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CA Final · Direct Tax Laws & International Taxation · Incomes which do not form part of Total Income

Nilgiri Estates, a resident firm, grows and cures coffee in India, then roasts and grinds it and sells it with chicory mixed in. For the tax year, the business income from these sales, computed as per the normal business provisions, is Rs 80,00,000. Ignoring replanting allowance and other incomes, how much of this is deemed to be income liable to tax under Rule 271 of the Income-tax Rules, 2026?

The taxable amount is Rs 32,00,000. Under Rule 271, income from coffee grown, cured, roasted and ground by the seller in India, with or without chicory, is computed as business income and 40% of it is deemed liable to tax. 40% of Rs 80,00,000 is Rs 32,00,000.

  1. ARs 20,00,000
  2. BRs 28,00,000
  3. CRs 32,00,000Correct
  4. DRs 48,00,000

Explanation

Rule 271(1), Table item 3, covers coffee grown, cured, roasted and ground by the seller in India, with or without chicory, and deems 40% of the income to be liable to tax. 40% of Rs 80,00,000 is Rs 32,00,000. Rs 20,00,000 uses the 25% rate, which applies only to coffee grown and cured but not roasted and ground. Rs 48,00,000 is the 60% balance.

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