My client taps rubber and makes ribbed smoked sheets to keep the latex from spoiling before sale. The Commissioner (Appeals) has applied Rule 7A and taxed thirty-five per cent as business income. Is that right?
No. The Tribunal held that ribbed smoked sheets are merely dried and smoked latex, intended to prevent deterioration and make the product marketable, and that the process involves no chemical or mechanical treatment or transformation resulting in a new product — so it is not "manufacture" or "processing" in the sense contemplated by Rule 7A. Rule 7A applies to income from the manufacture or processing of centrifuged latex and the other products it names, not to the simple smoking or drying of latex sheets. The Tribunal set aside the Commissioner (Appeals)'s order to the extent it treated thirty-five per cent of the income as business income and directed the Assessing Officer to treat the entire income from the sale of ribbed smoked rubber sheets as agricultural income.
Decided by the ITAT (Shri S.S. Viswanethra Ravi, Judicial Member and Shri S.R. Raghunatha, Accountant Member (Income Tax Appellate Tribunal, 'B' Bench, Chennai); order per S.R. Raghunatha, Accountant Member) on 2025-11-14, reported as ITA No. 1637/Chny/2025; assessment year 2020-21; date of hearing 11 September 2025; no law-report citation printed on the document. It bears on section Rule 7A, section Rule 7, section 2(1A), section 10(1), section 69A of the Income Tax Act 1961, in Capital Gains Exemptions, How Tax Law Is Read and Evidence & Burden of Proof matters.
This is the small and medium rubber grower's case, and it is the practical application of the second limb of s.2(1A)(b) — a process ordinarily employed by a cultivator to render the produce fit to be taken to market keeps the income agricultural. Two features make the decision usable. First, the Tribunal treated the products NAMED in Rule 7A as the boundary of the rule: centrifuged latex, cenex, latex based crepes, brown crepes and technically specified block rubbers. Ribbed smoked sheets are not among them, and the Tribunal declined to read them in. Second, the decision rests heavily on a technical opinion from the Rubber Research Institute of the Rubber Board of India, a statutory body under the Rubber Act, 1947, confirming by letter dated 5 June 2023 that ribbed smoked sheets are not in the category of manufactured products but only a marketable form of natural rubber. That is the evidence a practitioner should go and get, because the Tribunal called it "authoritative support". Note the procedural history, which is itself instructive: the Assessing Officer had added the whole agricultural income of Rs 39,81,121 as unexplained money under section 69A; the Commissioner (Appeals) deleted that characterisation but substituted a Rule 7 and 7A apportionment; only the second step survived to the Tribunal, and it too was set aside.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee was an individual with agricultural income and income from other sources. For assessment year 2020-21 she returned taxable income of Rs 4,08,815 and exempt agricultural income of Rs 43,43,129. The case was picked up for limited scrutiny through CASS on the issue of agricultural income. The Assessing Officer, in the Faceless Assessment Unit, added agricultural income of Rs 39,81,121 to total income as unexplained money under section 69A, raised a demand of Rs 42,01,763 and initiated penalty proceedings. On appeal the Commissioner (Appeals), by order dated 10 February 2025, deleted the addition as unexplained money but held that the cultivation and treatment of smoked rubber sheets was income from the sale of centrifuged latex falling under Rules 7 and 7A, partly agricultural and partly business, and treated Rs 13,93,392 as business income. The assessee appealed to the Tribunal, relying on a confirmation letter dated 5 June 2023 from the Rubber Research Institute, Rubber Board of India, a statutory body constituted under the Rubber Act, 1947, stating that ribbed smoked rubber sheets are not in the category of manufactured products but can only be considered a marketable form of natural rubber. There was a delay of 35 days in filing the appeal, which the Tribunal condoned on an affidavit explaining non-receipt of the appellate order through due channels.
The appeal was allowed. The Tribunal held that the assessee's activity of converting field latex into ribbed smoked sheets constitutes an integral part of the agricultural operation, and that the entire income from it is agricultural income exempt under section 10(1) of the Act (paragraph 27). It set aside the order of the Commissioner (Appeals) to the extent it treated thirty-five per cent of the agricultural income as business income under Rule 7A, and directed the Assessing Officer to treat the entire income from the sale of ribbed smoked rubber sheets as agricultural income (paragraph 28).
