TMI Blog1997 (8) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... of the eucalyptus trees grown by it was in the nature of agricultural income and hence it was not assessable to tax ?" The assessee company grows eucalyptus trees as shade trees and extracts eucalyptus oil from them. In the course of assessment proceedings for the assessment year 1978-79, the assessee contended that the sale proceeds of oil represented its agricultural income. The Income-tax Officer rejected this plea and treated the sale proceeds of the oil as miscellaneous receipts. However, on appeal, the Commissioner of Income-tax (Appeals) held that the extraction of oil was a process to render the leaves fit to be taken to market and, therefore, yielded agricultural income, which was not taxable. On further appeal by the Department, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... got to extract oil and bring the oil to the market since the eucalyptus oil alone has got the market. Placing reliance upon the provisions contained in section 2(1A)(b)(ii) of the Act, learned counsel submitted that even after a process is employed by a cultivator to make the produce fit for marketability, it would not lose its character as an agricultural produce. According to learned counsel, since the leaves themselves cannot be sold and the oil extracted alone is fit for marketability and therefore, the eucalyptus oil is agricultural produce. Reliance was placed upon the decisions in CIT v. H. G. Date [1971] 82 ITR 71 (Bom), CIT v. Woodland Estates Ltd. [1965] 58 ITR 612 (Ker) and CIT v. S. L. Mathias [1937] 5 ITR 435 (Mad). We have h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odity in the market. Thus clause (ii) includes within the categories of income, income derived from the employment of the process falling under that clause. As we have just observed the object of employing the requisite process is to make the produce marketable but in terms the clause does not refer to sale and does not require that the income should be obtained from sale as such though in a sense it contemplates the sale of the produce." In the above cited decision it is clearly pointed out that the employment of the process contemplated by the second clause must not alter the character of the produce. In South Arcot District Co-operative Supply and Marketing Society Ltd. v. CIT [1974] 97 ITR 500 (Mad), the assessee purchased paddy fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. H. G. Date [1971] 82 ITR 71 (Bom), the assessee, who cultivated sugarcane on his land and converted it into jaggery for sale in the market, claimed exemption for the income received as agricultural income. On a reference, the Bombay High Court held that there was evidence before the Tribunal to justify its finding that there was no market for the sugarcane produced by the assessee in its natural condition. Hence, the income received by the assessee from sale of jaggery was exempt from income-tax as agricultural income. In CIT v. Woodland Estates Ltd. [1965] 58 ITR 612 (Ker), while considering the provisions of section 2(1) of the Indian Income-tax Act, 1922, the Kerala High Court held that in order that an income might fall within th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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