Profits from Sale of Jaggery is Taxable, Not considered as Agricultural Income: Madras HC [Read Order]

In a recent ruling, the High Court of Madras held that profits from the sale of jaggery are taxable and that sugarcane and jaggery are different commodities and rejected the agricultural claim made by the assessee. It ruled that profit from the sale of jaggery falls beyond ken of agricultural income.

The appellants have appealed against the order of the Income Tax Appellate Authority ( ITAT ), which held that the profit from the sale of jaggery fell beyond the purview of agricultural income.

The appellant’s main issue, in this case, was whether, according to Schedule III of the Tamil Nadu General Sales Tax Act, 1959, “gur” and “jaggery”  are distinct commodities or whether they are the same for the purpose of determining the taxability of the profits from the sale of jaggery.

The counsel on behalf of the appellant contended that the product that was sold was not jaggery and that it was actually sugarcane, which is an agricultural commodity.

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The High Court noted that pleas made by the assessee cannot be accepted as the orders of the lower authorities contain detailed findings against the assessee, even at the assessment stage.

The bench further noted that the assessment order clearly states that the assessee possessed machinery to convert sugarcane into jaggery and failed to substantiate its claim that the sales to third parties involved sugarcane and not jaggery.

The HC was of the opinion that the assessee did not raise this issue before the first or second appellate authorities and instead focused on distinguishing between ‘gur’ and ‘jaggery,’ claiming they are different commodities.

The Madras High Court, comprising Justice Anita  Sumanath and Justice G Arul Murugan, after relying on several judgments such as [CIT v H.G.Date (1971) 82 ITR 71, Commissioner of Income-Tax v Kirloskar Bros. Ltd (181 ITR 523), held that ‘the essential characteristic of sugarcane in its original form, stands converted after processing, into jaggery and both the commodities are different and distinct from one another.‘

The bench ruled in favour of the Revenue and dismissed the appeal filed by the assessee.

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