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TMI Blog2006 (6) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... h was challenged by the assessees before the Agricultural Income-tax Appellate Tribunal. 2.3. Before the Tribunal, it was contended by the assessees that as per Rule 7 of the Tamil Nadu Agricultural Income-tax Rules, 1955, the computation made by the Income-tax Officer under the Income-tax Act should be accepted by the Agricultural Income-tax Officer and hence, the revision of assessment made by the Agricultural Income-tax Officer was not valid. 2.4. The Tribunal, accepting the contention of the assessees, allowed the appeals filed by them. Hence, the above revisions have been filed. 2.5. While admitting the revision petitions, this Court framed the following questions of law for consideration: T.C.No.31 of 2002: "Whether the order of the Agricultural Income Tax Officer, Coonoor is based on facts and as per the amendment to sub-section 4(b) to section 80 HHC of the Income-tax Act, 1961 by the Finance Act, 1999?" T.C.No.37 of 2002: "Whether the Tribunal is right in setting aside the assessment made by the Agricultural Income-tax Officer which was sustained by the Assistant Commissioner of Agricultural Income-tax?" 3.1. Mr.Haja Nazirudeen, learned Special Government Pleader ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act as well as Rule 7 of the Agricultural Income-tax Rules, 1955 which read as follows: Sub-section 4B of section 80 HHC of the Income-tax Act, 1961:- 80HHC. Deduction in respect of profits retained for export business -- (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the profits derived by the assessee from the export of such goods or merchandise: Provided that if the assessee, being a holder of an Export House Certificate or a Trading House Certificate (hereafter in this section referred to as an Export House or a Trading House, as the case may be), issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of the export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable to tax under clauses (ii) to (iv) of section 28 of the Act. Rule 8 of the Income-tax Rules, 1962, prescribes computation of income derived from the sale of tea grown and manufactured as if it were income derived from business. Rule 8 does not use the expression total income. It simply uses the expression income. Therefore, this income is to be construed as incomedefined in section 2(24) of the Act as income from profits and gains. This income is to be computed in the manner laid down in the Act. The expression total income defined in section 2(45) means the total amount of income referred to in section 5, computed in the manner laid down in the Act. The expression gross total incomehas neither been defined nor has been used in section 29 or anywhere in the provisions of sections 30 to 43D of the Act. The expression gross total incomeis used in Chapter VI-A. The expression gross total incomedefined in section 80B(5), refers to the total income computed in accordance with the provisions of the Act before making any deduction under Chapter VI-A. This definition creates a fiction under which the total income computed in the manner laid down in the Act becomes gross total income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading goods is to be reduced. It is only that part of the income which forms a component of the business income that would be eligible to deduction. The cost of growing tea would be a direct cost deductible from the business of export. The nature of profit contemplated under section 80HHC(1) is the profit out of the business and the turnover from the business, which by no stretch of imagination could include the profit derived from agriculture. The apportionment postulated in rule 8 is to be made before deduction under section 80HHC is allowed. In other words, the benefit of deduction under section 80HHC would be available only on the income derived from the profit out of the business of export of tea processed and manufactured and not out of the profit of growing tea which is subject to the Agricultural Income-tax Act outside the scope and purview of the Income-tax Act. Therefore, sub-section (4B) introduced through an amendment under the Finance Act, 1999, is clarificatory in nature." (Emphasis supplied) 9.2. In ASSAM CO. LTD. v. STATE OF ASSAM (248 ITR 567) the Apex Court, with reference to computation of agricultural income under the Income-tax Act for the purpose of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the a bove, the rule becomes ultra vires the Act. While interpreting a particular provision of a statute, courts should bear in mind the object and scheme of the entire Act. The particular provision cannot be considered or interpreted in isolation so as to give room for conflict inter se between the provisions of the same Act. Courts should also bear in mind that while interpreting a provision of the Act an interpretation leading to the provision becoming ultra vires should be avoided." (Emphasis supplied) 9.3. Following the decision of the Apex Court in Assam Co. Ltd. Case (248 ITR 567), the Kerala High Court in a recent decision in TATA TEA LTD. v. IAC OF AGR. I.T. (283 ITR 275), while dealing with the computation of income under the Income-tax Act and Kerala Agricultural Income-tax Act, 1991, held that the computation of income under the Central Act cannot be challenged. The relevant portion of the judgment reads thus: "The State Legislature can impose tax only in respect of 60 per cent of the income derived by the assessee from tea but such income has to be computed in the manner laid down under the 1922 Act and thereafter under the Income-tax Act, 1961, for the computatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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