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TMI Blog2012 (5) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the sale of crude palm oil as "business income" under Rule 7 of the Income-tax Rules, 1961. We have heard the learned Senior Counsel Sri. A.K.J. Nambiar appearing for the assessee and the learned Senior Counsel Sri. P.K.R. Menon appearing for the respondents. 2. The appellant is a plantation company in the public sector under the control of the State Government engaged in cultivation of oil palm and processing and extraction of crude palm oil from the fruit as well as from the kernel. For several years, the appellant has been assessed only under the Kerala Agricultural Income-tax Act treating 100% of the income as "agricultural income" and, therefore, the appellant has been filing returns under the Agricultural Income-tax Act and payin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant in the course of plantation and in the subsequent activity of extracting crude palm oil from palm pericarp(fruit portion excluding the kernel) and also from the kernel constitute agricultural income as defined under Section 2(1A) of the Income-tax Act, 1961. The Agricultural income as defined under the above provision is as follows: (1A) "agricultural income" means- (a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes; (b) any income derived from such land by- (i) agriculture; or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emperature of the mash to facilitate a subsequent pressing. By pressing with a screw press the solid portions and liquid portions of the mash are separated. The liquid portion is channelled to the Clarifier to clarify. After clarification of the oil it is passed through a Centrigure to remove the sand and heavy waste particles and to dry the oil. The dried oil is then continuously pumped to the storage tank for final dispatch. By this processing the company produce only Crude Palm Oil and not edible oil. The whole process of extraction of oil is to convert the same as a saleable commodity. The CPO is sold to Vanaspathy manufacturers etc. for further processing and manufacture of end products. The solid portions obtained from the press is pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h activity is assessable as its "profits and gains of business" under Section 28 of the Income Tax Act. 4. Rule 7 of the Income Tax Rules visualizes the situation where the income from various activities constitute partly agricultural income and partly business income. For easy reference, Rule 7 is extracted hereunder: "Rule 7. Income which is partially agricultural and partially from business. (1) In the case of income which is partially agricultural income as defined in Section 2 and partially income chargeable to income-tax under the head "Profits and gains of business" in determining that part which is chargeable to income-tax the market value of any agricultural produce which has been raised by the assessee or received b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed only for the value added product namely, crude palm oil extracted and sold. There is no serious controversy with regard to the computation of business income done by the assessing authority under the Income Tax Act by applying Rule 7, Even though, it would be desirable to provide a ratio for bifurcation of income as is done in Rule 7 A in the case of rubber, under Rule 7B for coffee, and under Rule 8 for tea, the Central Government has not chosen to make any specific provision for computation of income in the case of palm oil. We, therefore, feel that assessment by applying Rule 7 is perfectly in order. Since the computation made by the officer and modified in first appeal and by the Tribunal is not in contest, we do not go into the corr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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