My client grows rubber and my other client grows and cures coffee. What percentage of the income is business income in each case, and does it change if the coffee is also roasted and ground?
Rule 7A: income from the sale of centrifuged latex or cenex, or latex based crepes (such as pale latex crepe), or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe), or technically specified block rubbers, manufactured or processed from field latex or coagulum obtained from rubber plants GROWN BY THE SELLER IN INDIA, is computed as if it were business income and THIRTY-FIVE PER CENT of it is deemed to be income liable to tax — the balance sixty-five per cent being agricultural. Rule 7B has two cases: coffee GROWN AND CURED by the seller in India — TWENTY-FIVE PER CENT taxable, seventy-five per cent agricultural (sub-rule (1)); and coffee GROWN, CURED, ROASTED AND GROUNDED by the seller in India, with or without mixing chicory or other flavouring ingredients — FORTY PER CENT taxable, sixty per cent agricultural (sub-rule (1A)). Both rules carry a replanting allowance in their sub-rule (2), and the cost is not to be reduced by any subsidy that clause (31) of section 10 keeps out of total income.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text), reported as Rules 7A and 7B of the Income-tax Rules, 1962, as printed on incometaxindia.gov.in/w/rule-7a and /w/rule-7b (no "Year:" stamp is printed on departmental rule pages); Rule 7B corroborated at para 15 of ITA Nos. 1883-1885/Bang/2025 (ITAT Bangalore, 15 April 2026); Rule 7A corroborated at paras 9 and 14 of ITA No. 1637/Chny/2025 (ITAT Chennai, 14 November 2025). It bears on section Rule 7A, section Rule 7B, section Rule 7, section 10(1), section 10(31), section 2(1A) of the Income Tax Act 1961, in Capital Gains Exemptions, Deductions & Disallowances and How Tax Law Is Read matters.
These percentages are copied straight into a computation, so get the case right before you get the arithmetic right. Four points. First, both rules require that the plants be grown by the SELLER in India: produce bought in from other planters and merely processed carries no agricultural element at all, and the whole of that income is business income. Second, Rule 7B(1) and Rule 7B(1A) are different cases with different percentages — twenty-five and forty — and the dividing line is whether the seller has gone on to roast and grind. The presence or absence of chicory or other flavouring is expressly immaterial to sub-rule (1A). Third, "curing" in Rule 7B bears the meaning assigned to it by clause (d) of section 3 of the Coffee Act, 1942, so it is not open to an assessee or an officer to give it a lay meaning. Fourth, Rule 7A applies to the named rubber products manufactured or processed from field latex or coagulum; it is not a rule about rubber generally, and where the grower does no more than render the latex fit for market the income may remain wholly agricultural under s.2(1A)(b)(ii) with no thirty-five per cent charge at all. The replanting allowance in sub-rule (2) of each rule is confined to plants that have died or become permanently useless IN AN AREA ALREADY PLANTED which has not previously been abandoned — it is a replacement allowance, not a fresh-planting allowance.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Rule 7A, headed "Income from the manufacture of rubber", reads: "(1) Income derived from the sale of centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe) or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India shall be computed as if it were income derived from business, and thirty-five per cent of such income shall be deemed to be income liable to tax. (2) In computing such income, an allowance shall be made in respect of the cost of planting rubber plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in the total income." Rule 7B, headed "Income from the manufacture of coffee", reads: "(1) Income derived from the sale of coffee grown and cured by the seller in India shall be computed as if it were income derived from business, and twenty-five per cent of such income shall be deemed to be income liable to tax. (1A) Income derived from the sale of coffee grown, cured, roasted and grounded by the seller in India, with or without mixing chicory or other flavouring ingredients, shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax. Explanation.—For the purposes of sub-rules (1) and (1A) "curing" shall have the same meaning as assigned to it in clause (d) of section 3 of the Coffee Act, 1942 (7 of 1942). (2) In computing the incomes referred to in sub-rules (1) and (1A), an allowance shall be made in respect of the cost of planting coffee plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in the total income."
