land.

  • By Agriculture;
  • The performance by cultivator or receiver of rent in kind  of any process employed by cultivator or receiver of rent in kind to make the product received by him to be fit to be taken in a market
  • The income earned by cultivator or receiver of the rent in kind by the sale of produce in respect of which no process other than process employed to make produce fit for market use.

The cl(c) refers to the income derived from building having connection with agricultural land i.e building is on land or in the near vicinity of land used for purpose of a dwelling house, or storehouse or other outbuildings. The outbuilding refers to a building (such as a stable or a woodshed) separate from but an accessory to the main house ( Marriam Webster dictionary). For example, if a property is situated on land and is used not for agricultural purpose but the purpose of Hotel or as a marriage hall the income derived from such property will not be covered by head agricultural income but will be covered under the head “ profit and gain of business or profession[3].

The plain reading of the definition of agricultural income under section 2(1A) of the Act would indicate that it is a restrictive definition is indicative of it being defined by the word “means”. It is a settled position that the definition clause using the word “mean” is to be read in a restrictive sense and therefore, has to be construed strictly unless the context otherwise requires. Nothing has been shown to us that the context requires it to be read as inclusive or differently from restrictive[4].

The next question arose whether ownership of land is necessary for income tax. The plain reading of the section makes it clear that for the application of this section revenue should be derived by land situated in India which is used for agricultural purposes.[5]  

Furthermore, sub-clause ii and iii of the section also refer to term Cultivator or receiver of rent in kind implying that it is not necessary that land must be cultivated by the owner of a land section nowhere uses the term owner. In the case of CIT v. Kameshwar Singh[6], wherein The mortgagee-lease received some portion of the agricultural produce as Thika rent and the balance was received as consideration for the loan. The Revenue contended that rent is not agricultural as it is received by a money lender. The Privy council decides that section 2(1)(a)of the Act confers exemption to an agricultural income and it has no relation with the character of the recipient. Therefore, in the facts before it, the Privy Council held that if the business of money lending brings in income which has been derived from land then it is exempt from income tax. The mortgagee who receives Thika or rent receives in the character of a person who has an interest in the land and who is entitled to possession thereof.

Under section 2 (1A) cl (b) (ii), the produce taken to market for sale must be produce which is raised by the cultivator. Even though for purpose of making products to be fit for market sale some processes may have to be undertaken, the section does not contemplate the sale of an item of the commodity which is different from what is cultivated and processed[7].

Meaning of term Agriculture

 In the case of CIT v. Raja Binoy Kumar Sahas Roy[8], the assessee owned an area of 6000 acres of forest land assessed to land revenue and grown with sal and pujasal tree. The forest is of spontaneous growth, not grown by the aid of human skills and labors and has been in existence for 150 years. However, the staff is employed by assessee inter alia for the sowing of seeds after digging of the soil in the denuded area. The court explained that in the primary sense the term agriculture is understood is agar – field and “cultra” means “cultivation” i.e cultivation of land. The definition restricts agriculture only to tilling of land, sowing of seeds, planting and similar operation on the land. This operation is a primary operation and requires the expenditure for human skill and labor upon the land itself. One cannot dissociate the basic operations from the subsequent operations and say that the subsequent operations can constitute agricultural operations by themselves.

• The nature of the produce raised is not relevant, the produce could be either vegetables or fruits necessary for human consumption or pastures have grown for beasts or items like betel, coffee, tea, spices or tobacco or for the growth of commercial crops.

DTC provision 

As per the provision of DTC, Agricultural income means

 (a) any profits and gains derived from the cultivation of agricultural land;

 (b) any rent derived from any agricultural land;

 (c) any rent derived from any farmhouse; and (d) any income derived from saplings or seedlings grown in a nursery.

“agricultural land” means any land “situated in India” which is “used for agricultural purposes” and:  (a) is assessed to land revenue in India; or (b) is subject to a local rate assessed and collected by the officers of the go

The current law also restricts the process that can be applied to agricultural produce by stipulating that the process should be such as ordinarily employed by a cultivator to render the produce fit to be taken to the market. It is also stipulated that the sale of the final product should not be subject to any process other than that necessary for rendering the product fit to be taken to the market. It is by reference to these restrictions that courts and tribunals have, in cases involving modern-day agriculture, turned down the claim of exemption. However, the language used by the DTC in this regard is “any profits and gains derived from the cultivation of agricultural land”. The language is completely different and is capable of encompassing within its fold all incomes which might be derived from the cultivation of the land[9]. The restriction that the process employed must not be beyond what is employed by a cultivator to render the produce fit to be taken to the market, no longer finds the place.

