Instance of Income held to be Agricultural / Non-Agricultural Income

In the following Cases, Instances of Agricultural and Non-Agricultural Incomes are described in details with examples.

Instances of Agricultureal Income:

In the following cases, income is held as agricultural income:

1. If denuded parts of the forest are replanted and subsequent operations in forestry are carried out, the income arising from the sale of replanted trees.
2. Profit on sale of standing crop or the produce after harvest by a cultivating owner or tenant of land.
3. Rent for agricultural land received from sub-tenants by mortgagee-in-possession.
4. Compensation received from an insurance company for damage caused by hail storm to the green leaf forming part of assessee’s tea garden (moreover, no part of such compensation consists of manufacturing income, as such  compensation cannot be apportioned under rule 8 between manufacturing income and agricultural income).
5. Income from growing flowers and creepers.
6. Salary received by a partner for rendering services to a firm which is engaged in agricultural operations is agricultural income as payment of salary is only a mode of adjustment of the firm’s income [it may be noted that  share of profit from such firm is not taken as “agricultural income” as such share is exempt under section 10(2A)].
7. Interest on capital received by a partner from the firm engaged in agricultural operations.
8. If nursery is maintained by carrying out basic operations and subsequent operations are carried out in pots in continuation of basic operations, then income from such nursery would be agricultural income.

Instances of Non-Agricultural Income:

1. Annual annuity received by a person in consideration of transfer of agricultural land even if it is charged on land, as source of annuity is covenant and not land.
2. Interest on arrears of rent in respect of agricultural land as it is neither rent nor revenue derived from land.
3. Interest accrued on promissory notes obtained by a zamindar from defaulting tenants.
4. Income from sale of forest trees, fruits and flowers growing on land naturally, spontaneously and without the intervention of human agency.
5. Income from sale of wild grass and reeds of spontaneous growth.
6. Income of salt produced by flooding the land with sea water as it is not derived from land used for agricultural income.
7. Profit accruing from the purchase of a standing crop and resale of it after harvest by a merchant, having no interest in land except a mere licence to enter upon the land and gather upon the produce, as land is not the direct,  immediate or effective source of income.
8. Remuneration received by managing agent at a fixed percentage of net profit from a company having agricultural income.
9. Interest received by a money-lender in the form of agricultural produce.
10. Income of sale of agricultural produce received by way of price for water supplied to land.
11. Commission earned by the landlord for selling agricultural produce of his tenant.
12. Income derived from land let out for storing crops.
13. Income from fisheries.
14. Maintenance allowance charged on agricultural land.
15. If the assessee takes loans on hypothecation of agricultural produce cultivated by him and advances the same to its sister concerns, interest earned thereupon (is not agricultural income).
16. Royalty income of mines.
17. Income from butter and cheese making.
18. Income from poultry farming.
19. Income from sale of trees of forest which are of spontaneous growth and in relation to which forestry operations alone are performed.
20. Where the assessee-company is growing various kinds of hybrid/germ plasm seeds after conducting agrigenetic agricultural research costing crores of rupees, income earned on sale of such seeds cannot be treated  as ‘agricultural income’.
21. Receipts from TV serial shooting in farm house.