P.CHANDRA REDDY, J. - (1.)THE question that requires an answer in this reference is framed in the following words :
''Whether the proportionate income accruing on the sale of tobacco after the process of flue curing, is income exempt under S. 4(3)(viii) of the Act being agricultural income within the meaning of S. 2 (1)(b) of the Act -

(2.)THE reference relates to the asst. year 1955 -56. The assessee is an HUF. One of the businesses carried on by the assessee is export in tobacco, which is grown on the assessee's lands. Exemption from tax was claimed by the assessee under S. 4(3)(viii) of the Indian IT Act in respect of income arising on the sale of tobacco as agricultural income. The Department allowed the claim in part. The income ascribable to the operations carried on up to the stage of "flue -curing" of the tobacco was regarded as agricultural income, while that accruing from subsequent activities up to and including the sale of tobacco by export to foreign countries was treated as income from business which is subject to tax. The tobacco to be made fit for export to countries like United Kingdom and Russia had to undergo a further process of re -drying, stripping and grading. The order of the proper ITO was affirmed on appeal by the AAC as also by the Tribunal on a further appeal. Further,as the Tribunal thought that the case raises a question of law, it referred the matter to this Court under S. 66(1) of the Indian IT Act.
(3.)IN this enquiry, the problem that presents itself is whether the income attributable to operations of re -drying, stripping and grading would also come within the connotation of the expression
"agricultural income". "Agricultural income" is defined in S. 2(1) thus: "(1) 'Agricultural income' means -...... (b) any income derived from such land by -.... (ii) the performance by a cultivator or receiver of rent -in -kind of any process ordinarily employed by a cultivator or receiver of rent -in -kind to render to produce raised or received by him fit to be taken to market, or....."

It is plain that in order to attract cl. (ii) two requisites should be present, namely, (i) that the process should be ordinarily employed by the cultivator and (ii) that it should be necessary to make the agricultural produce marketable. Sri Kuppuswamy, learned counsel for the assessee, contends that the processes called "re -drying, stripping and grading" have to be employed to give durability and better quality to the tobacco and as such these activities also come within the sweep and range of cl. (ii). He further submits that all the processes commencing from "flue -curing" should together be described as agriculture. In support of this contention, the learned counsel draws our attention to the judgments of the High Courts of Patna, Madras and Kerala in J.M. Casey vs. CIT AIR 1930 Pat 44 (SB), State of Madras vs. Sarvana Pillai (1956) 2 MLJ 306 : (1956) 7 STC541 and Dy. Commr. of Agrl. IT & ST vs. A.P. Raman (1960) 11 STC263 respectively.