Accordingly, it can be concluded that the ambit of agricultural income has been significantly extended.

Insofar as the farmhouses are concerned, the existing condition for treating income as agricultural income it is necessary that the building must be near the land and that the same must be required by the cultivator as a dwelling house, storehouse or outhouse and the land must be assessed to land revenue. Where it is not so assessed, the farmhouses must not be situated in any urban area. In the DTC, “farmhouse” has been separately defined and incorporates the condition of being in the vicinity of the agricultural land and exclusively for dwelling house, storehouse or outhouse or for carrying out any process for taking the agricultural produce to the market. However, the condition of being subject to land revenue is absent as also the stipulation that where the land is not subject to land revenue it should be outside the urban areas. As we have seen, an explanation was inserted in the Finance Act, 2000, whereby the income from the farmhouse for any purpose other than agriculture was not considered as agricultural income. This explanation or component thereof does not find a place in the DTC. Accordingly, it is possible to argue that any income from any farmhouse whether rural or urban, whether used to rent out for a marriage party or not, will now be considered as agricultural income.

Partial Integration of taxation of Non-Agricultural Income with Agricultural Income.

The partially integrated taxation of non-agricultural income with income derived from Agriculture for determination of the rate of income tax of certain non – corporate assessee has been introduced by The Finance act Of 1973 accepting the recommendation of the Raj Committee. 

However, the validity of said amendment has been questioned in the case of K J Joseph vs lTO[10], the Kerala High Court held that the charge of tax is still on non-agricultural income. No part of the agricultural income is subjected to tax. To determine the rate at which non-agricultural income is to be taxed, the agricultural income is taken into account. This and the differential rates are based on the different sources of income available to the persons concerned. It is only in respect of persons who have agricultural income, in addition to the non-agricultural income that the mode of computation of the rate of tax as provided by the impugned provisions is adopted. This classification is reasonable and based on the intelligible differentia.

The committee headed by K N Raj on Taxation of Agriculture Income and wealth has also recommended the introduction of the Agricultural Holding Test instead of land revenue. The committee has recommended that the unit Of AHT assessment should be an operational holding and not an ownership holding. The operational holding is defined as holding consisting of land owned by farm operator minus land leased out by him plus the area leased out which must be duly registered. The adoption of AHT will discourage illegal and concealed lease of land because before leasing the land must be duly registered. However, the recommendation of the committee has not been accepted because it leaves out the rental income of landowners from the purview of agricultural taxation. Since the case of rental income by agricultural land is bigger than the taxation of farm business income. Thus it will introduce the element of equity in the taxation of Agricultural income.[11]

Table 2. Tax Treatment of Income which is partially agriculture and partially non- agricultural.

IncomeNon-Agricultural IncomeAgricultural Income
Growing and manufacturing of Tea in India.Sales of centrifuged latex or Cenex or latex-based crepes or brown crepes or specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India.Sale of coffee grown and cured by the seller.Sale of coffee grown, cured, roasted and grounded by the seller in India with or without mixing chicory or other flavoring ingredients.40%     35%     25%   40%60%     65%     75%   60%

Source: Taxmann, Student guide to income tax[12].

For integrated Income to be partially Income and Non-Agricultural Income certain conditions must be fulfilled.

  1. The taxpayer must be an individual, a Hindu undivided family, a body of Individual, an association of Person or an artificial juridical person. [The partial integration of agricultural and non-agricultural income does not apply to company, firm, cooperative society, etc.
  2. The taxpayer has non-agricultural income exceeding the amount of exemption limit. The exemption limit for the assessment year 2019-2020 is Rs 2, 50,000. [Higher exemption limit in case of a resident senior citizen born on After April 2, 1939, but before April 1, 1959, is Rs 3, 00,000].
  3. The agricultural income of the taxpayer exceeds Rs 5000.

