Tax Treatment of Income Which Partially Agricultural and Partially From Business [Rule 7, 7a, 7b and 8]

For disintegrating a composite business income which is partly agriculture and partly non-agricultural, the following rules are applicable – Income derived from the sale of tea, Coffee, Rubber grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax.

Income

Non-agricultural Income

Agricultural Income

Income Tax Rules

  • Growing and manufacturing tea in India
  • Sale of Centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes (such as estate brown crepe, remilled crepe, smoked blanked crepe or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India
  • Sale of coffee grown and cured by seller
  • Sale of coffee grown, cured, roasted and grounded by seller in India with or without mixing chicory or other flavouring ingredients

40%

35%

25%

40%

60%

65%

75%

60%

Rule 8

Rule 7A

Rule 7B(1)

Rule 7B(1A)

 Reference: Rule 8

Income from the manufacture of tea

(1) Income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax.

(2) In computing such income an allowance shall be made in respect of the cost of planting bushes in replacement of bushes that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (30) of section 10, is not includible in the total income.

Reference: Rule 7A

Income from the manufacture of rubber

(1) Income derived from the sale of centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe) or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India shall be computed as if it were income derived from business, and thirty-five per cent of such income shall be deemed to be income liable to tax.

(2) In computing such income, an allowance shall be made in respect of the cost of planting rubber plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in the total income.

Reference: Rule 7B

Income from the manufacture of coffee

(1) Income derived from the sale of coffee grown and cured by the seller in India shall be computed as if it were income derived from business, and twenty-five per cent of such income shall be deemed to be income liable to tax.

(1A) Income derived from the sale of coffee grown, cured, roasted and grounded by the seller in India, with or without mixing chicory or other flavouring ingredients, shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax.

Explanation : For the purposes of sub-rules (1) and (1A) “curing” shall have the same meaning as assigned to it in clause (d) of section 3 of the Coffee Act, 1942 (7 of 1942)

(2) In computing the incomes referred to in sub-rules (1) and (1A), an allowance shall be made in respect of the cost of planting coffee plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in the total income.

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