1961 (8) TMI 4 - SC - Income Tax

Whether bamboo, thatch, fuel, etc., grown by the assessee company and utilised for its own benefits in its tea business, agricultural income within the meaning of the Bengal Agricultural Income-tax Act ? Whether such income be computed under rule 4 of the rules framed under the Act ? Held that - 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 connection we may incidentally refer to the provisions of sub-clauses (i), (ii) and (iii) of section 7(1) of the Act which provide for the computation of tax and allowances under the head agricultural income from agriculture. These three sub-clauses in terms correspond to the three sub-clauses of section 2(1)(b) and lend some support to the conclusion that clause (i) in section 2(1)(b) does not require that the agricultural produce should be sold and profit or gain received from such sale before it is included 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.

Summary

Issues Involved:
1. Whether bamboo, thatch, fuel, etc., grown by the assessee company and utilized for its own benefits in its tea business constitute agricultural income within the meaning of the Bengal Agricultural Income-tax Act.
2. If the answer to the first question is affirmative, whether such income can be computed under rule 4 of the rules framed under the Act.

Issue-wise Detailed Analysis:

1. Agricultural Income Definition:
The primary issue revolves around the interpretation of "agricultural income" under Section 2(1)(b) of the Bengal Agricultural Income-tax Act. The appellant, a tea company, argued that the agricultural produce (bamboos, thatching grass, and fuel timber) grown and used internally for its business should not be considered agricultural income as it was not sold. The tax authorities, however, contended that the produce itself constituted agricultural income irrespective of sale. The court held that the definition of agricultural income under Section 2(1)(b)(i) includes income derived from land by agriculture, and this does not necessitate a sale. The court emphasized that agricultural produce used by the appellant for its business falls within this definition, rejecting the appellant's argument that income must involve profit or gain from a sale transaction.

2. Computation of Agricultural Income:
The second issue concerned the computation of such income under Rule 4 of the rules framed under the Act. Rule 4(1) pertains to produce sold in the market, while Rule 4(2) addresses produce not sold in the market. The appellant argued that Rule 4(2) should not apply as it only covers produce sold outside the market, and since their produce was not sold at all, there was no applicable rule for computation. The court disagreed, interpreting Rule 4(2) as a residuary rule covering all cases not falling under Rule 4(1), including produce not sold at all. Thus, the court upheld the tax authorities' computation of the market value of the agricultural produce used by the appellant.

Conclusion:
The court affirmed the High Court's decision, answering both questions in the affirmative. The agricultural produce used by the appellant for its business was deemed agricultural income under Section 2(1)(b)(i) of the Act, and its market value could be computed under Rule 4(2). The appeal was dismissed with costs.