1966 (10) TMI 32 - SC - Indian Laws

Whether, on the facts and in the circumstances of the case, the Deputy Commissioner of Agricultural Income-tax was right in holding that the applicants were liable to be assessed to agricultural income-tax on the entire income from the Dubarry Group of Estates for the agricultural season 1950-51? Held that - With regard to the crops, which had already been harvested, the High Court has held that they do not constitute the agricultural income of the assessee. In returning this answer, the High Court was perfectly correct. From those crops, the income accrued to the respondent because he had purchased the ready harvested crops. Income in respect of those crops was not, therefore, derived by the respondent by any agricultural operations carried on by the respondent, or by performance by the respondent of any process ordinarily employed by a cultivator to render the produce raised or received by him fit to be taken to the market, or by the sale by the respondent of produce raised or received by it. The crops, which had already been harvested, were raised and removed from the land by the vendor from whom the respondent purchased these crops. The sale price received by the vendor might have been treated as agricultural income of the vendor who had raised the crops and sold these harvested crops to the respondent. In no case, could this income received by the respondent by sale of harvested crops purchased by it in that condition be treated as agricultural income received by the respondent. The appeal dismissed.

Issues:
1. Assessment of agricultural income for the year 1952-53.
2. Treatment of receipts from the crop of the agricultural year 1950-51.
3. Claim for setting off the purchase price of crops against income.
4. Rejection of application for reference by the Commissioner.
5. High Court's direction to submit a statement of the case.
6. Determination of agricultural income and tax liability.
7. Appeal against the High Court's answer on agricultural income.

Analysis:
1. The respondent, a company, filed a return for assessment to agricultural income-tax for the year 1952-53, showing a loss of Rs. 43,071. The assessing authority found that receipts from the crop of the agricultural year 1950-51 were not accounted for by the respondent, leading to an addition of Rs. 2,16,000 to the agricultural income and assessment of tax thereon.

2. The respondent's explanation for excluding the receipts was that the crops were purchased separately, and thus not treated as agricultural receipts. A claim was made to set off the purchase price against income. However, the assessing authority considered the entire crop value as agricultural income, leading to tax assessment.

3. The respondent's appeal to the Deputy Commissioner and application to the Commissioner for a reference were unsuccessful. The High Court directed the Commissioner to submit a statement on whether the crop value of Rs. 2,16,000 constituted agricultural income and tax liability.

4. The High Court held that only net realizations from crops standing at the time of purchase were considered agricultural income, while harvested crops did not constitute agricultural income of the respondent. The High Court directed a fresh computation of the agricultural income liable for tax.

5. The Commissioner appealed against the High Court's decision on the first part of the answer, challenging the treatment of harvested crops as not constituting agricultural income. The court upheld the High Court's decision, stating that income from purchased harvested crops cannot be considered agricultural income of the respondent.

6. The judgment emphasized that income derived from purchased harvested crops was not a result of agricultural operations by the respondent. The income accrued to the vendor who raised and sold the crops, and the respondent's purchase of harvested crops did not qualify as agricultural income under the Act.

7. Ultimately, the appeal was dismissed, affirming the High Court's decision on the treatment of harvested crops as not forming part of the respondent's agricultural income. The court upheld the distinction between income from standing crops at the time of purchase and harvested crops purchased separately.

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