1956 (2) TMI 3 - SC - Income Tax

Whether on the facts and circumstances of the case, the income from the sale of milk received by the assessee during the accounting year is not 'agricultural income' within the meaning of the Income-tax Act? Held that - The appeal will be allowed and the answer given by the High Court will be set aside. The correct answer to the question referred will be that the income mentioned therein is not agricultural income within the meaning of the Income-tax Act.

Summary

Issues:
- Whether the income from the sale of milk received by the assessee constitutes agricultural income exempt from income tax.

Analysis:
The case involved an appeal by the Commissioner of Income-tax against a judgment regarding the classification of income from the sale of milk by a Hindu undivided family as agricultural income. The assessee claimed exemption from income tax for the profits from milk sales, contending it constituted agricultural income. The Income-tax Officer rejected the claim due to lack of evidence and estimated profits at Rs. 4,000 for taxation. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld this decision. The High Court directed the Tribunal to refer the question of law, which it did, resulting in the High Court's judgment in favor of the assessee.

The primary issue revolved around whether the income from milk sales qualified as agricultural income. The High Court held that there was insufficient material to deem the income as non-agricultural. However, the Supreme Court disagreed, emphasizing the assessee's failure to provide essential evidence to support the claim. The Court noted the absence of details on land usage, cattle maintenance, and milk production specifics. The burden of proof lay with the assessee, requiring them to substantiate the income's agricultural nature, which they failed to do adequately.

The Court highlighted the erroneous approach of the High Court in placing the burden on the Income-tax Authorities to disprove agricultural income status. It clarified that the assessee must present substantial evidence to support the exemption claim. The Court dismissed the reliance on legal interpretations and stressed the necessity of factual evidence. The regularity of milk sales, significant monthly values, and tax payments indicated a commercial business rather than agricultural operations.

Ultimately, the Supreme Court allowed the appeal, overturning the High Court's decision. It concluded that the income from milk sales did not qualify as agricultural income under the Income-tax Act. The Court held the assessee responsible for the lack of crucial evidence and declined further review requests due to the failure to utilize earlier opportunities for submission. The appellant was directed to pay the respondent's costs for the appeal.