Law:

Section:

Section 10(1) of the Income-tax Act, 1961 [Corresponding to section 4(3)(viii) of the Indian Income-tax Act, 1922] read with rule 24 of the Indian Income-tax Act, 1962 - Agricultural income - Assessment year 1960-61 - Whether where amount paid by insurance company in respect of damages caused by hail storm to growing crop belonging to assessee and that crop represented agricultural operations, said amount represented agricultural income and as such exempt under section 4(3)(viii)of 1922 Act - Held, yes FACTS The assessee-company was engaged in growing and manufacturing tea. In the assessment year 1960-61, the corresponding previous year being the calendar year 1959, the assessee received certain amount from an insurance company for damage caused to green leaf forming part of the assessee's garden. The damage was caused by hail storm. The assessee claimed that the aforesaid amount was exempt from taxation being agricultural income. The ITO disallowed this claim and included that receipt in the total income of the assessee. The taxable income was computed by applying the provisions of rule 24. The Tribunal held that the insurance against damage to standing crops by hail storm had got nothing to do with the manufacturing business of the assessee and as such was connected with the agricultural operation, namely, planting, growing and maintaining tea bushes. The Tribunal, therefore, came to the conclusion that the receipt in question was entirely a receipt connected with the agricultural operation and as such represented agricultural profit and, therefore, it was entitled to exemption from income-tax under section 4(3)(viii) of the 1922 Act. On reference: HELD Rule 24 was not applicable to the receipt of this nature. The same rule is only applicable when the income is derived from the sale of tea grown and manufactured by the seller. When tea is sold by one who both grows tea and manufactures it, the income there from is resultant from the combined operations of agriculture and manufacture. In cases of this type the income must be apportioned and until the appropriate rules, were framed under the Act, it was apportioned by stating that the portion of it which comes…

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