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TMI Blog1989 (4) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... tate " and accessories for recovery of Rs. 2,08,51,230.98 with interest being the arrears of sales tax, agricultural income-tax, employees' provident fund, etc., due from the petitioner. The petitioner owns the Ponmudi Estate measuring about 892 acres out of which an extent of 600 acres is a tea plantation. The counter-affidavit of the third respondent, Tahsildar, shows the break-up of the tax liability as follows : Rs. Sales tax : 23,37,825.03 Bank arrears due to Small Scale Development Corporation : 41,618.93 Emergency risk : 8,792.77 -do- : 5,206.00 Agricultural income-tax : 1,75,98,366.62 Employees' provident fund : 7,20,936.15 Basic tax : 5,237.46 Plantation tax : 1,33,248.02 --------------------------- 2,08,51,230.98 --------------------------- The arrears of agricultural income-tax and surcharge for the years 1977-78 to 1981-82 due from the petitioner are as follows as can be seen from the counter-affidavit filed on behalf of the respondents : --------------------------------------------------------------------------------------------------------------------------------------------------- Year Agri. income-tax Surcharge Total --------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been able to prove the same. The revisional authority found that an assessment under section 18(4) of the Act became necessary for the default of the petitioner in complying with the various notices issued by the assessing authority and rejecting all his contentions including the arbitrary nature of the assessment, the revisional authority confirmed the assessment orders, exhibit P-8 series. The learned single judge, as already stated, has declined to interfere with these orders for the reason of the persistent default of the assessee in complying with the various notices issued by the assessing authority and his failure to file objections to the pre-assessment notice. The learned judge has also adverted to his default in complying with the orders of the Supreme Court for sale of a portion of the estate to discharge his liability under a decree obtained by the Indian Bank against him. It is true that the assessee is a defaulter. He has failed to submit returns in response to the notices issued under section 35 of the Act. His case that he had not received any of those notices is not accepted by the revisional authority and the learned single judge. A best judgment assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een explained over and over again by this court. " The assessment orders, exhibit P-8 series, show that agricultural income is assessed on the basis also of the sales tax assessment. The sales tax assessment orders for the respective periods, therefore, form part of the records of the case. Some of these orders were produced by the petitioner as per C. M. P. No. 2097 of 1989. Exhibit P-8(e) is the order of assessment to agricultural income-tax for the assessment year 1977-78. The income from tea is estimated in exhibit P-8(e) at Rs. 27,79,000. The assessment order passed by the Assistant Commissioner of Sales Tax for the year 1978-79 is at page 164 of the paper book. This order shows that the petitioner was assessed to sales tax for the prior year 1977-78 on a total and taxable turnover of Rs. 27,79,900. Thus, the total taxable turnover for the year 1977-78 is taken as the agricultural income from tea for the said period in exhibit P-8(e) order of assessment. Exhibit P-8(d) is the order of assessment to agricultural income-tax for the year 1978-79. Income from tea is estimated in exhibit P-8(d) at Rs. 14,97,690. The sales tax assessment order for the said period is at page 164 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s enumerated in List I of the Seventh Schedule to the Constitution. As per clause (3) of the said article, the Legislature of a State has exclusive power to make laws with respect to matters enumerated in List II of the said Schedule. Entry 82 of List I reads : " Taxes on income other than agricultural income ". Entry 46 of List II provides for taxes on agricultural income. Article 366(1) of the Constitution defines " agricultural income " as follows : " 'agricultural income' means agricultural income as defined for the purposes of the enactments relating to Indian income-tax. " Sub-section (1) of section 2 of the Indian Income-tax Act, 1922, defines " agricultural income ", the material portion of which reads : " 'agricultural income' means-- (a) any rent or revenue derived from land which is used for agricultural purposes, and either assessed to land revenue in the taxable territories or subject to a local rate assessed and collected by officers of the Government as such ; (b) any income derived from such land by-- (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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act and Rules ; 40 per cent. of the income so computed is deemed to be income derived from business and assessable to non-agricultural income-tax. Havingregard to the decision in Karimtharuvi Tea Estates Ltd. v. State of Kerala [1963] 48 ITR 83 (SC) ; [1963] Supp. 1 SCR 823 ; AIR 1963 SC 760, we are bound to hold that (a) the Explanation to section 2(a)(2) of the Kerala Agricultural Income-tax Act adopts this rule of computation, and (b) the balance 60 per cent. of the income so computed is agricultural income within the meaning of the Central Income-tax Act and the Constitution. The agricultural income taxable under the Kerala Act is 60 per cent. of the income so computed after deducting therefrom the allowances authorised by section 5 of the Kerala Act in so far as the same has not already been allowed in the assessment under the Central Income-tax Act. There is no provision in the Kerala Act authorising the Agricultural Income-tax Officer to disregard the computation of the tea income made by the income-tax authorities acting under the Central Income-tax Acts. The Agricultural Income-tax Officer in making an assessment of agricultural income is bound to accept the comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karimtharuvi Tea Estates Ltd. [1963] 48 ITR 83 and Anglo-American Direct Tea Trading Co. Ltd. [1968] 69 ITR 667, it has been noticed by this court that the said Explanation to section 2(a)(2) of the Kerala Agricultural Income-tax Act was in line with the provisions of rule 24 of the Indian Income-tax Rules, 1922, and rule 8 of the Income-tax Rules, 1962, but that by itself does not make any difference and the reading of the aforesaid decisions makes it perfectly clear that even without that Explanation, the position would have been the same. The conclusion which must follow is that although the Explanation has been deleted from sub-clause (2) of clause (a) of section 2 of the Kerala Agricultural Income-tax Act and in spite of the amendments carried out by the Amendment Act of 1979 and thereafter the Amendment Act of 1980 in the case of the Bengal Agricultural Income-tax Act, an Agricultural Income-tax Officer acting under the Kerala Agricultural Income-tax Act or the Bengal Agricultural Income-tax Act has no power to levy agricultural income-tax except in respect of 60 per cent. of the income derived by an assessee from the sale of tea grown and manufactured by him and computed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority in the present case has not even perused the orders of assessment to sales tax for the different years in question. The Commissioner is wrong in ignoring the constitutional points raised by merely stating that the assessee has not shown that the income from tea assessed exceeds 60 per cent. of the total income from the sale of tea. The impugned orders of assessment, exhibit P-8 series, and the revisional order, exhibit P-13, are, therefore, vitiated by errors apparent on the face of the record. There is also lack of jurisdiction to assess income above 60 per cent. derived from tea and these orders are clearly unsustainable in law. The petitioner seeks to quash also the revenue recovery proceedings culminating in exhibit P-7 notification for sale of the Ponmudi Estate. The counter-affidavit of the third respondent shows that revenue recovery proceedings are taken against the petitioner for recovery of amounts due from him under various heads as referred to in the earlier part of this judgment. The Ponmudi Estate was attached under section 36 of the Revenue Recovery Act and the Collector has assumed management of the same in exercise of his powers under section 37 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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