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TMI Blog1991 (7) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee entered into an agreement with Messrs. Dooars Tea Co. Ltd. for purchase of Ghatia Tea Estate as a going concern from April 1, 1973. Dooars Tea Co. Ltd. was a sterling company carrying on business in India through its agents, Messrs. Gillander Arbuthnot and Co. Ltd. The sale and transfer of the said tea estate required approval of the Reserve Bank of India and also the authorities in the United Kingdom and, therefore, the conveyance deed could not be executed immediately. Clause 6A of the agreement for purchase contemplated that pending completion of the sale, the purchaser should, at its own cost, carry on and maintain and have the management of the tea estate in consultation with and under the supervision of Dooars Tea Co. Ltd., who would continue to be the owners thereof. Clause 24 of the said agreement also provided that, in the event the sale was not effected or the agreement was rescinded, the purchaser would be entitled to the expenses incurred in running the tea estate and the vendor-company would be entitled to the sale proceeds of the tea. Possession and management had been handed over to the assessee from the date of the agreement. The conveyance deed wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263. In the circumstances, the appeal by the assessee was allowed. At the hearing before us, Dr. Pal, appearing for the assessee has drawn our attention to clause 6A of the agreement and has submitted that the intention was that the vendor would be liable to be assessed on the income arising from the business until the conveyance was executed. He has also submitted that section 60 of the Act provides that all income arising to any person by virtue of a transfer whether revocable or not and whether effected before or after the commencement of the Act shall, where there is no transfer of the assets from which the income arises, be chargeable to income-tax as the income of the assessee-transferor and shall be included in his total income and since no assets have been transferred in this case, the question of the transferee being assessed to tax does not arise. He has also submitted that, in this case, the income of the relevant period has already been assessed in the hands of the transferor and accordingly for the same period, the transferee cannot be assessed to tax. We are, however, unable to accept this contention. An identical question came up for consideration before a Divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing process after the tea is grown gives rise to business income. The sale proceeds of such manufactured tea is assessed to tax after making allowances for the agricultural activities. Rule 8 of the Income-tax Rules provides the procedure for assessment of the composite income and apportionment of the income between two heads 'agriculture' and 'business'. The income arising out of manufacturing activity is not an income arising out of ownership of land. Any person may use somebody else's land or building for the purpose of earning income through manufacturing process and the income arising out of such activity will belong to the person who carries on the manufacturing activity and not to the person who owns such land." The court thereafter proceeded to consider the effect of the agreement in the following words (at page 300) : " The next question is about the effect of the agreements. There is no allegation that the agreements have not been acted upon. The agreements clearly provide that the terms and conditions of the agreement will come into effect from a date anterior to the date of execution of the deeds of conveyance. It has been categorically provided in the agreement tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aser and the vendor would be entitled to retain out of the sale proceeds any sum that might be payable by the purchaser to the vendor tinder the agreement." We may now proceed to set out the relevant clauses of the agreement in this case. One of the terms of the said agreement is that the sale shall be effective as a going concern from April 1. 1973, and that the management of the said Ghatia Tea Estate shall be handed over by the vendor to the purchaser after the execution of the agreement on payment by the purchaser to the vendor of fifty per cent. of the purchase price and the cost of running the said Ghatia Tea Estate from April 1, 1973, to the date of handing over the management of the said Ghatia Tea Estate. Clause 6A relied on by Dr. Pal, reads as follows : "Simultaneously with the execution of these presents and against payment of a further sum of Rs. 6.70,000 (rupees six lakhs seventy thousand) aggregating to the sum of Rs. 8,87,500 (rupees eight lakhs eighty-seven thousand and five hundred) being fifty per cent. of the said purchase price and pending completion of the sale by execution of the conveyance the purchaser shall at its own cost carry on and maintain and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural income-tax, excess profits tax, business profits tax, super profits tax and other tax on account of all profits earned after the first day of April one thousand nine hundred and seventy-three and so that As between the vendor and the purchaser, the purchaser will be solely liable for the payment of all income-tax, agricultural income-tax, excess profits tax, business profits tax, super profits tax and all other taxes imposed on account of all profits earned after the said first day of April, one thousand nine hundred and seventy-three or in respect of the occupation of the said tea estate after the first day of April, one thousand nine hundred and seventy-three. If, for any reason whatsoever, the vendor is compelled to and does pay any tax in respect of all or any of the foregoing tax liabilities, then in every such case, the purchaser shall forthwith, on demand, reimburse the vendor to the extent of such payment and all lawful costs and charges incurred by the vendor in or about the same, profits in this context mean all the taxable profits accruing after the first day of April, one thousand nine hundred and seventy-three and the purchaser shall not have the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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