COMMISSIONER OF INCOME TAX v H.

G [1971]

BENCH:
K. DESAI, N. MODY
DATE OF THE JUDGEMENT:
26 JANUARY 1970
FACTS OF THE CASE:
The respondent is the owner of the 93 acre land. It is situated in the Phaltan on the southern
bank of the river Nira. Respondent used to grow sugarcanes on his land. He owned 3 horse
power engines for crushing sugarcanes and used to turn sugarcane syrup into jaggery for the
market sale. He claimed that the income was agricultural income; and that he was entitled to
exemption from income-tax in respect thereof having regard to the provisions in section 2(1)
(b) (iii) read with section 4(3) (viii). This exemption was refused to him and in Appeals Nos.
1591 and 1592 of 1956, the Income-tax Appellate Tribunal by its order dated August 10,
1956, had that proper attempt had not been made to ascertain the truth whether there was in
fact a market for the sale of sugarcane grown by the RESPONDENT. The assessee was given
opportunity to tender further evidence in support of his case that his income was agricultural
income and that he was entitled to exemption having regard to the above provisions in the
Act. In the instant case, the sugarcane crops which were harvested by the appellant was
converted into jaggery and the profit made out of the sale of jaggery was shown as
agricultural income. This classification of income was not accepted by the assessing officers
as well as the Commissioner of Income Tax(Appeals). These orders were further confirmed
by the Income Tax Appellate Tribunal leading to these two appeals. The Assessing Officer
included the profit from the sale of the gur in the assessee's taxable income rejecting the
assessee's plea that it was agricultural income and the same stood confirmed by the Tribunal.
Respondent said that sugarcanes are not like wheat or rice, they cant be stored for months so
after cutting them, they should be sent to mills but mills owner prefer to buy them from near
by places. If sugarcanes are not sent to mills within 48 hours after being cut then they start
losing the sugar content. If no mill buys sugarcane, an agriculturist has to convert it into gur.
There is no market as such where sugarcane of this quality can be sent and sold.
ISSUES OF THE CASE :
1. If there is no market to sell the produce then any process which is ordinarily
employed to render it fit to reach the market, where it can be sold, would be covered
by the definition.
2. The mills buy their requirements at prices fixed by the Government or at such other
prices at which sugarcane can be purchased according to their requirements.
JUDGEMENT:
It was held that the sugarcane variety raised by the assessee was not usable in its natural form
which inevitably forced the farmer to convert it into sugar or jaggery to market. That was the
basis for such a ruling that the sugarcane which was converted to jaggery still falls under the
agricultural produce category to make it eligible for Income Tax exemption.
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.