1970 (2) TMI 41 - HC - Income Tax

Assessee cultivated sugarcane on his lands - sale proceeds from jaggery - Whetherthere was any evidence before the Tribunal to justify the finding that there was no market for sugarcane produced by the assessee - Whether the income received by the assessee was agricultural income within the meaning of the Indian Income-tax Act 1922

Summary

Issues Involved:
1. Evidence supporting the Tribunal's finding regarding the market for sugarcane produced by the assessee.
2. Classification of the income received by the assessee as agricultural income under the Indian Income-tax Act.

Issue-Wise Detailed Analysis:

1. Evidence Supporting the Tribunal's Finding Regarding the Market for Sugarcane:

The core issue was whether there was any evidence before the Tribunal to justify its finding that there was no market for the sugarcane produced by the assessee. The Tribunal had previously remanded the case to the Income-tax Officer for further investigation, which involved gathering extensive evidence, including oral testimonies and affidavits. The Income-tax Officer's report indicated that there were 419 sugarcane cultivators within a 15-mile radius of the Phaltan Sugar Factory, which had the capacity to purchase and crush substantial quantities of sugarcane. However, the assessee contended that the quality of his sugarcane was such that it could not be chewed and had to be converted into jaggery or sugar due to its perishable nature.

The Tribunal concluded that the sugarcane grown by the assessee could not be used for chewing and had to be converted into jaggery to be marketable. The Tribunal emphasized that the existence of a mill did not necessarily mean there was a market for the sugarcane, as a market implies multiple buyers and sellers. The Tribunal found that the only way for the assessee to keep his crop in a saleable condition was to convert it into jaggery.

The court held that the Tribunal's findings were based on substantial evidence, including the peculiarities of sugarcane as a crop and the limited market options available to the assessee. The court rejected the revenue's contention that there was no evidence to support the Tribunal's finding, noting that the Tribunal had considered all relevant evidence and had not misdirected itself in law.

2. Classification of Income as Agricultural Income:

The second issue was whether the income received by the assessee from the sale of jaggery was agricultural income within the meaning of the Indian Income-tax Act. The assessee argued that his income from the sale of jaggery was agricultural income and should be exempt from income tax under sections 2(1)(b)(iii) and 4(3)(viii) of the Act. The Tribunal accepted this argument, noting that the conversion of sugarcane into jaggery was a process ordinarily employed by a cultivator to make the produce marketable.

The court referred to the case of Brihan Maharashtra Sugar Syndicate v. Commissioner of Income-tax, which held that for income to be classified as agricultural, the process employed must be one ordinarily used by a cultivator to make the produce marketable, and the produce must retain its original character unless there is no market for selling it in that condition. The court found that the sugarcane produced by the assessee did not retain its original condition when converted into jaggery, but this conversion was necessary due to the lack of a market for the sugarcane in its natural form.

The court concluded that the Tribunal's finding that the income from the sale of jaggery was agricultural income was justified. The Tribunal had correctly applied the legal provisions and had based its findings on substantial evidence.

Conclusion:

The court answered both questions in the affirmative, upholding the Tribunal's findings. The Commissioner was ordered to pay the costs.