The Commissioner of Income Tax vs Yagappa Nadar

The question referred by the Income Tax Commissioner is:

Whether toddy extracted from cocoanut trees situate on lands assessed to Government revenue is or is not agricultural income ""within the meaning

of Section 2(1) and whether the Income Tax Act applies to profits derived from the sale of such toddy.

It is contended for the petitioner that he as lessee of the trees is entitled to treat the income derived from the toddy which is produced from these

trees as agricultural income. The juice which by contact with air in time becomes toddy is a product of these cocoanut trees and it is contended that

as such it is an agricultural product. That undoubtedly is so, and the income derived therefrom by the person who has produced that product by

agricultural operations would be agricultural income, but it does not at all follow that if he sells the juice to another person and that person makes

an income by again selling that product, the latter income is agricultural income. Ordinarily, it would certainly not be agricultural income unless it

could be shown that the second seller had obtained his income by agriculture, that is to say, he must show that he has either as owner or as lessee

done some agricultural operation by reason of which he becomes possessed of the toddy and therefore is entitled to treat the proceeds as income

from agriculture. It is contended here that the petitioner is the lessee of the trees, but admittedly not of. the land on which they stand. It is very

doubtful whether it is possible to have a lease of the trees without the land on which they stand. Under the Transfer of Property Act leases are only

in respect of Immovable property and no instance of a lease of moveable property has been suggested to us. No interest in the land has been

transferred here and it would appear that what the petitioner has obtained is a mere license to tap the trees and draw the juice. If that is so, the

mere fact that he has to water the trees (and this is not proved to be the case) shows only that the watering is one of the conditions of his license

and not an act whereby the agricultural produce had been raised, for that was raised before he obtained his license. As the facts of the case have

not been put before us by the Commissioner, we must give a general answer as follows:

Income derived from toddy is agricultural income when it is received by the actual cultivator, whether owner or lessee of the land on which the

trees grow. If the income is obtained by a person who has not produced the trees from which the toddy is tapped, or has not done any agricultural

operation whereby those trees have been raised, it is not agricultural income within the meaning of the Act.

Counsel''s fee Rs. 250 will be paid according to the result of the disposal of the petition.