Not a judgment. The statutory position is that rubber income within Rule 7A is thirty-five per cent taxable and sixty-five per cent agricultural; coffee grown and cured under Rule 7B(1) is twenty-five per cent taxable and seventy-five per cent agricultural; and coffee grown, cured, roasted and grounded under Rule 7B(1A) is forty per cent taxable and sixty per cent agricultural. Each rule confines itself to produce from plants grown by the seller in India, and each carries a replanting allowance in sub-rule (2) which is not to be reduced by a subsidy excluded by s.10(31).
Not a judgment; no judicial reasoning is stated for the rules themselves. On their operation, the ITAT Bangalore in Bennur Siddegowda Santhosh at paragraph 16 read Rule 7B as meaning that twenty-five per cent of the income from coffee grown and cured is deemed business income and seventy-five per cent agricultural, and that forty per cent of the income from coffee grown, cured, roasted and grounded is liable to tax with sixty per cent treated as agricultural income.
(1A) Income derived from the sale of coffee grown, cured, roasted and grounded by the seller in India, with or without mixing chicory or other flavouring ingredients, shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax.
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Handle my notice → Ask a CA on WhatsAppRule 7A: income from the sale of centrifuged latex or cenex, or latex based crepes (such as pale latex crepe), or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe), or technically specified block rubbers, manufactured or processed from field latex or coagulum obtained from rubber plants GROWN BY THE SELLER IN INDIA, is computed as if it were business income and THIRTY-FIVE PER CENT of it is deemed to be income liable to tax — the balance sixty-five per cent being agricultural. Rule 7B has two cases: coffee GROWN AND CURED by the seller in India — TWENTY-FIVE PER CENT taxable, seventy-five per cent agricultural (sub-rule (1)); and coffee GROWN, CURED, ROASTED AND GROUNDED by the seller in India, with or without mixing chicory or other flavouring ingredients — FORTY PER CENT taxable, sixty per cent agricultural (sub-rule (1A)). Both rules carry a replanting allowance in their sub-rule (2), and the cost is not to be reduced by any subsidy that clause (31) of section 10 keeps out of total income. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section Rule 7A, section Rule 7B, section Rule 7, section 10(1), section 10(31), section 2(1A) of the Income Tax Act 1961. It is reported as Rules 7A and 7B of the Income-tax Rules, 1962, as printed on incometaxindia.gov.in/w/rule-7a and /w/rule-7b (no "Year:" stamp is printed on departmental rule pages); Rule 7B corroborated at para 15 of ITA Nos. 1883-1885/Bang/2025 (ITAT Bangalore, 15 April 2026); Rule 7A corroborated at paras 9 and 14 of ITA No. 1637/Chny/2025 (ITAT Chennai, 14 November 2025). These percentages are copied straight into a computation, so get the case right before you get the arithmetic right. Four points. First, both rules require that the plants be grown by the SELLER in India: produce bought in from other planters and merely processed carries no agricultural element at all, and the whole of that income is business income. Second, Rule 7B(1) and Rule 7B(1A) are different cases with different percentages — twenty-five and forty — and the dividing line is whether the seller has gone on to roast and grind. The presence or absence of chicory or other flavouring is expressly immaterial to sub-rule (1A). Third, "curing" in Rule 7B bears the meaning assigned to it by clause (d) of section 3 of the Coffee Act, 1942, so it is not open to an assessee or an officer to give it a lay meaning. Fourth, Rule 7A applies to the named rubber products manufactured or processed from field latex or coagulum; it is not a rule about rubber generally, and where the grower does no more than render the latex fit for market the income may remain wholly agricultural under s.2(1A)(b)(ii) with no thirty-five per cent charge at all. The replanting allowance in sub-rule (2) of each rule is confined to plants that have died or become permanently useless IN AN AREA ALREADY PLANTED which has not previously been abandoned — it is a replacement allowance, not a fresh-planting allowance. If it applies to you, the first step is this: For coffee, decide first whether your client stops at curing or goes on to roast and grind, and apply twenty-five per cent or forty per cent accordingly. Record the decision and the facts supporting it in the computation itself.
