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TMI Blog1957 (12) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... It is said in the statement of the case that in order to enable the Tribunal to prepare it, the parties were given an opportunity of collating the necessary materials centering round the two questions of law . Nothing could have been less correct. The Tribunal ought to know that the findings of fact made by it, if properly made, are final; that those findings are to be made in the appellate order; that only the facts so found are to be set out in the statement of the case and submitted to the court; that findings made at the appellate stage cannot be added to or varied at the stage of making a reference, except that clerical errors may be corrected or some necessary clarification supplied; and that this court's opinion can be sought only on the basis of the facts found by the appellate order and only on questions of law arising out of them. The Tribunal should therefore always find all the necessary facts by their appellate order, so that they may state them to this court in case they have to make a reference under section 63(1) or they are asked to make a reference under section 63(2). It is altogether wrong not to find and set out all the necessary facts in the appellate or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to that estimate did exist, as alleged by the assessee. He also found that the entries made in the kuth list produced before him were correct, although he thought that the estimate, which gave only 4 maunds per acre, was ridiculously low. But while accepting the assessee's case that the estimated yield of paddy in his half-share during the accounting year was 2,414 maunds, to which he was limited, the Income-tax Officer held that the assessee's receipt also must be taken to have been the same quantity, irrespective of what he had been able to collect. He, therefore, made an assessment on 2,414 maunds of paddy, together with a certain quantity of straw. In doing so, he took the market value of the 46 maunds and 19 seers of paddy, sold by the assessee, to be the price for which the quantity had been actually sold, but he treated the balance of 2,367 maunds and 21 seers, which was taken to have been the quantity consumed by the assessee, as not sold in the market and valued it at the open market rate of ₹ 9-12 per maund. On an appeal by the assessee, the Assistant Commissioner expressed his dissent from the Income-tax Officer's view that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtually become tenants and, therefore, the share of produce received from them should now be treated as rent in kind and assessed under section 6, instead of section 7, on the basis of actual receipt. The other question related to the applicability of the procurement rate to the paddy consumed by the assessee. The Tribunal held that the first question was concluded by a previous decision of this court, while the second could not possibly be sustained in the face of rule 4(2)(a) and accordingly they declined to make a reference. The assessee then applied to this court under section 63(2) of the Act and obtained an order on the Tribunal to refer the two following questions: (1) Whether, in the facts and circumstances of the case, the actual receipt should be the basis of assessment under section 7 of the Bengal Agricultural Income-tax Act? (2) Whether, in the facts and circumstances of the case, the procurement rate fixed by the Government in the locality should be taken as the basis of valuation of the unsold stock of paddy? In compliance with the direction of this court, the present reference has been made. Before taking up the questions, I would make two obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived remuneration for their work in the form of a share of the produce paid to them, the share paid to bargadars was also received by the owner of the lands and it was liable to be included in his income. But in computing that income, there could be no question of excluding 50 per cent. of the total yield at the very outset. What the proviso to section 7(1) lays down is that in cases coming under it, the allowance admissible to the: assessee shall be, not 50 per cent. of the produce raised from the land but 50 per cent. of its market value. Where the market value of the whole quantity of the produce falls to be computed at the same rate, initial exclusion of one-half of the produce would lead to the same result as a subsequent deduction of one-half of the market value. But where the market value of different portions of the whole produce falls to be determined at different rates and the total market value of the total yield is more or, as in the present case, less than what such market value would be, if the rate applicable to the bargadar's half-share were applicable to the whole, an initial exclusion of 50 per cent. of the produce would obviously make a difference. Since thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the share prescribed by the statute. If the share of the produce received by him is received as wages, it is obviously paid to him by his employer, the owner of the lands, and, obviously, the latter cannot pay it unless it is his property and he has first received it as such. The bargadar's share must therefore be treated as received by the owner even when, in actual fact, it is simply retained by the bargadar instead of being first handed over to the owner and then received back, because the application of this portion of the produce to the payment of the bargadar's remuneration presupposes and involves its prior receipt by the owner. This portion was undoubtedly derived from the land and if it was also received by the owner, it must obviously be included in the computation of his income by reason of the provisions of sections 4 and 7 of the Act. I may point out, however, that while the West Bengal Bargadars Act of 1950 distinguishes a bargadar from a tenant, it appears to distinguish him also from a labourer. Section 5(1) of the Act empowers the owner of any land to terminate its cultivation by the bargadar, if he desires to cultivate it by, inter alia, servants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been