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TMI Blog1957 (8) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... .......... the proceeds of the coffee crop treated by the Indian Coffee Board as the crop of earlier years shall be excluded. It was common ground, that the petitioner received from the Coffee Board during the relevant year of account 1954-55 an amount of ₹ 2,39,206-8-6, which represented in part the sale proceeds of the years anterior to 1st April, 1954, namely, 1952-53 and 1953-54. The petitioner adopted the mercantile system of accounts. It was, however, not disputed by the learned counsel for the petitioner, that this amount was brought to account in the books of the assessee only in the year of account 1954-55 though the coffee produce itself had been delivered in the prior years in compliance with the provisions of the Coffee Market Expansion Act (VII of 1942). In exercise of the powers vested in the Government by section 61 of the Act, the Government amended the Rules on 10th April, 1956, directing the deletion (repeal) of rule 10 with effect from 1st September, 1955, itself, on which date the Rules as originally promulgated came into force. The effect of this notification was as if rule 10 had never formed part of the Rules. On 1st May, 1956, the Agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate authority. In W. P. No. 48 of 1957, the petitioner applied for the issue of a writ of certiorari to set aside the order of assessment dated 23rd December, 1956, principally on the ground that the order was vitiated by the inclusion of the sum in dispute ₹ 68,827-6-6. I shall reserve for consideration the preliminary objection of the learned Additional Government Pleader, that the rule nisi in each of these petitions should be discharged without any further investigation as the petitioner company availed itself of an alternative and statutory remedy and has exercised its right of appeal. The question that is common to both the petitions is whether the sale proceeds received by the petitioner from the Coffee Board in the relevant years of account towards the price of coffee produced and sold before 1st April, 1954, could be assessed to tax as agricultural income. The question arises independently of the application of section 35, which is an additional issue for determination in W.P. No. 749 of 1956. In the case of the petitioner the first year of account was 1954-55 and the first year of assessment under the Act was 1955-56. Rule 10 in express terms exempted fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 4 but rule 10. That basis disappeared. I shall examine the scope of sections 3 and 4 among others freed even from these considerations. The relevant portion of section 2(a) of the Act runs : agricultural income means - (2) any income derived from such plantation in the State by - (i) agriculture, or (ii) The performance by a cultivator... of any process ordinarily employed by a cultivator... to render the produce raised or received by him fit to be taken to market; Explanation II. - Agricultural income derived from such plantation by the cultivation of coffee...means that portion of the income derived from the cultivation, manufacture and sale of coffee...as may be defind to be agricultural income for the purpose of the enactments relating to the Indian income-tax. Section 2(x) runs : Total agricultural income means the aggregate of all agricultural income mentioned in section 4 computed in accordance with the provisions of section 5...... Section 3(1), the main charging section, runs : Agricultural income-tax at the rate or rates specified in Part 1 of the Schedule to this Act shall be charged for each financial year commencing from the 1st Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to exclude from the total agricultural income, which has been really defined by section 4 and which is what is subjected to tax by section 3, the sale proceeds of agricultural crops grown and gathered by an assessee from his plantation before 1st April, 1954, and also sold before 1st April, 1954, but the sale proceeds of which were received by the assessee and brought to account only subsequent to 1st April, 1954. There appears to be no basis for importing what was referred to during the arguments as the time factor in considering the scope of the definition of agricultural income in section 2(a) of the Act. None of the factors, the year of produce, the year of sale or the year of receipt of the sale proceeds is relevant in interpreting the scope of agricultural income as defined by section 2(a). I have said that total agricultural income , despite the definition attempted in section 2(t), is really explained only in section 4 of the Act. Section 4 explains what is the total agricultural income of the previous year in relation to the relevant year of assessment. Three conditions have to be satisfied : (1) The total agricultural income must be of the previous year; (2) It sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to accept the contention, that section 5 or section 12 or both compel the requirement, that the agricultural income must have been derived in the previous year, in the sense that the income must relate to the produce of the previous year. Section 4, in my opinion, does not prescribe such a condition. Section 5 provides for the deductions to be made in computing the total agricultural income to arrive at the assessable income. Some of the items that could be deducted are the expenses incurred in the previous year. Section 5 provides for a notional or statutory concept of assessable income. Except to the extent it provides, either in express terms or by necessary intendment, it cannot control the liability declared by section 3 read with section 4. Neither does section 12 affect that liability except to the extent it makes a provision for carrying forward the loss incurred on and after 1954-55 the first of the previous years for the purposes of the Act. I shall deal later with the alternative argument of the learned counsel for the petitioner, that whatever might be the position in relation to a previous year after the Act came into operation, the sale proceeds of the agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act made total agricultural income taxable for the first time only on and after 1st April, 1955. It is equally true that the first year, the total agriculture income of which was made taxable, was the previous year in relation to the first of the assessment years 1955-56. If considerations of the year of produce are not relevant for computing the total agricultural income of any year subsequent to the commencement of the Act, I am unable to see how they could become relevant in computing the total agricultural income of the first of the previous years, 1954-55. The learned counsel for the petitioner urged that, if the proceeds of the years antecedent to 1st April, 1954, were taken into account on the only ground that the sale proceeds of the produce were received in the years of account subsequent to 1st April, 1954, the true income of none of these years of account could be ascertained. It was pointed out that neither the expenses incurred to earn that income in the year of produce anterior to 1st April, 1954, nor the losses, if any, sustained in that period could be taken into account. Section 5 of the Act barred the first, and section 12, the other. That no doubt is tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The real question is, is it wide enough to cover the case of the petitioner with reference to the assessment year 1955-56. When the assessment was completed on 21st March, 1956, the receipt of this sum of ₹ 2,39,206-8-6 in the year of account 1954-55 was shown in the books of the petitioner. It was not shown in the return submitted by the petitioner company before it was assessed on 21st March, 1956. The petitioner was entitled to exclude this sum under rule 10 as it stood then. The receipt of that amount in the year of account was known to the Agricultural Income-tax Officer who examined the accounts of the petitioner. The same was not assessed to tax in 1955-56, but only because rule 10 was in operation on the date of assessment, 21st March, 1956. On that date there was certainly no escape form assessment, because as the law stood then, the amount was not liable to be taxed. The implied decision rendered on 21st March, 1956, excluding this amount from the computed total agricultural income, was a correct decision. Within a month thereafter the law was changed and rule 10 stood repealed. The basis of what really amounted to an exemption granted to coffee disappeared. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly in Commissioner of Income-tax, Bombay v. D. R. Naik, Beaumont, C.J., observed : So that the mistake, which resulted in the original assessment, was a mistake of law, for which the learned Commissioner of Income-tax had some justification. The words of section 34 are very wide and say that if for any reason the assessment is too low. I think those words are wide enough to cover such a mistake as existed in the present case, and I see no reason, therefore, why a fresh assessment should not be made under section 34. The principle laid down in Commissioner of Income-tax, Bombay v. D. R. Naik was approved of by a Divisional Bench of the Calcutta High Court (Derbyshire, C.J., and Nasim Ali, J.) in P. C. Mallick and D. G. Aich, In re. In Chimanram Motilal v. Commissioner of Income-tax, (Central), Bombay, Beaumont, C.J., observed at page 58 : Again, it cannot, I think, be disputed that as this court held in Commissioner of Income-tax, Bombay v. P. N. Contractor 4, if an assessment is based on a view of the law held to be correct by High Courts in India but subsequently, within the year allowed by the section 34, held by the Privy Council to be incorrect and by rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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