If three conditions are fulfilled then the scheme of partial integration of tax on agricultural income and non-agricultural income is applicable 

Controversies on Taxation of Income

In India, agriculture is not limited to primitive practices involved in farming and cultivation but has grown where activities of the agricultural sector are complementary or allied to manufacturing sectors. Agricultural produce is not limited only for domestic consumption but raw agricultural produce has been exported to many countries by companies, AOP and BOI, etc. The tax department has repeatedly denied the benefits of exemption to such income. Companies and partnership firms are earning even profit from storehouses and outbuildings.

Capital gain and Salary

In the case of  Premier Construction Co. v. CIT,[13], the privy council while dealing with the definition of agricultural income as defined in section 2(1A) of the Indian Income Tax Act, 1922, which is similar to that found under section 2 (1A) of the Act, had held that the remuneration earned by the Managing Agent of a Company which is engaged in agricultural operations cannot be treated as agricultural income. The Court held that the assessee therein received remuneration for the rendering of Service under the contract. The aforesaid decision would apply on all fours to the present dispute. 

The Supreme Court in Maharajadhiraja Sir Kameshwar Singh v. CIT[14], the assessee was an Executor of a Trust deed which inter alia included agricultural properties. Under the deed, the Executor had a right to receive remuneration for the management of the trust and its properties. The Court held that the Assessee therein did not have the right to receive and/or appropriate to himself agricultural income which would arise from the agricultural properties belonging to the trust. For any income to be classifiable as agricultural income. It has primarily to be derived from land. In the present facts, no agricultural income is derived by the appellant from the land. It receives consideration for providing Services under the contract dated 23.7.1999 For providing Services relatable to agricultural operations is still not income derived from the land. The words “derived from” would mean direct linkage/immediate source of income and not an indirect source of income.

Nurseries  Cultivation

One of the issues before the amendment of 1972 in Income tax is about whether income earned by nursery and pot cultivation is exempted from income tax. However, after the inclusion of Explanation 3 in section 2 (1A) it became clear that any income derived from sapling or seedling grown in a nursery shall be deemed to be agricultural income 

Contract farming is defined as a system for the production and supply of agricultural produce under a contract between buyer and supplier. In contract farming the contractor supplies with equipment or inputs which is helpful in cultivation while farmer supplies cultivation and labor. However, the terms of a contract can differ widely on different crops. Contract farming has been taken in various states of India like UP, MP, Maharashtra. In the case of Advanta India Ltd, Bangalore v. Assessee[15], the assessee company which is engaged in the development and production of basic and hybrid seeds filed its return of income for the assessment year 2003-04 on 27.11.2003 declaring a loss of Rs.3,59,00,900/. The claim of exemption under section 10 has been rejected by AO. The court held that the method of contract farming does not exclude the basic agricultural operation. The assessee company procures germplasm and sown in its field, the seed so harvested are put through the agricultural process and finally producing hybrid seed. It is to be seen that the assessee company has carried out basic as well as secondary agricultural operations. Therefore, without any fear of contradiction, we can hold that entire such income of the assessee is agricultural which is to be excluded from the nature of total income.

The case which has been in news recently is the case of PepsiCo in which there is the spat between PepsiCo and small farmers who were growing and selling potato of reserved quality which were reserved and patented by the PepsiCo for production of chips popularly known as lays. The company claimed for damages of over crores after which due to its heavy criticism in the market. The company took steps and offered farmers to take into Contract Farming.  It has been argued by many academicians and businessmen that for the expenditure for buying of seeds, fertilizers and other inputs necessary for cultivation have been provided to them and in return, the potatoes were to be purchased by the company at predetermined rates. It is to be noted here that such a mechanism in India is unlikely to benefit farmers with small and marginal land holding and farm laborers who work as tenet as daily wages on land. But by such arrangement, Big corporations like PepsiCo who almost own monopoly over the market in the production of chips will get huge profit and the plight of daily wage laborers, small and marginal farmers will remain the same.

Taxation of Agricultural income against Companies, Big Farmers, BOI, AOP.

