E. Palaniappan Vs ITO (Madras High Court)
It is not the case of the appellant/assessee that the sugarcane in its original form could not be marketed by him. The conversion of sugarcane into jaggery is also not an essential process to make sugarcane marketable. In the decision in CIT Vs. H.G. DATE (1971) reported in 82 ITR 71 (Bombay), it was held that the sugarcane variety raised by the assessee was not usable in its natural form which inevitably forced the farmer to convert it into sugar or jaggery to market. That was the basis for such a ruling that the sugarcane which was converted to jaggery still falls under the agricultural produce category to make it eligible for Income Tax exemption. Such instances are far and few and definitely the exception cannot be a rule. Moreover, the assessment Officer in his order dated 18.11.2005 has categorically found that the present assessee did not state the circumstance under which the asssessee 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 expenditure of Rs.1,30,000/- towards cultivating sugarcane.
Moreover, it is also seen that though manufacturing of jaggery can be done by a small scale by a group 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 get the jaggery, it is evident that the process of converting sugarcane into jaggery is not an essential one to make sugarcane marketable and there is more profit in making it as jaggery and selling. If the exemption of agricultural income is extended to the sale of jaggery, it would only facilitate many agriculturists to claim this exemption and carrying revenue loss to the exchequer.
