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Issues involved: Interpretation of deduction of cess under the Assam Taxation (on Specified Land) Act, 1990 from the computed income of tea u/s 8(2)(e) of the Agricultural Income-tax Act, 1939.
Summary: The petitioner, a public limited company engaged in tea cultivation, paid cess under the Assam Taxation Act and sought deduction from 60% of the computed income of tea u/s 8(2)(e) of the Agricultural Income-tax Act, 1939. The petitioner's claim for tax clearance certificate was denied by the respondent, stating that deduction from 100% of the income was not approved. The petitioner argued that as per the provisions of the Assam Agricultural Income-tax Act and Income-tax Rules, the deduction should be from 60% of the composite income. The respondents disputed this claim, leading to a legal challenge by the petitioner. The court considered the definition of agricultural income u/s 2(1A) of the Income-tax Act, 1961, and emphasized that income derived from the sale of tea should be treated as business income, with 40% deemed liable to tax. Referring to section 8(2)(e) of the Agricultural Income-tax Act, which allows deduction of tax paid on cultivation or sale of crops, including cess, the court concluded that cess is a form of tax. Citing precedents, the court affirmed that cess is indeed a tax and ruled in favor of the petitioner, directing the issuance of the tax clearance certificate upon payment of tax on 60% of the composite income after deducting the cess amount. In light of the above, the court quashed the earlier letters denying the deduction and provided relief to the petitioner, disposing of the writ petition without costs.
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