TMI Blog1961 (8) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded in the said clause. Therefore, we do not think that Mr. Mitra is justified in contending that the answer made by the High Court in the affirmative and against the appellant in reference to question No. 1 is wrong. Rrule 4(2) deals with cases where agricultural produce has been sold outside the market as well as cases where agricultural produce has not been sold at all. The effect of reading the two sub-rules together is that the cases of market sales are covered by rule 4(1) and all other cases are covered by rule 4(2). Rule 4(2) is a residuary rule which applies to all cases not falling under rule 4(1). Therefore, we must hold that the answer given by the High Court to question No. 2 in the affirmative and against the appellant is also right. Appeal dismissed. - - - - - Dated:- 18-8-1961 - Judge(s) : P. B. GAJENDRAGADKAR., K. SUBBA RAO., M. HIDAYATULLAH JUDGMENT The judgment of the court was delivered by GAJENDRAGADKAR J.---This appeal by a certificate arises out of a reference made to the High Court at Calcutta under section 63(1) of the Bengal Agricultural Income-tax Act (IV of 1944) (hereafter called the Act). The appellant, the Dooars Tea Co. Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said varieties had not been sold. This dispute went up to the Tribunal ; but the Tribunal agreed with the conclusion of the tax authorities and held that the produce in question constituted agricultural income of the appellant for the relevant year, and so the addition of Rs. 39,849 made by the Agricultural Income-tax Officer in determining the total agricultural income of the appellant for the relevant year was affirmed. It was also urged by the appellant in the assessment proceedings that even if the produce in question constituted the appellant's agricultural income its market value could not be computed in money because no rule had been framed for the computation of the market value of such income. The appellant urged that rule 4 of the Rules framed under the Act was inapplicable to the present case. This contention has also been rejected by the tax authorities as well as by the Tribunal. In the result the agricultural income found to have been earned by the appellant for the relevant year has been duly taxed. Feeling aggrieved by the final order passed by the Tribunal in this matter the appellant required the Tribunal to refer two questions for the opinion of the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not concerned with this part of the definition. Section 2(1)(b) reads thus : " any income derived from such land by--- (i) agriculture, or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in item (ii). " The respondent, the Commissioner of Agricultural Income-tax, West Bengal, contends that the agricultural produce in the present case falls directly under section 2(1)(b)(i). It is income derived from agricultural land by agriculture. It is not disputed by the appellant that in the context income may mean either cash or income in kind. It is also conceded by the appellant that the dictionary meaning of the word " income " includes " produce of a farm ", and so if we were to construe the relevant clause in the light of the dictionary meaning of the word " income " it would take in agricultural produce wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction rather than its mere form, and he proceeded to observe that in the case before the court, dis-regarding technicalities, it was impossible to get away from the fact that the business was owned and run by the assessee himself ; and if he was to be held liable for the tax " you reach the position that a man is supposed to be selling to himself and thereby making a profit out of himself which on the face of it is not only absurd but against all canons of mercantile and income-tax law ". Mr. Mitra suggests that in taxing the agricultural produce utilised by the appellant for its own purpose the respondent is really taxing the appellant on the basis that it has traded with itself and made profits on the agricultural produce in question. This argument is based on the assumption that income as defined by section 2(1)(b)(i) must always be in the nature of profit or gain, and that inevitably postulates a sale transaction made at a profit or gain. Mr. Mitra seeks to derive assistance for this argument from the provisions of sections 4 and 6 of the Income-tax Act where income, profits and gains are grouped together. What is true about the denotation of the word " income " u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(b) consists of three clauses. Let us first construe clauses (ii) and (iii). Clause (ii) includes cases of income derived from the performance of any process therein specified. The process must be one which is usually employed by the cultivator or receiver of rent-in-kind ; it may be simple manual process or it may involve the use and assistance of machinery. That is the first requirement of this proviso. The second requirement is that the said process must have been employed with the object of making the produce marketable. It is, however, clear that the employment of the process contemplated by the second clause must not alter the character of the produce. The produce must retain its original character and the only change that may have been brought about in the produce is to make it marketable. The said change in the condition of the produce is only intended to make the produce a saleable commodity in the market. Thus clause (ii) includes within the categories of income, income derived from the employment of the process falling under that clause. As we have just observed the object of employing the requisite process is to make the produce marketable but in terms the clause doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce in question and we feel no diffculty in agreeing with the High Court when it held that the agricultural produce utilised by the appellant for its business constitutes income under section 2(1)(b)(i). If the agricultural produce used by the appellant was not intended to be included within the definition of income under section 2(1)(b) we apprehend that the whole clause would have been very differently worded. Where income derived from sale was intended to be prescribed the legislature has done so in terms by clause (iii) of section 2(1)(b). Where the marketable condition of the produce resulting from the employment of the specified processes and income derived from the adoption of such processes was intended to be included in the income the legislature has done so by clause (ii) ; and so those two cases having been specifically provided for by the two respective clauses there would be no justification for introducing the concept of sale in construing clause (i) of section 2(1)(b). The words in section 2(1)(b)(i) are, in our opinion, wide, plain and unambiguous and they cannot be construed to exclude agricultural produce used by the appellant for its business. In this connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own business. The appellant contends that rule 4(2) cannot also be invoked against it, and so there is no rule under which the agricultural income in question can be computed. Incidentally the appellant suggested that if its construction of rule 4(2) is right it indirectly supports its case as to the true scope and effect of section 2(1)(b)(i). The legislature knew that agricultural produce is not taxable unless it is sold, and so it has not made any rule for the computation of agricultural income alleged to have been received by the assessee from agricultural produce used by the assessee for its own purpose. On the other hand, the respondent contends that rule 4(2) covers the present case, and if that is so, according to the respondent, that would incidentally support his construction of section 2(1)(b)(i). The argument urged by the appellant assumes that the two rules are based on a kind of basic dichotomy. Rule 4(1) deals with agricultural produce sold in the market, and rule 4(2) with the agricultural produce which has been sold but not in the market. In other words, according to the appellant, both the rules assume that the agricultural produce has in fact been sold ; rul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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