Q.In the following year, the same grower in Coorg expands operations to grow, cure, roast and grind the coffee (mixing it with chicory) before sale. The composite income for that year is ₹5,00,000. Determine the agricultural and business portions for AY 2026-27, citing the applicable Rule, and explain why the business share is higher than in the previous question.

Adding roasting and grinding to the activity moves the grower to a different Rule, with a larger business share.

Roasted-and-ground coffee is split 60% agricultural / 40% business — a higher business share than growing-and-curing-only coffee.

Since the grower now grows, cures, roasts AND grinds the coffee (mixed with chicory), Rule 7B(1A) applies instead of Rule 7B(1), fixing the split at 60% agricultural (exempt) and 40% business (taxable).

Agricultural income (exempt) = 60% × ₹5,00,000 = ₹3,00,000

Business income (taxable) = 40% × ₹5,00,000 = ₹2,00,000

Why the business share is higher than in the previous question: in the previous question, the grower's activity stopped at curing — a stage still reasonably close to basic agricultural processing. Here, roasting and grinding are added, which are genuinely manufacturing-style operations that transform the raw cured coffee into a substantially different, more market-ready product (adding chicory is itself a further manufacturing/blending step). Because more of the final income now reflects value added by this manufacturing activity rather than the underlying agricultural produce, the Income-tax Rules assign a correspondingly larger share (40%, up from 25%) to taxable business income.

Assuming mixing chicory itself changes the percentage split differently from plain roasted-and-ground coffee — Rule 7B(1A)'s 60:40 split applies whether or not chicory or other flavouring ingredients are mixed in; the split depends on roasting-and-grinding having been carried out, not on the presence of chicory specifically.