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TMI Blog1964 (12) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... adras portions of the estate. The managerial, supervisory and clerical staff and the estate labour force are combined for the whole estate. The expenses are incurred for maintenance of the estate as one unit and the produce of the entire estate is manufactured and sold together. Common accounts are maintained for the whole estate, and there are no separate accounts for the Madras portion of the estate. The accounting period of the petitioner is the year ending 30th November. The accounts are kept on a mercantile basis. Assessment to agricultural Income Tax was made by the Agricultural Income Tax Officer, Batlagundu in Madurai district, on the petitioner, for the three assessment years 1956-57 to 1958-59. 2. A brief reference can be made at this stage to the definition of "agricultural income" so far as that is concerned. Under article 366(1) of the Constitution, "agricultural income" means agricultural income as defined for the purposes of the enactments relating to Indian Income Tax. Section 2(2) of the Indian Income Tax Act defines "agricultural income". This definition is incorporated in the corresponding definition in section 2 of the Madras Agric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tlagundu, came to the conclusion that the basis of computation adopted by the central Income Tax authority for computing the proportion of income under the Indian Income Tax Act attributable to 36.40 acres of Chittavarri estate situated in the Madras State was incorrect, and substituted a different computation for the purpose of calculating the income under the Indian Income Tax Act, and after such a computation, he took 60 per cent. of it as agricultural income assessable in Madras State. The assessment thus made was confirmed by the Assistant Commissioner of Agricultural Income Tax. The matter was then taken to the Agricultural Income Tax Appellate Tribunal, which however set aside the assessment and remanded the case to the Assistant Commissioner for disposal in the light of certain observations made by the Tribunal. The details of these observations we will refer to presently in this judgment. Thereafter adopting the view expressed by the Agricultural Income Tax Officer for the assessment year 1960-61, the department proposed to reassess the assessments made for the three earlier years 1956-59 and issued three notices under section 35 of the Agricultural Income Tax Act. T. C. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount came in Indian currency to ₹ 9,78,602. The proportion of this expenditure for Chittuvarrai estate was calculated on the basis of the acreage giving ₹ 40,630. The total loss, therefore, for Chittuvarrai came to ₹ 1,02,455 (Rs. 61,825 plus ₹ 40,630). Thereafter, the proportion of this loss attributable to the Madras portion of the Chittuvarrai estate was worked out on the basis of the yield. The yield was 29,090 lbs. for 36.40 acres in Madras State against 5,68,310 lbs. for the whole estate of 1,043 acres. The proportion of the loss for the Madras State was worked out to ₹ 5,210.40 per cent. of this was taken as income for assessment to central Income Tax in respect of the Madras portion and the remaining 60 per cent. had to be treated as the agricultural income for the Madras portion giving a loss of ₹ 3,126. A small amount of ₹ 327 was thereafter deducted from this amount for land revenue, etc., giving a net loss of ₹ 2,799. 7. In the opinion of the Agricultural Income Tax Officer, the above method of computation (proposed by the assessee, and substantially accepted by the Central Income Tax Officer) was incorrect. It did not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken the value of the produce from the Madras portion as the gross receipt. From this, he has deducted every item of expenditure allowed by the Central Income Tax Officer, but re-calculated it for the Madras portion on the basis of acreage. By doing so, there resulted a profit. The fact that the Madras area showed a higher yield per acre than the Kerala area of the estate was given by the Agricultural Income Tax Officer as the reason for making this departure. But in our view that cannot be a valid reason for the different computation adopted by the Agricultural Income Tax Officer. The area in the Madras State is only a small fraction of the area of the entire estate. It might be possible that this area is more fertile or had received favourable and timely rainfall. On the other hand, the Kerala area might have suffered vicissitudes like excessive rain or land-slides affecting the crops on some portion. The estate as a whole has been maintained and run by the petitioner as a single unit. In the affidavit of the petitioner, in W. P. No. 700 of 1963 he stated : 4. The tea area in the Madras State is only a small portion of the petitioners Chittuvarrai estate comprising 1,043 acres o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption and that there may be difference in quality in the tea produced in the Madras area and the same may have been sold at different times for different prices. He contends that under those circumstances, to separate the value of tea produced in the Madras area would not be a correct method of computation. But there are no data to decide how far this argument can be upheld. 10. The Appellate Tribunal recognised the impropriety of the assessment. But, we cannot accept the rectifications that the Tribunal had directed to be carried out after remand. It gave a few items of expenditure, which have to be apportioned on acreage basis and a few items of expenditure, which had to be apportioned on the basis of yield, and then directed the Appellate Assistant Commissioner to receive the remaining items of expenditure and find out whether they are suitable for being apportioned under one or other basis, viz., acreage or yield. But here again we wish to point out that the company has treated the whole estate as a unit from the business point of view and the assessing authorities have no basis to attack this. Accounts are kept for the estate as a whole. A factory is maintained for the whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me adopting the figures arrived at by the Central Income Tax Officer. 