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TMI Blog2008 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of income derived from the said tea grown and manufactured by your petitioner and further forbearing the respondents from giving any effect or further effect of proceeding in any way to enforce the impugned notices of demand dated 26.3.1984, 04.04.1984 and 29.03.1985." 4. The assessee also prayed that sections 3 and 5 of the Bengal Agricultural Income Tax (Amendment) Act, 1980 be declared as ultra vires of the Constitution and beyond the competence of the State Legislature in enacting the same. 5. The writ petition was disposed of by the learned Single Judge of the Calcutta High Court in terms of the judgment of this court in Tata Tea Ltd. & Another v. State of West Bengal & Others 1988 (Supp) SCC 316. In this case, the court directed that after assessment, the Income Tax Officer (for short "ITO") can levy the tax on 40% of the income in accordance with the provisions of the Income Tax Act, 1961 (hereinafter referred to as "the 1961 Act") and balance amount may be assessed by the Agricultural Income Tax Officer to tax under the Bengal Agricultural Income Tax Act, 1944 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate. After considering the provisions of both the 1944 Act and the 1961 Act, the court observed as under:- "41. ........ the result would still be the same, namely, that the Kerala State Legislature can impose tax only in respect of 60 per cent of the income derived by an assessee who sells tea grown and manufactured by him in India and such income has to be computed in the manner laid down in the Act of 1922 and thereafter in the Act of 1961 for computation of business income. The same is the position in respect of the powers of the legislature of the State of West Bengal in spite of the amendments made by the said legislature by the Amendment Act of 1980 and earlier under the Amending Act of 1979 which was in force only for one year as we have stated before. It is not necessary to strike down the said amendments because they do not directly conflict with the definition of the term "agricultural income" under the Constitution as we have pointed out earlier, but we may make it clear that they do not confer any wider power on the State Legislature to impose taxes on agricultural income than what we have set out earlier." 11. This court considered the amendments made by the State G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income tax under the enactment relating to Indian Income Tax, the income derived therefrom is computed under those enactment in such manner as to include agricultural income, be deemed to be that portion of such income as so computed on which income tax is not payable under those enactments, and agricultural income tax at the rates specified in the Schedule shall be payable on the whole of such agricultural income as so computed." 13. The aforesaid sub-section (1A) which has been inserted with retrospective effect also provides that income from 'tea grown and manufactured' shall be assessed under the provisions of Income Tax Act and the income assessed also includes agricultural income which is taxable by the State. 14. Sub-section (3) of section 8 of the 1944 Act further provides that for the purpose of assessment of agricultural income tax a certified copy of an order of the assessment made under the Income Tax Act shall be conclusive evidence of the contents of such order. The relevant sub-section (3) of section 8 of the 1944 Act reads as under:- "(3) For the purpose of the assessment of agricultural income-tax under this section or any rule made thereunder a certified copy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 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 item (ii) (c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator, or the receiver of rent-in-kind of any land with respect to which, or the produce of which, any operation mentioned in items (ii) and (iii) of sub-clause (b) is carried on; Provided that the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator or the receiver of the rent-in-kind by reason of his connection with the land, requires as a dwelling house, or as a store house or other out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal to the business? This can never be the intention of legislature. 24. In case the assessee directly sells the green tea leaves resulting into an income from agricultural products, it cannot be taken as incidental income to the business and whatever the income is derived from the sale of the green tea leaves can be assessed by the Agricultural Income Tax Officer under the 1944 Act. 25. The Division Bench of the High Court while following the ratio of Tata Tea (supra) directed the Assessing Officer to compute the tax on the income of the respondent assessee on the basis of the aforementioned formula. 26. The High Court further directed that in case the agricultural income had wrongly been included by the Income Tax Officer in computing the income under the provisions of 1961 Act that could be excluded and assessment could be rectified. In the impugned judgment, it is also incorporated that by following these principles the Income Tax Officer would avoid the double taxation of the assessee. 27. It is also directed that while taxing the income from the sale of green tea leaves, the Agricultural Income Tax Officer should see, if expenses on the tea grown are already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct the Assessing Officer that in case the assessment order has already been passed contrary to the ratio of Tata Tea (supra), such assessment order must stand quashed and fresh assessment order be passed in accordance with law, as expeditiously as possible. 32. These appeals are disposed of in terms of the aforementioned directions. In the facts and circumstances of the case, the parties are directed to bear their own costs. ......................................J. (Ashok Bhan) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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