The Income Tax Appellate Tribunal (ITAT), Bangalore has held that the income received from the sale of cocoons is not agricultural income and therefore, the same is taxable as “Income from Other Sources” under the income tax law.
The assessee, a HUF, is engaged in agricultural operations. While completing assessment proceedings against the assessee, the Assessing Officer observed that according to the reports of the Village Accountant and Revenue Inspector, the assessee’s lands in question were under cultivation in the year under consideration.
The Assessing Officer concluded the assessment under section 143(3) of the Act, treating agricultural income as income from other sources.
The first appellate authority confirmed the assessment order. The Tribunal observed that the income from the sale of cocoons cannot be regarded as agricultural income.
The Tribunal further noticed the decision of the Apex Court in the case of K. Lakshmanan & Co. Vs. CIT wherein it was held that the income derived by the assessee from the sale of cocoons raised by it by feeding mulberry leaves to silkworms is not agricultural income.
“In the case on hand, the AO has considered income from sericulture at Rs.1,92,240/- and 50% thereof viz., Rs.96,120/- as income derived from the cultivation of mulberry plants. It has already been held in this order that the AO was not correct in estimating, both the agricultural income as well as the expenditure thereon, when the facts on record establish that the assessee HUF had carried on agricultural operations; including the growing of Mulberry plants and sericulture; during the year under consideration. In the facts and circumstances of the case, as discussed above, on this issue, the income from sericulture as declared by the assessee amounting to Rs.15,42,199/- is to be accepted and 50% thereof, amounting to Rs.7,71,100/- is held to be attributable to the sale of cocoons, which is chargeable to tax,” the Tribunal said.
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