INCOME TAX ACT, 1961

Section 10

Income not to be included in total income - Agricultural income or not - Receipt of sum from State Electricity Grid Corporation for cutting of trees on assessee's land - Assessee engaged in earning agricultural income

Assessee was stated to be engaged in the business of manufacturing and trading of essential oil, plantations and extraction of essential oils and received a sum from State Electricity Grid Corporation for cutting of trees on assessee's land for heavy electric lines. Assessee pleaded that compensation so received shall either be capital receipt not chargeable to tax or alternatively, it would be in the nature of agricultural income exempt under section 10(1). AO opined that agriculture would involve cultivation of land when the integrated activity carried on the said land comprising of basis operations followed by subsequent operations is performed. Trees are cut to give way to high tension wires which are to pass through assessee's land. Though trees were cut but right over the soil was retained by the assessee. Therefore, income would not be agricultural income. Held: Certain trees lying on assessee's land were cut since the same were obstructing the hire tension wires of the Electricity Company and assessee was compensated. Assessee was engaged in business of manufacturing and trading of essential oil, plantations and extraction of essential oils. Therefore, trees so cut by assessee would form part of its trading operations since the assessee would be earning revenue by utilizing these trees. Had the trees not been cut, the assessee would have earned more revenue from the trees. Therefore, any compensation received in lieu of loss thereof would form part of assessee's trading operations and the same would constitute agricultural income in the hands of assessee.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16

SUBSCRIBE FOR FULL CONTENT