The Tribunal framed the question at paragraph 20 as whether income from the sale of smoked rubber sheets is assessable as agricultural income or under Rules 7 and 7A so as to bring thirty-five per cent to tax as business income. It recorded at paragraph 22 that Rule 7A provides for computation of income from the sale of centrifuged latex, crepes and technically specified block rubbers manufactured or processed from field latex obtained from rubber plants, deeming thirty-five per cent of such income to be business income and the balance agricultural. At paragraph 23 it held that the crucial question is whether ribbed smoked sheets fall within the ambit of the products specified in Rule 7A, and that on a plain reading of the rule and the clarification of the Rubber Board, ribbed smoked sheets are merely dried and smoked latex intended to prevent deterioration and make the product marketable, the process involving no chemical or mechanical treatment or transformation resulting in a new product, so that it cannot be considered manufacture or processing in the sense contemplated under Rule 7A. At paragraph 25 it held that the Commissioner (Appeals)'s reliance on Rules 7 and 7A was misplaced since the rule applies to income derived from the manufacture or processing of centrifuged latex and not to the simple smoking or drying of latex sheets, and at paragraph 26 that the technical opinion of the Rubber Research Institute, a statutory expert body, lends authoritative support to the assessee's contention.
In the present facts and circumstances of the case and considering the judicial precedents, we hold that the assessee's activity of converting field latex into ribbed smoked sheets constitutes an integral part of the agricultural operation, and the entire income therefrom is agricultural income exempt under section 10(1) of the Act.
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Handle my notice → Ask a CA on WhatsAppNo. The Tribunal held that ribbed smoked sheets are merely dried and smoked latex, intended to prevent deterioration and make the product marketable, and that the process involves no chemical or mechanical treatment or transformation resulting in a new product — so it is not "manufacture" or "processing" in the sense contemplated by Rule 7A. Rule 7A applies to income from the manufacture or processing of centrifuged latex and the other products it names, not to the simple smoking or drying of latex sheets. The Tribunal set aside the Commissioner (Appeals)'s order to the extent it treated thirty-five per cent of the income as business income and directed the Assessing Officer to treat the entire income from the sale of ribbed smoked rubber sheets as agricultural income. This was decided by the ITAT (Shri S.S. Viswanethra Ravi, Judicial Member and Shri S.R. Raghunatha, Accountant Member (Income Tax Appellate Tribunal, 'B' Bench, Chennai); order per S.R. Raghunatha, Accountant Member) and bears on section Rule 7A, section Rule 7, section 2(1A), section 10(1), section 69A of the Income Tax Act 1961. It is reported as ITA No. 1637/Chny/2025; assessment year 2020-21; date of hearing 11 September 2025; no law-report citation printed on the document. This is the small and medium rubber grower's case, and it is the practical application of the second limb of s.2(1A)(b) — a process ordinarily employed by a cultivator to render the produce fit to be taken to market keeps the income agricultural. Two features make the decision usable. First, the Tribunal treated the products NAMED in Rule 7A as the boundary of the rule: centrifuged latex, cenex, latex based crepes, brown crepes and technically specified block rubbers. Ribbed smoked sheets are not among them, and the Tribunal declined to read them in. Second, the decision rests heavily on a technical opinion from the Rubber Research Institute of the Rubber Board of India, a statutory body under the Rubber Act, 1947, confirming by letter dated 5 June 2023 that ribbed smoked sheets are not in the category of manufactured products but only a marketable form of natural rubber. That is the evidence a practitioner should go and get, because the Tribunal called it "authoritative support". Note the procedural history, which is itself instructive: the Assessing Officer had added the whole agricultural income of Rs 39,81,121 as unexplained money under section 69A; the Commissioner (Appeals) deleted that characterisation but substituted a Rule 7 and 7A apportionment; only the second step survived to the Tribunal, and it too was set aside. If it applies to you, the first step is this: Identify precisely what the grower sells. If it is not one of the products named in Rule 7A, argue that the rule does not engage at all rather than arguing about the percentage.
