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Section 139 of the Income-tax Act, 1961 – Return of income – Clarification regarding filing of return of income by coffee growers, being individuals covered by rule 7B of the Income-tax Rules, 1962

1. The existing provisions of rule 7B of the Income-tax Rules, 1962 inserted by the Income-tax (Second Amendment) Rules, 2001, w.e.f. 1-4-2002 and further amended by the IT (Third Amendment) Rules, 2002 w.e.f. 1-4-2003, provide that income derived from the sale of coffee grown and cured by the seller shall be computed as if it were income derived from business and 25% of such income shall be deemed to be income liable to tax.

2. Under the existing provisions of section 139(1)(b) of the Income-tax Act, 1961, an individual is required to file return of income only if his total income is above the taxable limit, i.e., above Rs. 50,000, subject to first proviso to section 139(1) of the Income-tax Act, 1961.

3. In order to provide relief to the individual coffee growers and on representations received from them, the Board have considered the matter of filing return of income by the coffee growers. It is clarified that an individual deriving income from growing and curing coffee, with or without mixing chicory or other flavouring ingredients, and not covered by the first proviso to section 139(1) of the Income-tax Act, 1961, would not be obliged to file his return, if his income from growing and curing of coffee is Rs. 2 lakh or less as only 25% of such income is taxable as business income under rule 7B(1) of the Income-tax Rules, 1962. Where such individual, not covered by the first proviso to section 139(1), derives income from growing, curing, roasting and grounding, with or without mixing chicory or other flavouring ingredients and his income from such activity is Rs. 1,25,000 or less, he would not be obliged to file his return of income as only 40% of such income is taxable as business income under rule 7B(2) of the Income-tax Rules, 1962.

Circular : No. 10/2003, dated 24-12-2003.

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