Any processing done on Agricultural produce to make it marketable is a part of agricultural operations and such amount recovered will be treated as agricultural income only, with some exceptions.
But the business of purchasing paddy from the agriculturist and milling the same by the purchaser (rice mill owner) and, thereafter, dealing in the business of sale of rice is taxable.
Madhya Pradesh High Court
Commissioner Of Income-Tax vs Kisan Co-Operative Rice Mills ... on 4 August, 1975