TMI Blog1968 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... State. They are assessed to non-agricultural as well as agricultural income tax. Civil Appeals Nos. 936 to 939 of 1966 arise out of the agricultural income-tax assessments of the Anglo-American Direct Tea Trading Co. Ltd. under the Kerala Agricultural Income-tax Act, 1950, for the years 1958-59, 1959-60, 1960-61 and 1961-62. Civil Appeals Nos. 585 to 588 of 1966 arise out of the agricultural income-tax assessments of the Travancore Tea Estates Co. Ltd. for the years 1957-58, 1958-59, 1959-60 and 1960-61. Civil Appeals Nos. 589 to 591 of 1966 arise out of the agricultural income-tax assessments of the Southern India Tea Estates Co. Ltd. for the years 1957-58, 1958-59 and 1959-60. For all the assessment years, the Central income-tax authorities computed the total tea income of the appellants and 40 per cent. thereof representing the non-agricultural income was assessed to non-agricultural income-tax and the balance 60 per cent. was left unassessed as agricultural income. The appellants produced before the Agricultural Income-tax Assistant Commissioner, Kerala, the Central income-tax assessment orders, and requested him to take 60 per cent. of the tea income computed by the Central in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e". In view of article 366(1), agricultural income means "agricultural income as defined for the purposes of the enactments relating to Indian Income-tax." Article 274(1) provides that a Bill which seeks to vary this meaning requires the prior recommendation of the President. These provisions of the Constitution correspond to sections 141(1), 311(2), Schedule VII, List I, entry 54, List II, entry 41 of the Government of India Act, 1935. Section 2(1) of the Indian Income-tax Act, 1922, defined agricultural income. Section 10 provided for computation of income derived from business. Section 59 empowered the Central Board of Revenue to make rules which took effect as if enacted in the Act. Rules 23 and 24 of the Indian Income-tax Rules, 1922, framed under section 59 provided for computation of the business profits where the income was derived partly from agriculture and partly from business. Under rule 23, the market value of the agricultural produce used as raw material in the business was deducted in computing the business profits. Rule 24 provided that "income derived from the sale of tea grown and manufactured by the seller in the taxable territories shall be computed as if it wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea plantations. The reasons for this conclusion may be summarised thus : The definition of agricultural income in the Constitution and the Indian Income-tax Act, 1922, is bound up with rule 24 of the Income-tax Rules, 1922. Income derived from the sale of tea grown and manufactured by the seller is to be computed under rule 24 as if it were income derived from business in accordance with the provisions of section 10 of the Indian Income-tax Act. The Explanation to section 2(a)(2) of the Kerala Act adopts this rule of computation. Of the income so computed, 40 per cent. is to be treated as income liable to income-tax and the other 60 per cent. only is deemed to be agricultural income within the meaning of that expression in the Income-tax Act. The power of the State legislature to make a law in respect of taxes on agricultural income arising from tea plantations is limited to legislating with respect to the agricultural income so determined. The legislature cannot add to the amount of the agricultural income so determined by disallowing any item of deductions allowable under rule 24 read with section 10(2) (xv) of the Indian Income-tax Act. Explanation 2 to section 5 of the Kerala A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gricultural income is derived from lands partly within the State of Kerala and partly outside the State, the portion of the income attributable to lands within the State, is determined under section 6 of the Kerala Agricultural Income-tax Act read with rule 15 of the Kerala Agricultural Income-tax Rules. Our attention was drawn to the provisions of : (a) sections 8(2), 24(1) proviso, 24(2) proviso, 25(4) and 25(5) of the Bengal Agricultural Income-tax Act, 1944, and rules 7 and 8 of the Bengal Agricultural Income-tax Rules, 1944, (b) section 8 of the Mysore Agricultural Income-tax Act, 1957, and rule 6 of the Mysore Agricultural Income-tax Rules, 1957, (c) section 8 of the Coorg Agricultural Income-tax Act, 1951, (d) the second proviso to section 8 of the Assam Agricultural Income-tax Act, 1939, and rule 5 of the Assam Agricultural Income-tax Rules, 1939, (e) Explanation 1 to section 2(a)(2) of the Madras Plantations Agricultural Income-tax Act, 1955, and rule 7(1) of the Madras Plantations Agricultural Income-tax Rules, 1955, and (f) rule 5 of the Bihar Agricultural Income-tax Rules, 1949. Under some Acts and Rules, the Agricultural Income-tax Officer is bound to adopt the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first proviso to sub-section (5)(a) of section 10 must be exercised by the Central Income-tax Officer alone, that there is no provision in the Kerala Act conferring the power on the Agricultural Income-tax Officer and that therefore the assessment of agricultural income must wait until the assessment by the Central Income-tax Officer under rule 24 read with section 10. This wider question does not arise for decision and is left open. In all the cases before us, the assessments by the Central Income-tax Officer were completed before the Agricultural Income-tax Officer proceeded to assess the agricultural income. For the purpose of these appeals, it is sufficient to say that the Agricultural Income-tax Officer acting under the Kerala Agricultural Income-tax Act, 1950, is bound to follow the assessment of income by the Central Income-tax Officer under rule 24 of the Income-tax Rules, 1922, and rule 8 of the Income-tax Rules, 1962, where such assessment has been made before the Agricultural Income-tax Officer proceeds to make the assessment under the Kerala Act. The question referred to the High Court is answered accordingly. We must not be understood to say that the assessment made by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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