Partly Agricultural and Partly Business Income
Introduction
Income from combined agricultural and business activities, such as tea, rubber, and coffee production, is apportioned for tax purposes. Agricultural income is exempt, while business income is taxable.
Apportionment Methods
- Profits from manufacture and sale of tea ( Rule 8 ) :
- Income from growing and manufacturing tea is first computed as business income after deductions.
- Profits are split: 60% treated as agricultural income and 40% as business income.
- Deduction allowed for cost of replanting tea bushes that died or became useless, if the area is not abandoned.
Subsidy received from or through the Tea Board is not deductible.
- Profits from growing coffee ( Rule 7B ) :
- Income shall be computed as if it were income derived from normal business
- Coffee grown and cured: 75% agricultural, 25% business.
- Coffee grown, cured, roasted, and grounded: 60% agricultural, 40% business.
- Deduction allowed for planting replacement coffee plants, provided such an area has not been previously abandoned.
- No deduction is allowed for any subsidy received from or through the concerned board
- Profits from manufacture of rubber ( Rule 7A ) :
- Income shall be computed as if it were income derived from normal business.
- 65% agricultural income (exempt), 35% business income (taxable).
- Deduction allowed for planting replacement rubber plants, provided such an area has not been previously abandoned.
- No deduction is allowed for any subsidy received from or through the concerned board
- Use of agricultural produce in business ( Form 7 )
- The market value of agricultural produce used as raw material in business is deducted from business income.
- Determination of Market Value
- If sold in a market: Average selling price during the year.
- If no market exists: Sum of cultivation expenses, land revenue/rent, and such amount of profit as the Assessing Officer may find reasonable.