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TMI Blog1962 (11) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 5 of the Agricultural Income-tax Act against the Karimtharuvi Tea Estates Ltd., Kottayam, viz., petitioner No. 1. - Petitions Nos. 234 to 236 of 1961 - - - Dated:- 1-11-1962 - DAYAL, RAGHUBAR, DAS, S.K., KAPUR, J.L., SARKAR, A.K. AND HIDAYATULLAH, M., JJ. For the Petitioner: M. C. Setalvad, Attorney-General for India, C.K. Daphtary, Solicitor General of India, S. T. Desai, Vellapaly, J. B.Dadachanji, O.C. Mathur and Ravinder Narain, For the Respondent: V. P. G. Nambiar, Advoeate-General for the State of Kerala, A. V. Viswanatha Sastri and V. A. Seyid Muhammed, JUDGMENT RAGHUBAR DAYAL J. - These are three petitions under article 32 of the Constitution by the Karimtharuvi Tea Estate Ltd., Kottayam, and one of its directors and members praying for a declaration that the Agricultural Income-tax (Amendment) Act, 1961 (IX of 1961) hereinafter called the Amendment Act, enacted by the Kerala State Legislature, is null and void and that the State's power to tax income from tea to agricultural income-tax is limited to taking 60% of the income computed for the purpose of the Indian Income-tax Act (hereinafter referred to as the Income-tax Act) as if it were income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation 2 to section 5 of Agricultural Income-tax Act, 1950. This Explanation reads: "Nothing contained in this section shall be deemed to entitle a person deriving agricultural income to deduction of any expenditure laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income has been derived during the previous years." The petitioners challenged the validity of the Amendment Act stating that it was not within the competence of the State Legislature and that its provides contravened the provisions of article 14, 19(1)(f) and (g) and 31 of the Constitution. At the hearing, however, the contentions about the Act contravening article 19(1)(f) and (g) and article 31 were not raised. The main contention raised at the hearing is that the legislature of the State of Kerala cannot enact such a provision which would make agricultural income under it different from "agricultural income" as defined in the enactments relating to the Income-tax Act and that the impugned Explanation 2 to section 5, if applicable to the income from tea plantations, would make the income from such plantations, for the purpose of the Agricultural Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains shall be arrived at in the case of (i) income derived in part from agriculture and in part from business; (3) In cases coming under clause (a) of sub-section (2), where the income, profits and gains liable to tax cannot be definitely ascertained, or can be ascertained only with an amount of trouble and expense to the assessee which, in the opinion of the Central Board of Revenue, is unreasonable, the rules made under that sub-section may (a) prescribe methods by which an estimate of such income, profits and gains may be made, and (b) in cases coming under sub-section (i) of clause (a) of subsection (2), prescribe the proportion of the income which shall be deemed to be income, profits and gains liable to tax;and an assessment based on such estimate or proportion shall be deemed to be made in accordance with the provisions of this Act (5) Rules made under this section shall be published in the Official Gazette, and shall thereupon have effect as if enacted in this Act." Rules 23 and 24 of the Indian Income-tax Rules, 1922, made under the above-quoted section, provide for the determination of income for the purposes of income-tax when the entire income is partially agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant of the definition of "agricultural income" in the Agricultural Income-tax Act reads : "2. In this Act, unless there is anything repugnant in the subject or context (a) 'Agricultural income' means (1) any rent or revenue derived from land which is used for agricultural purpose; (2) any income derived from such land in the State by (i) agriculture, or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind) to render the produce raised or received by him fit to be taken to market, or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in sub clause (ii); Explanation. - Agricultural income derived from such land by the cultivation of tea means that portion of the income derived from the cultivation, manufacture and sale of tea as is defined to be agricultural income for the purpose of the enactments relating to Indian income tax." This definition practically conforms to the definition of "agricultural income" in sub-clause (a) and (b) of clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such income being that portion of the income derived from land by the cultivation, manufacture and sale of tea as is defined to be agricultural income for the purposes of the enactments relating to Indian Income-tax. Explanation 2, if applied to income from tea, would create an agricultural income which is not contemplated by the Income-tax Act and the Constitution and would then be void. Though wide in terms, Explanation 2 to section 5 should therefore be construed not to apply to the computation of agricultural income derived from land by the cultivation of tea. Such a construction would make it harmonious with the Explanation to sub-section (2) of clause (a) of section 2 of the Agricultural Income-tax Act. It is true as urged for respondents, that the State Legislature has full freedom to enact such provisions as it considers fit in respect of tax on agricultural income and that such power includes the power to enact for matters subsidiary and incidental to the taxation of agricultural income. We also agree that the State Legislature is free to provide the method of computation of the agricultural income and is free to allow any particular deductions from the gross income as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which died or became permanently useless in an area already planted. It deals with the cost of planting bushes and not with the expenses incurred in the upkeep and maintenance of bushes already planted. These petitions are not with respect to the expenses incurred in the planting of immature tea bushes but are with respect to expenses incurred in the upkeep and maintenance of immature plants. We, therefore, construe Explanation 2 to section 5 of the Agricultural Income-tax Act not to extend to the computation of agricultural income derived from tea plantations and hold that in computing such agricultural income for the purpose of taxation under the Agricultural Income-tax Act, the Explanation to section 2 of that Act must be kept in mind and the income mist be taken to be as defined for the purposes of the enactments relating to Indian income-tax. In view of our opinion it is not necessary to consider the other contention of the petitioner that Explanation 2 to section 5 is discriminatory and contravenes the provisions of article 14 of the constitution. We therefore allow these petitions to this extent that we declare that Explanation 2 to section 5 of the Agricultural Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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