Law:

Section:

Section 2(1), read with section 10(1), of the Income-tax Act, 1961 - Agricultural income - Assessee obtained permanent lease of agricultural land which was also being claimed by b as lessee - Assesses obtained an ejectment decree against b who subsequently obtained court's stay order - Court directed b to deposit Rs. 30,000 annually in form of defence saving certificates which, with accrued interest thereon, would be finally paid to successful party - Assessee finally succeeded and received Rs. 67,337 as his share of impugned deposit with interest - Whether impugned amount was exempt as agricultural income - Held, yes, qua only deposit Facts The assessee and his wife obtained on 6-9-1950 permanent lease of some agricultural land which was also claimed by B and a few others as its lessees. There was thus a protracted litigation between the assessee and B. The assessee eventually obtained an ejectment decree on 26-6-1964. B, thereafter, filed a writ petition asking for a stay of this ejectment order. As per the High Court's order, B was required to deposit during pendency of writ Rs. 30,000 annually in form of Defence Savings Certificates. The High Court also directed that if the petition was allowed, the accumulated amount, with interest, would be returned to B but in case of its dismissal, the same, with accrued interest thereon, would be paid to the assessee. The writ petition was ultimately dismissed and the deposit amount of Rs. 1,25,000 and interest amount of Rs. 9,675 was distributed to the assessee and his brothers. The assessee received Rs. 67,337 as his share and claimed the same as agricultural income immune from tax. The ITO and the AAC, however, included the impugned amounts in his total income. The Tribunal, however, deleted the same, holding, inter alia, that the receipt was agricultural income exempt from tax under section 10(7). On reference: Held 1. If the amount was to be treated as agricultural income, it had to fall under sub-clause (a) or (b) of section 2(1). It did not fall under sub-clause (b) since the assessee did not raise or process or sell any agricultural produce. He received the money as a result of the High Court's stay order with…

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