1988 (9) TMI 76 - AT - Income Tax

Accounting Year Agricultural Income Assessment Year Earned Income Industrial Undertaking

Summary

Issues:
1. Whether income derived from toddy tapping is exempt under sec. 10(1) of the IT Act.
2. Whether the assessee is eligible for deduction under sec. 80HHA.

Analysis:
1. The assessee claimed that the income from toddy tapping is exempt under sec. 10(1) as agricultural income. The argument was based on the process of toddy tapping involving acts of culture on trees to ensure proper yield. However, the tribunal held that toddy is produced by the tree itself through a natural process, and the human role is merely to collect the liquid. The tribunal referred to case laws where it was established that income from toddy tapping is considered agricultural income only when derived by the actual cultivator of the land. Since the assessee was neither the owner nor the cultivator of the land, the exemption under sec. 10(1) was denied.

2. The alternative argument was regarding the claim for deduction under sec. 80HHA, which provides relief to small scale industrial undertakings. The tribunal noted that toddy tapping does not qualify as a manufacturing activity, as highlighted in a Supreme Court case regarding the definition of 'production.' The tribunal emphasized that toddy is naturally produced by the tree, and human involvement is limited to collection, with no role in the fermentation process. Therefore, the tribunal concluded that the relief under sec. 80HHA cannot be granted to the assessee.

In conclusion, the tribunal dismissed the appeal, ruling against the assessee's claim for exemption under sec. 10(1) and deduction under sec. 80HHA based on the nature of toddy tapping and the lack of human involvement in the production process.