The assessee was an individual with agricultural income and income from other sources. For assessment year 2020-21 she returned taxable income of Rs 4,08,815 and exempt agricultural income of Rs 43,43,129. The case was picked up for limited scrutiny through CASS on the issue of agricultural income. The Assessing Officer, in the Faceless Assessment Unit, added agricultural income of Rs 39,81,121 to total income as unexplained money under section 69A, raised a demand of Rs 42,01,763 and initiated penalty proceedings. On appeal the Commissioner (Appeals), by order dated 10 February 2025, deleted the addition as unexplained money but held that the cultivation and treatment of smoked rubber sheets was income from the sale of centrifuged latex falling under Rules 7 and 7A, partly agricultural and partly business, and treated Rs 13,93,392 as business income. The assessee appealed to the Tribunal, relying on a confirmation letter dated 5 June 2023 from the Rubber Research Institute, Rubber Board of India, a statutory body constituted under the Rubber Act, 1947, stating that ribbed smoked rubber sheets are not in the category of manufactured products but can only be considered a marketable form of natural rubber. There was a delay of 35 days in filing the appeal, which the Tribunal condoned on an affidavit explaining non-receipt of the appellate order through due channels. The matter was decided on 2025-11-14 by the ITAT (Shri S.S. Viswanethra Ravi, Judicial Member and Shri S.R. Raghunatha, Accountant Member (Income Tax Appellate Tribunal, 'B' Bench, Chennai); order per S.R. Raghunatha, Accountant Member). On those facts the ITAT held as follows. The appeal was allowed. The Tribunal held that the assessee's activity of converting field latex into ribbed smoked sheets constitutes an integral part of the agricultural operation, and that the entire income from it is agricultural income exempt under section 10(1) of the Act (paragraph 27). It set aside the order of the Commissioner (Appeals) to the extent it treated thirty-five per cent of the agricultural income as business income under Rule 7A, and directed the Assessing Officer to treat the entire income from the sale of ribbed smoked rubber sheets as agricultural income (paragraph 28).
The Tribunal framed the question at paragraph 20 as whether income from the sale of smoked rubber sheets is assessable as agricultural income or under Rules 7 and 7A so as to bring thirty-five per cent to tax as business income. It recorded at paragraph 22 that Rule 7A provides for computation of income from the sale of centrifuged latex, crepes and technically specified block rubbers manufactured or processed from field latex obtained from rubber plants, deeming thirty-five per cent of such income to be business income and the balance agricultural. At paragraph 23 it held that the crucial question is whether ribbed smoked sheets fall within the ambit of the products specified in Rule 7A, and that on a plain reading of the rule and the clarification of the Rubber Board, ribbed smoked sheets are merely dried and smoked latex intended to prevent deterioration and make the product marketable, the process involving no chemical or mechanical treatment or transformation resulting in a new product, so that it cannot be considered manufacture or processing in the sense contemplated under Rule 7A. At paragraph 25 it held that the Commissioner (Appeals)'s reliance on Rules 7 and 7A was misplaced since the rule applies to income derived from the manufacture or processing of centrifuged latex and not to the simple smoking or drying of latex sheets, and at paragraph 26 that the technical opinion of the Rubber Research Institute, a statutory expert body, lends authoritative support to the assessee's contention. In the words reproduced by the source cited on this page: "In the present facts and circumstances of the case and considering the judicial precedents, we hold that the assessee's activity of converting field latex into ribbed smoked sheets constitutes an integral part of the agricultural operation, and the entire income therefrom is agricultural income exempt under section 10(1) of the Act." The decision followed or applied Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Sherneilly Rubber and Cardamom Estates Ltd. — relied on, as cited in the order; CIT v. Woodland Estates Ltd. (Kerala High Court) — relied on, as cited in the order; Meenachil Rubber Marketing and Processing Co-operative Society Ltd. v. CIT (Kerala High Court) — relied on, as cited in the order; CIT, Thiruvananthapuram v. State Farm Corporation of Kerala Ltd. (Kerala High Court) — quoted at para 14 for the description of centrifuging and the 65:35 apportionment.
