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TMI Blog1957 (9) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... he company hold a large tract of land under a lease from the local Government and in a part of it they grow bamboos, thatching grass and fuel timber. During the calendar year 1948, they cut down some bamboos, some thatching grass and some fuel timber and utilised the same for the purposes of their business. The bamboos, thatching grass and fuel timber were grown by the assessee company on their own land by agricultural operation carried on by their servants and labourers, but after they had been grown, they were merely utilised by the company for the purpose of their tea business and not sold in the market or sold at all. It has now been found that such utilisation of bamboo, thatching grass and timber took place every year. The thatching grass had to be cut every year, because otherwise it would deteriorate and normally, the assessee company also used the grass every year. Bamboos and fuel timber were cut as and when necessary and normally some bamboos an dsome timber were cut every year. There was no absolute regularity as regards such cutting and appropriation, but since, in practice, the cutting and the using of the grass, bamboos and timber took place every year, such regulari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany next required the Tribunal to refer the questions raised by them for the opinion of this court and in due course the Tribunal referred the two following questions: (1) Is bamboo, thatch, fuel etc., grown by the assessee company and utilised for its own benefits in its tea business, agricultural income within the meaning of the Bengal Agricultural Income-tax Act? and (2) If the answer to question (1) be in the affirmative, can such income be computed under rule 4 of the Rules framed under the Act? When the reference came up for hearing, this court felt some difficulty in regard to both the questions. The first question had been framed in general terms and did not merely ask whether in order that agricultural produce might constitute agricultural income within the meaning of the Act, it was essential that the same should be sold in the market. It asked a broad question and invited this court to say whether, in the circumstances stated, the agricultural produce could be income at all. It appeared to us that if this court was to answer the general question as to whether agricultural produce grown by a person on his own land and utilised for his own purposes could, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Tribunal and dealt with by them, but their appellate order contained no trace of any such contention and necessarily there was no finding thereon. In making our order of remand, we, accordingly, directed the Tribunal also to state to this court whether it had been contended before the Tribunal that even assuming that the bamboos, thatching grass and fuel timber did constitute the assessee company's agricultural income in the circumstances of the case, rule 4 of the Rules framed under the Act could not be applied to the computation of the income. The Tribunal were also asked to state, if such a contention had been advanced, what their finding on that contention was. The Tribunal have now stated that the contention had in fact been advanced at the hearing of the appeal and they have given a finding against the assessee company. I am entirely unable to accept the extreme contention of the assessee company reflected in the first of the two questions. Mr. Mitra, who appeared for them, submitted that when a person grew agricultural produce by his own labour and on his own land, nothing came in to him form outside and accordingly there could not be any income accruing or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, only what the assessee had always possessed. I am unable to find any consistency or logic in the extreme contention of Mr. Mitra. Looking at the matter from the fundamental point of view, also I do not see why agricultural produce cannot in itself be income until it is sold and until it fetches its money value form third parties. To say that the produce was always immanent in the land and, therefore, when it grew and became the assessee's property, it brought nothing new to him, is, to my mind, an extravagant contention. The assessee under the Agricultural Income-tax Act has, his land just as the assessee under the Indian Income-tax Act has, say his business. The former, by expending his labour and skill on his capital asset of land, brings into existence the produce which is no less his income than the profit which the latter brings into existence by expending his business acumen and skill on his stock-in-trade and the profit-making structure. In each case, there is a gain or profit which is in itself of an exchangeable value proceeding form the fixed or capital asset, severed from it and received by the assessee for his separate use, benefit or disposal. I cannot se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such process and, therefore, it contemplates produce just as it is received form the land and located only so far as necessary to make it marketable as produce. The agricultural income contemplated by section 2(1)(b)(iii) is thus the income derived by the sale of such processed produce. Sub-clause (ii) of section 2(1)(b) speaks of agricultural income derived form agricultural land by the performance by a cultivator or receiver of rent in kind of any process of the nature I have already described. It will be noticed that the income which this sub-clause has in view is only such income as is derived form the mere process performed on the agricultural produce. It obviously means that where the performance of the process has added to the value of the raw produce, so much of the price of the processed produce as may reasonably be attributed to the process is also agricultural income, although it is not the product of agriculture, truly so-called. In a way sub-clauses (ii) and (iii) of section 2(1)(b) divided between them the income derived form the sale of agricultural produce which has been processed for marketing purposes. If such produce has not been processed but has been sold in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 2 and received by the assessee in the previous year. Since it refers to the whole of section 2(1)(b), sub-clause (i) of that section also is obviously included. The effect of section is to treat as agricultural income and charge to tax even produce derived from agricultural land, although it has not been sold the only condition being that it has been received. It was contended. that the provision for allowances contained in sub-section (1) of section 7 indicated that the section did not contemplate that produce which had not been sold should be chargeable to tax. The allowances admissible are, confining oneself only to income derived from cultivation of land, the cost of cultivation, the cost of performing the process referred to in section 2(1)(b)(ii), the cost of transporting the produce to the marker and the cost incurred in maintaining agricultural implements and machinery in good repair and providing for the upkeep of the necessary cattle. It appears to have been suggested before the Appellate Assistant Commissioner, though it was not suggested before us, that since there was the conjunction and between items (iii) and (iv) of sub- section (1) of section 7, it was intend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce not sold was outside the rule altogether, whereas for produce sold, two types of sale had been mentioned, namely, sale in the market and sale not in the market. It was said that the rule clearly contemplated that the produce had been sold and then it proceeded to lay down different standards for the computation of price according as the produce had been sold in the market or sold elsewhere, but still sold. The argument was reinforced by referring to the fact that what rule 4 was prescribing was only the method of determining the market value of agricultural produce, but market value was referred to only in the proviso to section 7(1) and in the main paragraph of section 8(1), proviso (a) to the latter section, where also the expression occurs, being specifically excluded by rule 4. It was accordingly said that the method of computation laid down in rule 4 was intended to be applied only to the determination of the market value of agricultural produce for the purposes of the proviso to section 7(1) and the main paragraph of section 8(1) and for no other purpose. I am unable to accept this contention of the assessee as well. On the question of the construction of rule 4, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish a return must furnish it in the prescribed form . The Act itself, therefore, says that a form shall be prescribed. The form actually prescribed is Form 5 which has two schedules and the seventh column of Schedule B provides for showing the market value of agricultural produce. The column is divided into four-sub-columns of which column 'b' requires the assessee to state the quantity of the produce. It is thus clear that even where the agricultural income of an assessee is constituted by agricultural produce in his hands, he has to furnish the return of his income in terms of the market value of the produce. It is thus necessary, in order to carry out one of the purposes of the Act, to provide how such market value is to be determined and that is exactly what rule 4 has been framed to do although it also provides the standard of valuation for cases where the produce has been sold off. For the purposes of the Act, with which rule 4 opens, must mean for all the purposes and one of the purposes being to enable the assessee to furnish his return in the prescribed from and, therefore, to enable him to state the market value of his income of agricultural produce. Rule 4 p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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