Rule 7A, headed "Income from the manufacture of rubber", reads: "(1) Income derived from the sale of centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe) or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India shall be computed as if it were income derived from business, and thirty-five per cent of such income shall be deemed to be income liable to tax. (2) In computing such income, an allowance shall be made in respect of the cost of planting rubber plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in the total income." Rule 7B, headed "Income from the manufacture of coffee", reads: "(1) Income derived from the sale of coffee grown and cured by the seller in India shall be computed as if it were income derived from business, and twenty-five per cent of such income shall be deemed to be income liable to tax. (1A) Income derived from the sale of coffee grown, cured, roasted and grounded by the seller in India, with or without mixing chicory or other flavouring ingredients, shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax. Explanation.—For the purposes of sub-rules (1) and (1A) "curing" shall have the same meaning as assigned to it in clause (d) of section 3 of the Coffee Act, 1942 (7 of 1942). (2) In computing the incomes referred to in sub-rules (1) and (1A), an allowance shall be made in respect of the cost of planting coffee plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in the total income." It was decided by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not a judgment. The statutory position is that rubber income within Rule 7A is thirty-five per cent taxable and sixty-five per cent agricultural; coffee grown and cured under Rule 7B(1) is twenty-five per cent taxable and seventy-five per cent agricultural; and coffee grown, cured, roasted and grounded under Rule 7B(1A) is forty per cent taxable and sixty per cent agricultural. Each rule confines itself to produce from plants grown by the seller in India, and each carries a replanting allowance in sub-rule (2) which is not to be reduced by a subsidy excluded by s.10(31).
Not a judgment; no judicial reasoning is stated for the rules themselves. On their operation, the ITAT Bangalore in Bennur Siddegowda Santhosh at paragraph 16 read Rule 7B as meaning that twenty-five per cent of the income from coffee grown and cured is deemed business income and seventy-five per cent agricultural, and that forty per cent of the income from coffee grown, cured, roasted and grounded is liable to tax with sixty per cent treated as agricultural income. In the words reproduced by the source cited on this page: "(1A) Income derived from the sale of coffee grown, cured, roasted and grounded by the seller in India, with or without mixing chicory or other flavouring ingredients, shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax."
It was decided by the CBDT Circulars & Instructions and is reported as Rules 7A and 7B of the Income-tax Rules, 1962, as printed on incometaxindia.gov.in/w/rule-7a and /w/rule-7b (no "Year:" stamp is printed on departmental rule pages); Rule 7B corroborated at para 15 of ITA Nos. 1883-1885/Bang/2025 (ITAT Bangalore, 15 April 2026); Rule 7A corroborated at paras 9 and 14 of ITA No. 1637/Chny/2025 (ITAT Chennai, 14 November 2025). Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section Rule 7A, section Rule 7B, section Rule 7, section 10(1), section 10(31), section 2(1A), 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 cuts both ways and is cited by both sides. Not a judgment. The statutory position is that rubber income within Rule 7A is thirty-five per cent taxable and sixty-five per cent agricultural; coffee grown and cured under Rule 7B(1) is twenty-five per cent taxable and seventy-five per cent agricultural; and coffee grown, cured, roasted and grounded under Rule 7B(1A) is forty per cent taxable and sixty per cent agricultural. Each rule confines itself to produce from plants grown by the seller in India, and each carries a replanting allowance in sub-rule (2) which is not to be reduced by a subsidy excluded by s.10(31). It arises in Capital Gains Exemptions, Deductions & Disallowances and How Tax Law Is Read matters, on section Rule 7A, section Rule 7B, section Rule 7, section 10(1), section 10(31), section 2(1A) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. 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. Take "curing" from clause (d) of section 3 of the Coffee Act, 1942 and cite it; do not argue the word at large. For rubber, check that the product sold is one of the products named in Rule 7A. If the grower only converts field latex into sheets and dries or smokes them to make the produce marketable, argue that the process falls within s.2(1A)(b)(ii) and that Rule 7A does not bite at all. Segregate own-grown produce from bought-in produce in the books before the return goes in. Rule 7A and Rule 7B apply only to what the seller grew; bought-in produce processed and sold is business income in full. Claim the replanting allowance under sub-rule (2) only for replacement of dead or permanently useless plants in an area already planted and not previously abandoned, and do not reduce the cost by any subsidy excluded by s.10(31).