12. The above conclusion will be sufficient for disposing of the present cases. But, learned counsel, Sri Thiruvenkatachari, for the petitioner urges that apart from the circumstances of this case, on a question of legal interpretation of the Agricultural Income Tax Act, the computation of the Central Income Tax Officer has to be followed automatically by the Agricultural Income Tax Officer as it is statutorily binding on him, and there is no question of substituting for that computation any other computation by the Agricultural Income Tax Officer as has been done in this case. According to the learned counsel, under article 366(1) of the Constitution, "agricultural income" means agricultural income as defined for the purpose of the enactments relating to the Indian Income Tax Act. The Agricultural Income Tax Act has adopted the definition of "agricultural income" given in the Indian Income Tax Act. For applying this definition, there is a difficulty in the case of tea, which has little commercial value in its green and un-cured condition. Only after curing, it becomes a readily marketable co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not an obligatory requirement that computation of the Central Income Tax Officers for the levy of Income Tax should be automatically accepted by the agricultural Income Tax authorities. The latter have a discretion to accept the Central Income Tax Officers computation where it appears reasonable or to depart from it when they think it necessary and make independent computation of their own, after applying Indian Income Tax Act and its Rules. Sri Thiruvenkatachari also presses us to consider in support of his argument, the provision in article 261(1) of the Constitution : 261 (1). Full faith and credit shall be given throughout the territory of India to public acts, records and judicial proceedings of the Union and of every State. 14. He also referred to the decision of the Supreme Court in Lalji Haridas v. State of Maharashtra where the view was expressed though in a different context that proceedings before the Income Tax Officer were judicial proceedings for the purpose of section 193, Indian Penal Code, and it must be treated as proceedings in a court for the purpose of section 195(1)(b) of the Criminal Procedure Code. But it may not be proper to press into service this provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Officers computation is complete, and is available to the Agricultural Income Tax Officer. As between officers of two different Government departments engaged in making assessments, one of the Central and the other of the State, if each were to consider the other officers computation to be wrong and proceed to make an independent but conflicting calculation under the provisions of the Indian Income Tax Act, not merely will the assessees suffer, but there will be risk and anomaly of the central department assessing what is really agricultural income liable to assessment by the State, and the State department assessing what is really income for the purpose of Income Tax liable to assessment by the Central Government, each one encroaching upon the jurisdiction of the other. Such conflicts have to be avoided in the interests of the assessees as well as of the Governments concerned. The data available to the central Income Tax department will be generally fuller, because they have been engaged in making assessments to central Income Tax from a period long anterior to the Agricultural Income Tax Act, which has been enacted only on 1955. Their staff are well trained in applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion when it is subsequent to the Agricultural Income Tax Officers assessment, also leads to the same conclusion. 17. There is, however, one comment to be made regarding the first proviso to rule 7. It requires the Agricultural Income Tax Officer to get the prior permission of his superior officer, if he proposes to reject the computation of the Central Income Tax Officer and make a fresh computation. Thus, he will be surrendering his judgment to that of a superior officer and take the latters orders in the matter of deciding whether he should accept or not accept the Central Income Tax Officers computation. However, rule 7 applies to the agricultural income from tea grown and manufactured in the State of Madras, in the present case the tea is grown inside the State but manufactured outside the State of Madras, and rule 7 is inapplicable. We do not therefore propose to examine in this case how far the first proviso to rule 7 is a valid one. 18. According to the learned Government Pleader, rule 8 of the Rules will apply to the present case. This was also the view of the Assistant Commissioner of Agricultural Income Tax. That rule reads : Where an agricultural income is derived fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax assessment on the facts of this case. Though the learned Government Pleader referred to the rules framed under the Agricultural Income Tax Act, in our opinion, they have no application to the facts of this case. Learned counsel for the assessee urged that we should give a decision in that case that the Central Income Tax Officers computation should be deemed to be statutorily binding on the Agricultural Income Tax Officer. But, equally vehemently, the learned Government Pleader urged us to follow the Kerala Courts decision referred to above in Commissioner of Agricultural Income Tax v. Perunad Plantations Ltd. and hold that the Agricultural Income Tax Officer is not bound by the Central Income Tax Officers computation in the case of tea. But, on the facts of the case, which we have discussed at length the Agricultural Income Tax Officer has not given sufficient reasons for not accepting the Central Income Tax Officers computation, which must be deemed to be a proper one and which should have been adopted in this case. In view of this, it is unnecessary for us to give a finding on the abstract question whether the Central Income Tax Officers computation should be legally binding ..... 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