TMI Blog1998 (1) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 10(1) of the Income-tax Act? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the activity of tapping toddy did not involve manufacture or production of an article or thing? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to deduction under section 80HHA in respect of its toddy business?" The facts of the case are that the assessee is the licensee for tapping and vending of toddy. He filed his returns for the assessment year 1983-84 declaring nil income. A notice under section 142 of the Income-tax Act was issued and a representative of the assessee was present and was heard. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows : "(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee's income as a result of toddy tapping was not an agricultural income exempt under section 10(1) of the Income-tax Act?" The business of the assessee consists of extracting toddy and vending toddy in the districts of Mysore, Nanjangud and Periapatna taluks. The assessee has shown the income of Rs. 1,11,558 as profits from business. The question is whether the activity of tapping and vending toddy constitute an agricultural operation. The assessee has not produced any evidence to show that he does an agricultural operation for extracting toddy and vending the same. Section 17(2) of the Karnataka Excise Act, 1965 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he right to extract the toddy and vend the same. The excise toddy trees which are also on the private lands and Government lands are auctioned for the purpose of leasing them to the highest bidders in the concerned excise year. The trees are naturally grown on the lands. Even taking that the trees are owned by the owner of the land, he is not permitted to tap the trees. Only the Government has got a right to cut the trees, tap and vend the liquor. At the most the owner will be paid the tax as per the rules or in case the trees are situated in such a land which is an agricultural land wherein tapping is permitted, his crops will be spoilt but the trees will not be exempted from tapping. There is no right for the owner to tap the trees and ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g undergrowths could be regarded as agricultural operations when they are taken in conjunction with and as continuation of the basic operations mentioned before, they could not, apart from those operations, be regarded as bearing the character of agricultural operations. But if these basic operations are wanting, the subsequent operations do not acquire the characteristic of agricultural operations. It is agreed on all hands that products which grow wild on the land or are of spontaneous growth not involving any human labour or skill upon the land are not products of agriculture and the income derived therefrom is not agricultural income. There is no process of agriculture involved in the raising of these products from the land. In a simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Questions Nos. 2 and 3 are interlinked and they are as follows : "(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the activity of tapping toddy did not involve manufacture or production of an article or thing? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to deduction under section 80HHA in respect of its toddy business?" It is the case of the assessee that he is carrying on industrial operations. Therefore, he is entitled to claim exemption under section 80HHA of the Act. As stated supra, the activity conducted by the assessee is tapping of trees and vending of toddy and therefore there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking as required under section 80HHA of the Act. The assessee has not produced any evidence to show that he has purchased or installed any machinery and there is no evidence on record. As per the provisions of the Excise Act referred to supra, the process of tapping and vending of toddy trees will be done by obtaining the lease and the required licence from the Government and no manufacturing process is involved in extracting toddy and vending. In view of the above circumstances, the activity of tapping and vending of toddy will not amount to an industrial operation and is not an industrial undertaking. The establishment of the lessee is not an industrial undertaking and the assessee is not entitled for exemption under section 80HH ..... X X X X Extracts X X X X X X X X Extracts X X X X
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