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Whether Income from sale of fish could be treated as “Agricultural Income”? CA Naresh Jakhotia
1. I am accountant undertaking private accounting work.
2. One of my client has taken a Lake on lease from Government
3. He is carrying out fishing activity over the pond
4. For fishing activity, he has employed persons to work for it like feeding, collecting, protecting fish from the lake.
5. He is incurring expenses and making income also.
6. I want to know whether the income from sales of fish is an agricultural income or its an income from business? [ firstname.lastname@example.org]
1. Agricultural income has been defined in s. 2(1A) of the Income Tax Act.
[Definition reproduced after the end of this opinion].
2. As per said definition, agricultural income mean
(a) any rent or revenue derived from land used for agricultural purposes;
(b) any income derived from such land by
(i) agriculture; or
(ii) the performance by a cultivator or receiver of rent in kind of certain activities;
(iii) sale by a cultivator or receiver of rent in kind of the produce raised or received by him in certain circumstances
(c) any income derived from any building owned and occupied by receiver of the rent or revenue of any such land.
It may be noted here that there is no inclusion of income from sale of fish from the pond or lake taken on lease from the Government in the said definition.
In absence of any specific inclusions, the activity of your client could not fall in the definition of “Agricultural activity”. By and large, agricultural activity has an activity wherein “land” is yielding he income.
In my considered opinion, your activity would not fall within the ambit of “agricultural income” as provided in section 2(1A) of the Income Tax Act.
The way the activities has been carried out, it will be treated as business income chargeable under the head “profits and gains of business or profession”.
The definition of Agricultural Income as per Income Tax Act – 1961 is as under:
(1A) “agricultural income” means—
(a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes;
(b) any income derived from such land by—
(i) agriculture; or
(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or
(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause;
(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on :
(i) the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and
(ii) the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated—
(A) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand; or
(B) in any area within the distance, measured aerially,—
(I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten thousand but not exceeding one lakh; or
(II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than one lakh but not exceeding ten lakh; or
(III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten lakh.
Explanation 1.—For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section.
Explanation 2.—For the removal of doubts, it is hereby declared that income derived from any building or land referred to in sub-clause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under sub-clause (a) or sub-clause (b) shall not be agricultural income.
Explanation 3.—For the purposes of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.
Explanation 4.—For the purposes of clause (ii) of the proviso to sub-clause (c), “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;
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