In India, the number of companies has been involved in agro products has been significantly increased during the years. Approximately 100 to 120 companies have been engaged in agriculture i.e. on tilling, sowing and harvesting of crops carrying primary and subsequent functions necessary for agriculture. The Income-tax for taxation does not make any distinction between individuals and companies involved in agriculture. The state government has given the power to legislate on the matter of taxation of agricultural income but few states like Assam, Karnataka, Kerala, Tripura, West Bengal, Sikkim, has enacted act on Taxation of agricultural income. For most the taxation has been on crops and revenue generated by Assam through the cultivation of tea.  For tax on the production of tea 40% of total income is treated as agriculture and 60% as non-agricultural income.

CAG Report Analyses

The Audit report of Comptroller and Auditor General Of India has been released ( in 2019) to ascertain the genuineness and correctness of exemption claimed in the case of agricultural income. The distribution of 6778 cases was checked based on agriculture income allowed and agriculture claimed.

The agriculture income claimed by various types of assessee. In-Toto amounts to Rs 3656.25 Cr and the agriculture income allowed is Rs 2544.20 Cr.

Table 3. The PAN category-wise distribution of agricultural income claimed and allowed by the AOs in respect of cases audited is as below

Type of AssesseeNo of AssesseeAgricultural income claimed ( Rs In Cr)Agricultural income allowed
Company7292093.82    1161.47
Firm16069.18  68.24
Artificial Juridical person114.63   14.63
Local Authority10.150.15
Individual  54101349.391185.82
Non-pan case886.336.30

Source: CAG Report

It is found by the audit report of CAG that in 1527 out of 6778 (22.5%) cases claim on the ground of exemption of agricultural taxes was allowed by authorities without examining the supported verification document as income and expenditure statement, land records and proof of agricultural income such as ledger account, bills, invoice, etc. No documentary proof in support of agricultural income claimed by the assessee was available in assessment records. Out of 1527 cases, land records were not available in 10.6 % of cases i.e. in 716 cases. Documentary proof in support of agricultural income was not available in 1270 cases.  In 1046 cases out of 1527 cases, the agricultural income claim was made through ITR form-4 which in turn allows exemption also to presumptive income earned by business and profession.

In 2016, NSSO has published a report which gives an annual income of farmers in India between July 2012 and June 2013.  According to the report that an average agricultural household earns RS 6, 426 per month i.e. Rs 77,112 in an annual year. It is also to be observed that Small farmer ( also include farmer with marginal landholding) to be earning an amount of 4,152 per month i.e. approx 50,000 yearly which does not fall even the income slab of 2,50,000[16]. Therefore it can be presumed that the exemption for tax under agricultural income has been claimed by individual holding land over 5 and 10 hectares and companies, BOI ( Body of Individuals), AOP ( Association of Persons), Trust, HUF, Trust from the financial year 2014 -15 to 2016 -17  in which exemption has been allowed by the income tax department. It can be seen in the table above that total of 3656.25 cr of income is claimed to be agricultural income and maximum of income is claimed by companies and individuals owning big chunks of land which amounts to 3,442.39 which is 94% of total exemption claimed. Out of claimed Rs 3656.25 Cr the amount of Rs 2544.21cr has been declared as agricultural income and been exempted from income tax. However, it is to be noted that the exemption allowed on Amt of Rs 2544.21 Cr in almost 22.5% i.e. in 1527 cases the Income-tax department has not examined the proper document before allowing the exemption.

Furthermore, an exemption has been allowed even in those cases in which the presumptive income is earned by business and profession.

The agro-based company has been given a similar amount of tax exemption as any other Individual because of the state levy no agricultural income tax. For the assessment year 2014, the top 10 claimants for exemption of income under agricultural income were companies claiming a total of Rs 599.7 crores.[17]  In addition to this in 2014, The third tax Administration reform Commission report has been released recommending the taxation of agricultural income on the ground that a large number of rich farmers who earn more than the salaried employee in the cities  get away without paying tax at all because of the government’s lack of will to consider agricultural income.

 Inequality in distribution of land

Size classTotal landholding Number(000)       Area(000)Net Area cultivated
Marginal (0.1 ha – 1ha)928263590834936
Small (1.0ha- 2ha)247793524434249
Semi Medium (2.0 ha-4 ha)138963770536291
Medium (4ha -10 ha)58753382831910
Large 10ha & above)9731690715388
All class138398159592152775

Table.4. Showing Total landholding and net area cultivated in the Year 2015-16.

