Q. Consider the following statements:

Statement I:
In India, income from allied agricultural activities like poultry farming and wool rearing in rural areas is exempted from any tax.

Statement II:
In India, rural agricultural land is not considered a capital asset under the provisions of the Income-tax Act, 1961.

Which one of the following is correct in respect of the above statements?
(a) Both Statement I and Statement II are correct and Statement II explains Statement I
(b) Both Statement I and Statement II are correct but Statement II does not explain Statement I
(c) Statement I is correct but Statement II is not correct
(d) Statement I is not correct but Statement II is correct

35. निम्नलिखित कथनों पर विचार कीजिए:

कथन I:
भारत में, ग्रामीण क्षेत्रों में कुक्कुट पालन और ऊन उत्पादन जैसे संवर्गी कृषि कार्यकलाप से प्राप्त आय को किसी भी कर से छूट प्राप्त है।

कथन II:
भारत में, आयकर अधिनियम, 1961 के उपबंधों के अधीन, ग्रामीण कृषि भूमि को पूँजीगत परिसंपत्ति नहीं माना जाता है।

उपर्युक्त कथनों के बारे में, निम्नलिखित में से कौन-सा एक सही है?
(a) कथन I और कथन II दोनों सही हैं तथा कथन II, कथन I की व्याख्या करता है
(b) कथन I और कथन II दोनों सही है किन्तु कथन II, कथन I की व्याख्या नहीं करता है
(c) कथन I सही है किन्तु कथन II सही नहीं है
(d) कथन I सही नहीं है किन्तु कथन II सही है

Answer: (d)

Explanation:

Statement I is not correct:

• Income from agriculture is exempt from tax under Section 10(1) of the Income Tax Act only if it meets specific conditions.
• However, not all activities like poultry farming, dairy, wool rearing, or other allied activities are treated as agricultural income.
• For example:
• Poultry farming and dairy farming are not considered agricultural income as they do not involve direct cultivation of land

Statement II is correct:

In India, rural agricultural land is not considered a capital asset under the provisions of the Income-tax Act, 1961.

• According to Section 2(14) of the Income Tax Act:
• Rural agricultural land is excluded from the definition of capital asset.
• Therefore, any gains from the sale of rural agricultural land are not considered capital gains and are not taxable.

Source: Income Tax India - Capital Gains Provisions