1957 (12) TMI 31 - HC - Income Tax

Summary

Issues Involved:
1. Basis of assessment under section 7 of the Bengal Agricultural Income-tax Act.
2. Valuation of unsold stock of paddy at procurement rate.

Issue-wise Detailed Analysis:

1. Basis of Assessment under Section 7 of the Bengal Agricultural Income-tax Act
The primary issue was whether the actual receipt should be the basis of assessment under section 7 of the Bengal Agricultural Income-tax Act. The Tribunal originally held that the assessment should be based on the actual yield of the year, not merely the estimated or actual collection. The court clarified that the Act provides for the taxation of agricultural income on a receipt basis, meaning no tax can be levied on income that has not been realized. It was emphasized that "receivability" without receipt is nothing. The court stated that the share of the produce received by the bargadar should be treated as received by the owner, either actually or constructively, but the owner's own share should only be included in the computation to the extent it was actually received. The court concluded that the owner's share of produce from land cultivated by bargadars is liable to agricultural income-tax only to the extent that it is actually received, unless the unrealized portion has been remitted.

2. Valuation of Unsold Stock of Paddy at Procurement Rate
The second issue was whether the procurement rate fixed by the Government should be taken as the basis of valuation of the unsold stock of paddy. The court referred to rule 4(2)(a) of the Rules, which states that the market value of produce not sold in the market must be taken as the average price at which such produce has been sold in the locality during the previous year. The court found no justification for the contention that the procurement rate should be applied. It was not proven that all the paddy in the locality had been requisitioned and purchased at the procurement rate, nor was it alleged that there was no open market. The court concluded that the open market rate should be used for valuation, as the assessee would have had to purchase paddy at the open market price if he did not have the paddy received from his bargadars.

Conclusion:
The court answered the questions as follows:
1. Yes, the actual receipt should be the basis of assessment under section 7, so far as the assessee's own share of the produce was concerned, unless it was found that the portion not received had been remitted.
2. No, the procurement rate should not be taken as the basis of valuation of the unsold stock of paddy.

The court noted that success was equally divided and thus made no order for costs.