Law:

Section:

Section 10(1) , read with section 2(1A), of the Income-tax Act, 1961 (Corresponding to section 4(3)(viii), read with section 2(1), of the Indian Income-tax Act, 1922) - Agricultural income - Assessment year 1955-56 - Assessee - HUF was carrying on business of export of tobacco which was grown on its lands - Processes carried on by assessee commenced from flue - curing and subsequent processes like re-drying, stripping and grading were carried out to make tobacco gift for export - Assessee claimed exemption under section 4(3)(viii) of 1922 Act in respect of income arising from sale of tobacco- Income attributable to operations carried on upto stage of -fluering of tobacco was regarded by assessing authority as agricultural income while that accruing from subsequent activities like re-drying, shipping and grading was treated as income from business liable to tax - Whether operations of re-drying, stripping and grading were not essential to make tobacco marketable in India - Held, yes - Whether since re-ordering and drying machines are very expensive plants and it is commercial organizations who perform operations of "re-ordering and drying," it is not within capacity of ordinary cultivator to perform process of re-drying and ,as such, it could not be said that this process is ordinarily employed by cultivator - Held, yes - Whether, therefore, income attributable to these operations could not be described as agricultural income but should be treated as business income - Held, yes FACTS The assessee was a HUF. One of the businesses carried on by the assessee was export in tobacco, which was grown on the assessee's lands. Processes carried on by assessee commenced from flue-curing of tobacco. The tobacco to be made fit for export had to undergo a further process of re-drying, stripping and grading. Exemption from tax was claimed by the assessee under section 4(3)(viii) of the 1922 Act, in respect of income arising on the sale of tobacco as agricultural income. The department allowed the claim in part. The income attributable to the operations carried on up to the stage of "flue-curing" of the tobacco was regarded as agricultural income, while that accruing from…

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