realised, whether the reason for the non-realisation be that the person bound to pay has defaulted or that the person entitled to receive the income has taken no steps to exercise his right. Where, however, the omission to exercise the right was on account of a voluntary foregoing of the claim, the case will be one of an application of the income and, necessarily, receipt will be presumed; but, otherwise, when an Act charges income to tax only on a receipt basis, no one can be taxed on income which he did not in fact receive, on the footing that he might have received it but for his wilful default. Receipt, however, may be actual as well as constructive. One of the forms of constructive receipt is an adjustment of cross-claims. These propositions are well-settled and reference for authority in their support may be made to Leigh v. Commissioners of Inland Revenue [1928] 1 K.B. 73, Dewar v. Commissioners of Inland Revenue [1935] 19 Tax Cas. 561, and cases on income received under the Indian Income-tax Act. In the case of land cultivated through bargadars, the latter have no independent or proprietary right to the produce. The share received by them is paid as remuneratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, lays the charge on total agricultural income and section 4, by which total agricultural income is defined, and sections 6 and 7, which provide respectively for the computation of agricultural income from rent or revenue and agricultural income from agriculture, all lay down two requirements of chargeability, viz., derived from land and received or received during the previous year . If mere acquisition of the income or accrual of the right to it was intended to attract the tax, derived from land during the previous year would suffice and there was no reason to add the word received . It may, however, be said that cultivation through bargadars is the owner's own cultivation, the bargadars being mere labourers, and since no man can receive anything from himself, the concept, and necessarily the requirement, of receipt is inapplicable to income derived by agriculture from land cultivated through bargadars. To hold that bargadars are labourers, cultivating the land on the owner's behalf and to hold at the same time that the produce raised from the land may be received by the owner from his bargadars is, it may be said, inconsistent. The argument is plausible, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in or without West Bengal are there, but the primary meaning of the second part of the definition is that the income must be received by the assessee. In the case of income from agriculture, it must be received, that is to say, actually obtained, from the land where the cultivation is by the assessee himself and it must be received, that is to say, got from bargadars, adhiars or bhagchasis, where the cultivation is by such labourers, whether actually or constructively. I do not think that it is correct to say that even where land is cultivated through bargadars, the produce, and the whole of it, is received by the owner as soon as it is harvested. It is true that the strict legal status of a bargadar is still that of a labourer, since he is not yet a tenant, but it appears to me that the factual position now is that he occupies an intermediate status between that of a tenant and that of a casual labourer employed on hire. The owner of land cultivated through a bargadar can now terminate the arrangement on very limited grounds so that the bargadar has a right of a very substantial character to hold the land. The crop, when grown and harvested, is in his possession and under his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not a labourer working under the owner as directed by him, but is a special type of labourer with many independent rights of his own. I am accordingly of opinion that the notion of a receipt from the bargadar is not an impossible notion as involving a receipt by the owner from himself. In relation to income derived by agriculture from land cultivated by bargadars, the word received is thus not redundant, but lays down a requirement of a real character. It makes receipt of the income, whether actual or constructive, necessary, if liability to tax is to be attracted to it. By virtue of that word, the owner's share of produce from land cultivated by bargadars is liable to agricultural income-tax only to the extent that it is actually received, that is to say, realised and collected, provided of course that the unrealised portion has not been remitted. It is a satisfaction to be able to feel that this construction of the Act leads to a just result, because it would be very unjust if it were to be held that although one State Act had practically removed the bargadar from the control of the owner and placed it in his power to continue his cultivation of the land without paying to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e market value of the bargadar's share, added to the market value of what the owner has actually received in his own share, whereas he will be entitled to a deduction of one-half of the market value of the entire produce raised from the land as the allowance admissible to him. The Act, however, seems to contemplate such a disparity as a possibility even where the owner receives the whole of his share and the whole of it is brought into the computation. For example, where the bargadar's share is less than one-half, the owner's cost of cultivation will be only the market value of that share, because that is all that he pays, but he will be entitled to an allowance of one-half of the market value of the whole of the produce. There will be a disparity in such a case, unless it is avoided by reason of a difference in the rates of market value, applicable to the different portions of the produce. In any event, we must place a fair and rational construction on the words of the Act and if such construction results in any advantage to the assessee, such advantage must go to him. The question of justice or injustice is really irrelevant. If I have referred to it, it is only for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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