Source: Agriculture research Databook Agricultural census 2015-2016.

It is to be observed from the abovementioned data that more than 35908 ha of the area has been divided among 92826 marginal landholders having cultivated area of 34936 i.e. 0.37 ha of the area is cultivated per landholding. Whereas the farmer holding land over 10 ha has an area of 16907 divided among 973 landholding which is approximately 17.37 ha of area per holding. Out of 17.37 ha of land 15.38ha of land cultivated per holding.

Thus it is to be observed that a large farmer holds approximately 47 times the land cultivated by a marginal farmer. The individual, joint and institutional holdings have shown a growth of 5.04 percent, 7.07 percent, and 10.88 percent, respectively. The report on the number and area of operational holdings in India is based on the provisional results of the first phase of the current Agriculture Census 2015-16.[18] 

Also, According to data on agricultural census 2015-16, the number of large operational holding has been decreased from 17.38 (Census 2011) to 17.07 in 2015- 16. Small operational holding has been decreased from 1.42 to 1.40 ha.

Suggestion and Conclusion

The Income-tax act 1961 has exempted the agricultural income from taxation which aims to protect the interest of farmers. Various accounts have been provided that the benefit of exemption of agricultural income from taxes in its practical implication does not protect the interest of small farmers but of large farmers and companies deriving large profit from agriculture and exempting their income from tax liability whereas small farmers are unable to earn up to income tax slab fro which income becomes taxable. The benefits extended to farmers to promote equality have become a tool to promote inequality and thus exemption of agricultural income from taxation is not progressive but regressive which further aggravates inequality.

  1. The competency to legislate on the matter of taxation of agricultural income has been given to the state by article 246 and List II of the seventh schedule of the constitution of India. The levying of tax on agricultural income can add to the revenue of the state and at the same time can help to reduce the gap between the taxation of agricultural and nonagricultural income. Therefore state-level reforms are needed to curb the menace created by companies, AOP, BOI, etc. It is also suggested that various organizations like NABARD, Ministry of Agriculture and Farmer welfare and state-wise report to be prepared by a concerned organization to provide possible methods to levy tax along with the responsibility to protect the interest of small, marginal or semi medium farmers.
  2.  The clause must be added by amending the Income-tax act making the distinction between individuals and companies. The exemption from agriculture must be given to farmers who are involved in cultivation rather than to those companies or firm operating businesses for the profit-making process. Companies claim more than RS 1000 of crores to be exempted as agricultural income and this amount isn’t included in total income.
  3. It is also been suggested that the income derived from building having a connection with agricultural land i.e. building is on land or in the near vicinity of land used for purpose of the dwelling house, or storehouse or another outbuilding. The outbuilding refers to a building (such as a stable or a woodshed) separate from but an accessory to the main house must be excluded from agricultural income because various companies provide a place for storage of food and earn profit by storehouse and any building situated in the vicinity of agricultural land.

[1] last visited 2 October 2019).

[2] CIT V. Williamson Financial Service (2008) 2 SCC 520

[3]  Rule 2 Income Tax Act 1961.

 [4] The Forest Development Corporation of Maharashtra Limited v. The Additional Commissioner of Income Tax, (2004) 87 TTJ Nag 519.

[5]  Dr. Girjesh Shukla & Mahima V. Tiwari (eds.), Law of Taxation 44 (Lexis Nexis, New Delhi, 2015   )

[6] 2 ITR 305.

[7] K. Lakshmanan & co v. CIT (1998) 9 SCC 537.

[8] 1957 32 ITR 466.

[9] DP Gupta and R Kavita Rao, “Direct Tax Code and Taxation of Agricultural Income: A Missed Opportunity” 47 EPWJ 51-60 (2012).

[10] 20  ITR 178.

[11] C. H.  Hannumantha Rao, “Agricultural Taxation” 7 EPWJ  2345-2347 (1972).

[12]. Dr. Vinod K Singhania & Dr. Monica Singhania, Student Guide to Income Tax 383 (Taxmann 2019).

[13] 16 ITR 380.

[14] 41 ITR 170.

[15] 2015  ITR 276.

[16] ( last visited on 3 Oct 2019)

[17] ( last visited 3 Oct 2019)

[18] (Last visited on 3 OCT 2019).

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