Law:

Section:

Section 2(1A) of the Income-tax Act, 1961 [corresponding to section 2(1) of the Indian Income-tax Act, 1922] - Agricultural income - Assessment year 1955-56 - Assessee was owner of certain agricultural lands - His lands were requisitioned by Government for military purposes and compensation was awarded to him - Whether amount received by assessee as compensation under statutory rules could not be regarded as 'agricultural income' within meaning of section 2(1)(a) or section 2(1)(b)(i) of 1922 Act - Held, yes FACTS The assessee was owner of certain agricultural lands. These lands were requisitioned for military purposes in accordance with the relevant rules made under the Defence of India (XXXV of 1939). By reason of the requisition of the lands for military purposes by the Government under the aforesaid rules the assessee became entitled to payment of compensation. The ITO held that the compensation so received was not agricultural income and, thus, it was to be included in the taxable income of the assessee. On appeal, the AAC as well as the Tribunal upheld order of the ITO. On reference : HELD An income derived from the land will be agricultural income within the meaning of Act, only if the income is derived from the land by agricultural, in other words, as a direct consequence of the carrying on the actual agricultural operations. The fact that the income is indirectly referable to the land will not invest it with the character of agricultural income. In the instant case, it was not suggested that the military authorities had carried on agricultural operations in the lands that they had requisitioned. The amount had been paid to the assessee as compensation under the statutory rules for the deprivation of the income of the owner and in lieu of what otherwise he would have got from the lands. It did not represent the income derived by the owner of land by reason of his own cultivation or the receipt of rent from a tenant who carried on agricultural operations. Therefore, it was to be held that the amount received by the assessee in the circumstances of case was not 'agricultural income' within the meaning of section 2(1)(a) or section 2(1)(b)(i ) of 1922 Act.…

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