The assessee, an agriculturalist engaged within the activity of conversion of the sugarcane crops harvested by him into jaggery. The sugarcane crops which were harvested by the appellant were 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). While filing his 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 tax department stating that the said activity can't be treated as an agricultural activity for allowing the exemption.
While considering the appeal against the orders of the lower authorities and therefore the Tribunal, Justice Duraiswami, and Justice Hemalatha observed that the conversion of sugarcane into jaggery is additionally not an important process to form sugarcane marketable. The commodity should remain the same even after the application of any process and the process in itself should be a necessary one to render the original commodity marketable.
The bench noted that the assessment officer in his order found that this assessee didn't state the circumstance under which the assessee 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 an expenditure of Rs.1,30,000/- towards cultivating sugarcane.
“Moreover, it's also seen that though manufacturing of jaggery is often done by a little scale by a gaggle 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 urge the jaggery, it's evident that the method of converting sugarcane into jaggery isn't an important one to form sugarcane marketable and there's more profit in making it as jaggery and selling. If the exemption of agricultural income is extended to the sale of jaggery, it might only facilitate many agriculturists to say this exemption and carrying revenue loss to the exchequer,” the bench said.