TMI Blog1995 (3) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... was not justified in holding the 40 per cent of business profit be taken for the purpose of arriving at the proportionate export profit though business profit was determined in proportion to the total turnover which include agricultural proportion of 60 per cent. 3. That, the Assessing Officer be directed to take 100 per cent. of the business income computed under the head 'Profits and gains of business or profession' in working out the proportionate export profit in relation to total turnover of the appellant. 4. That, the appellant craves leave to amend, cancel or otherwise modify the grounds stated hereinabove." 2. In the order passed on 22-5-1990 under section 143(3) read with section 251 the deduction under section 80HHC was comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was that instead of taking the amount of Rs. 6,42,54,492 as the income computed under the head 'Profits and gains of the business', the Income-tax Officer should have taken the sum of Rs. 16,04,91,502. The CIT(A) did not accept the assessee's contention. He was of the view that if the entire composite income is taken for the purpose of section 80HHC as contended on behalf of the assessee, that would amount to allowing the deduction even with reference to that portion of the composite income which is statutorily treated as agricultural income. He, therefore, rejected the assessee's contention and upheld the computation of the deduction under section 80HHC as made by the Income-tax Officer. 4. In the further appeal before us, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d submitted that the issue is fully covered by the said order in favour of the revenue. It was, therefore, submitted that the appeal should be dismissed. 6. On a careful consideration of the rival contentions, we are of the view that the contention of the assessee cannot be accepted. The question is not adopting a view in favour of the assessee because the provision is one for deduction. The issue is much more than that. Under entry 46, list II, 7th Schedule to the Constitution, read with Article 245, entry 82, list I to the Constitution, the State Legislature alone is competent to make laws with regard to " taxes on agricultural income " and the Central Parliament is competent to make laws with respect to " taxes on income other than agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said term in Article 366(1) of the Constitution of India and that sub Article states that agricultural income means 'agricultural income' as defined for the purpose of the enactments relating to Indian Income tax. A scrutiny of the aforesaid decision of this court in Karimpharuvi Tea Estates Ltd. [1963] 48 ITR 83 and Anglo-American Direct Tea Tading Co. Ltd. [1968] 69 ITR 667, shows that this court has consistently taken the view that the definition of the term 'agricultural income' for the purposes of the Act of 1922 and the Act of 1961, being Act pertaining to the levy of income-tax, has to be considered in the light of rule 24 of the Indian Income-tax Rules, 1922 in the case of the Act of 1922 and rules 7 8 of the Income-tax Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act and the decisions do not prohibit the deduction under section 80HHC being granted with reference to the entire income since under general principles the business income of the assessee is the entire income and not merely 40 per cent thereof. This submission cannot be accepted since accepting the same would be flying in the teeth of the three decisions of the Supreme Court cited above. The Supreme Court has in terms held that rule 8 of the I.T. Rules, which at first sight would appear to be only a rule of apportionment or computation, must really be treated as incorporated in the definition of the term " agricultural income " in the Income-tax Act. We do no see how the assessee's submission can be accepted in the face of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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