Whether income from sale of eucalyptus and wattle trees is agricultural income as per section 2(1A)?

Описание: [2025] 127 ITR (Trib.) S.N. 79 (Chennai) B – Bench

Razak Rowther Mohamed Saleem
V.
Income-Tax Officer

S.S. Viswanethra Ravi (J.M.) and S.R. Raghunatha (A.M.)

17.10.2025

Playlist: 2(1A), Agriculture Income

A.Y: 2016-17/Assessee

Question: Whether income from sale of eucalyptus and wattle trees is agricultural income as per section 2(1A)?

1. According to section 2(1A) of the Income-Tax Act, 1961, agricultural income includes revenue from agricultural land and buildings, and income from agricultural activities and can be broadly classified into 3 categories;
(i) Rent on revenue earned from agricultural land situated in India.
(ii) Income from agricultural land arising from primary agricultural activities
(iii) and the sale of agricultural produce.

2. For the A.Y. 2016-17, the assessee filed its return of income and claimed agricultural income.

3. The assessee had grown Kungiliyam (Eucalyptus) tress and Seegai (Wattle) trees on his land and offered the agricultural income out of sale of trees.

4. The assessee’s case was selected from limited scrutiny to verify correct claim of agricultural income, sales turnover or receipts correctly offered to tax and capital gain/loss on sale of property correctly shown in the return of income.

5. The assessee produced the patta and chitta of the lands during the assessment proceedings showing that the land was punjai lands or dry agricultural land and eucalyptus trees were grown thereon.

6. The A.O., to verify the assessee’s claim deputed an inspector, who submitted his field report stating that the assessee was growing eucalyptus trees on his land but did not carry out any maintenance for growth of trees.

7. The A.O. disallowed the claim of agriculture on the ground of lack of evidence to show agricultural activities and proof of any expenses therefor which was confirmed by CIT(A).

8. On further appeal it was held by allowing the appeal, that the assessee had furnished complete details about the land being an agricultural land growing Kungiliyam (Eucalyptus) trees and Seegai (Wattle) trees and any income derived from the land by way of revenue was an agricultural income.

9. The assessee has carried out many activities for the cultivation of eucalyptus trees on land, including growth habit, fertilizers, planting techniques, block and row planting irrigation, etc. and was involved in basic operations and subsequent operations for processing the product to make it market ready and sold the said agricultural produce pursuant to the order of the local district collector.

10. The proceeds therefrom were treated as agricultural income and thus, satisfying the conditions laid down in section 2(1A).

11. Hence, the income from the sale of eucalyptus trees that was grown on the assessee’s dry agricultural land was agricultural income.

12. Therefore, as CIT(A) was not justified in confirming the order of the A.O. in denying the claim of agricultural income, the addition made thereon was deleted.

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