It was decided by the ITAT on 2025-11-14 and is reported as ITA No. 1637/Chny/2025; assessment year 2020-21; date of hearing 11 September 2025; no law-report citation printed on the document. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section Rule 7A, section Rule 7, section 2(1A), section 10(1), section 69A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed. The Tribunal held that the assessee's activity of converting field latex into ribbed smoked sheets constitutes an integral part of the agricultural operation, and that the entire income from it is agricultural income exempt under section 10(1) of the Act (paragraph 27). It set aside the order of the Commissioner (Appeals) to the extent it treated thirty-five per cent of the agricultural income as business income under Rule 7A, and directed the Assessing Officer to treat the entire income from the sale of ribbed smoked rubber sheets as agricultural income (paragraph 28). It arises in Capital Gains Exemptions, How Tax Law Is Read and Evidence & Burden of Proof matters, on section Rule 7A, section Rule 7, section 2(1A), section 10(1), section 69A of the Income Tax Act 1961, and was decided by Shri S.S. Viswanethra Ravi, Judicial Member and Shri S.R. Raghunatha, Accountant Member (Income Tax Appellate Tribunal, 'B' Bench, Chennai); order per S.R. Raghunatha, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Obtain a written technical opinion from the Rubber Board or the Rubber Research Institute on whether the product is a manufactured product or a marketable form of the natural produce, and file it as part of the record. Frame the claim under s.2(1A)(b)(ii): the drying or smoking is a process ordinarily employed by a cultivator to render the produce fit to be taken to market, so the whole receipt is agricultural income exempt under s.10(1). Where the officer has made a section 69A addition for unexplained money, deal with the source evidence separately from the Rule 7A characterisation — they are different arguments and, as here, may be decided at different stages. Be ready for the distinction with centrifuging, which the Kerala High Court in State Farm Corporation described as a process done with extensive machinery in a factory that concentrates, colours and preserves the latex — that is what Rule 7A is aimed at.
Searched for later treatment; none was found. That is not the same as a source affirming it. A citedby citator search on the Indian Kanoon record of this order (doc 63331750, confirmed by the search page as 'Mrs. Sisily Jose, Chennai vs ITO, NCW-19(4), Chennai on 14 November, 2025') returns no later decision at all. A second, differently framed probe for the assessee's name restricted to High Court judgments returned only Shaji K Saimon v State of Kerala (Kerala High Court, 24 June 2026), an unrelated matter. No High Court appeal under s.260A against this order, and no coordinate-bench order taking a different view on ribbed smoked sheets under Rule 7A, could be found. The order is about ten months old; it is uncited rather than approved, and it binds nobody. Nothing overruling, doubting or distinguishing it was found, and no appeal to a High Court against it is disclosed on the record searched. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order runs to 29 numbered paragraphs and ends with the disposal at paragraph 29; that count was established by transcribing the whole order from the raw ?type=print text, not by asking. It is important to read the paragraphs in their right character: paragraphs 8 to 16 are the submissions of the authorised representative, paragraph 17 is the departmental representative's, and the Tribunal's own reasoning begins at paragraph 18. Paragraph 9, which recites the text of Rule 7A, is therefore counsel's recital and not a finding — I have used it only to corroborate the TEXT of the rule against the departmental page, which it matches. Paragraph 14 sets out a long passage in quotation marks from the Kerala High Court in CIT, Thiruvananthapuram v. State Farm Corporation of Kerala Ltd.; that passage is the High Court's words reproduced inside this order, not the Tribunal's, and its "65:35" description is cited here as the High Court's. The order refers at ground 3 to "Rule 74 of the Act", which is evidently a typographical error for Rule 7 and 7A of the Rules. The header of the document as displayed on indiankanoon contains Devanagari and Tamil script that renders imperfectly; the Members' names, ITA number and dates are as printed in the Roman-script portions. The order also cites Sherneilly Rubber and Cardamom Estates, Woodland Estates and Meenachil Rubber Marketing as supporting authorities; I did not open any of those decisions and state nothing about them beyond the fact that this order relies on them. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed. The Tribunal held that the assessee's activity of converting field latex into ribbed smoked sheets constitutes an integral part of the agricultural operation, and that the entire income from it is agricultural income exempt under section 10(1) of the Act (paragraph 27). It set aside the order of the Commissioner (Appeals) to the extent it treated thirty-five per cent of the agricultural income as business income under Rule 7A, and directed the Assessing Officer to treat the entire income from the sale of ribbed smoked rubber sheets as agricultural income (paragraph 28).
TaxSphere, “Mrs. Sisily Jose v. ITO, NCW-19(4), Chennai (ITAT Chennai) — converting field latex into ribbed smoked sheets is not "manufacture or processing" within Rule 7A, so the whole income remains agricultural”, https://taxnotice.vittsphere.com/caselaw/case/sisily-jose-ribbed-smoked-rubber-sheets-fall-outside-rule-7a-and-the-whole-income-stays-agricultural/ (validity last checked 2026-09-09)
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