Still good law. Both rules were read on departmental pages that identified themselves as the Income-tax Rules, 1962, and both were corroborated against reproductions in Tribunal orders of November 2025 and April 2026 which applied them as current law. Departmental rule pages carry no "Year:" stamp, so these rules cannot be dated the way a section can, and no commencement date for the percentages is asserted here. No amending instrument was searched for and no check of judicial treatment beyond the two orders named was carried out. 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.
Both rules were transcribed in full from the departmental pages https://incometaxindia.gov.in/w/rule-7a and https://incometaxindia.gov.in/w/rule-7b. On each fetch I demanded the name of the instrument before the text, and each page identified itself as the Income-tax Rules, 1962 — this matters because the neighbouring /w/rule-7 and /w/rule-8 URLs on the same site serve the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. Neither rule page carries a "Year:" stamp: departmental RULE pages carry none, so I have NOT dated these rules and no commencement date for the percentages is stated here. Rule 7B was corroborated word for word against its reproduction at paragraph 15 of the ITAT Bangalore order in Bennur Siddegowda Santhosh v. ITO, Ward-1, Chikmagalur (15 April 2026). Rule 7A was corroborated against its recital at paragraph 9 of the ITAT Chennai order in Mrs. Sisily Jose v. ITO, NCW-19(4), Chennai (14 November 2025) — that recital is in the passage recording the authorised representative's submission, so it corroborates the TEXT of the rule and not any holding; the same order at paragraph 14 quotes the Kerala High Court in CIT v. State Farm Corporation of Kerala Ltd. describing the apportionment as being "in the ratio of 65:35", which independently confirms the thirty-five per cent figure. The departmental page prints the coffee sub-rule as "grown, cured, roasted and grounded" and the Tribunal reproduces the same word "grounded"; I have kept it rather than correcting it to "ground". The "decided_on" value is NOT a decision date and NOT a commencement date. Departmental rule pages carry no "Year:" stamp, so no commencement date for the thirty-five, twenty-five and forty per cent figures could be established and no amending instrument was identified. The date carried is the date of the most recent source in which these rules were read in the form set out here — the ITAT Bangalore order of 15 April 2026 reproducing Rule 7B; Rule 7A was last so read in the ITAT Chennai order of 14 November 2025. The date on which this entry was written must not be used, because on a statutory entry it reads as a commencement date. This page carries no date. That is deliberate: no commencement date for this provision was established on this pass, and every other date available — the date of a judgment that reproduces the text, or the vintage of the departmental page it was read from — would be read as the day the position took effect, which it is not. The percentages and text above are verified; only the date they took effect from is not. A later pass will supply it. 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.
Not a judgment. The statutory position is that rubber income within Rule 7A is thirty-five per cent taxable and sixty-five per cent agricultural; coffee grown and cured under Rule 7B(1) is twenty-five per cent taxable and seventy-five per cent agricultural; and coffee grown, cured, roasted and grounded under Rule 7B(1A) is forty per cent taxable and sixty per cent agricultural. Each rule confines itself to produce from plants grown by the seller in India, and each carries a replanting allowance in sub-rule (2) which is not to be reduced by a subsidy excluded by s.10(31).
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