Sale of Jaggery is not an ‘Agricultural Activity’: Madras HC upholds denial of Income Tax Exemption [Read Judgment]

A division bench of the Madras High Court has held that the exemption for agricultural income under the Income Tax Act, 1961 does not include the income from the sale of jaggery.

The assessee, an agriculturalist engaged in the activity of conversion of the sugarcane crops harvested by him into jaggery. While filing his income tax return for the relevant year, he disclosed his income from the sale of jaggery as agricultural income and claimed for exemption. However, the request was rejected by the income tax department stating that the said activity cannot be treated as agricultural activity for allowing exemption.

While considering the appeal against the orders of the lower authorities and the Tribunal, Justice Duraiswami and Justice Hemalatha observed that the conversion of sugarcane into jaggery is also not an essential process to make sugarcane marketable.

The bench noted that the assessment Officer in his order found that the present assessee did not state the circumstance under which the asssessee converted the sugarcane into jaggery. It is further observed by him that the assessee has incurred an expenditure of Rs.1,70,000/- for manufacturing of jaggery while he incurred expenditure of Rs.1,30,000/- towards cultivating sugarcane.

“Moreover, it is also seen that though manufacturing of jaggery can be done by a small scale by a group of farmers by extracting juice from fresh sugarcane which is filtered and boiled in wide yellow shallow iron pans with continuous stirring and also adding soda or other similar chemicals to get the jaggery, it is evident that the process of converting sugarcane into jaggery is not an essential one to make sugarcane marketable and there is more profit in making it as jaggery and selling. If the exemption of agricultural income is extended to the sale of jaggery, it would only facilitate many agriculturists to claim this exemption and carrying revenue loss to the exchequer,” the bench said.

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.