1954 (10) TMI 2 - SUPREME COURT

Whether 60% of the dividend amounting to ₹ 2,750 received by the assessee from the two tea companies is agricultural income and as such exempt under section 4(3) (viii) of the Act?

Held that:- It is true that the agricultural process renders 60% of the profits from land which is used for agricultural purposes exempt from tax in the hands of the company but can it be said that when such company decides to distribute its profits to the shareholders and declares the dividends to be allocated to them, such dividends in the hands of the shareholders also partake of the character of revenue derived from land which is used for agricultural purposes? Such a position if accepted would extend the scope of the vital words " revenue derived from land " beyond its legitimate limits.

The policy of the Act as gathered from the various sub-clauses of section 2(1) appears to be to exempt agricultural income from the purview of the Income-tax Act. The object appears to be not to subject to tax either the actual tiller of the soil or any other person getting land cultivated by others for deriving benefit therefrom, but to say that the benefit intended to be conferred upon this class of persons should extend to those into whosoever hands that revenue falls, however remote the receiver of such revenue may be, is hardly warranted. Appeal dismissed.