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TMI Blog1977 (1) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... le at 40% in view of rule 8 of the Income-tax Rules, 1962 ? " The dispute relates to the lease rent received by the assessee from another partnership firm. The assessee is a partnership firm called M/s. Haroocharai Tea Company. It purchased a tea estate known as Samaguri Tea Estate from Moabund Tea Co. Ltd. on January 24, 1963. For this purchase it had taken a loan from the Assam Financial Corporation by mortgaging the same tea estate. The partners of this firm and the partners of another firm called Gatoonga Tea Estate are the same. The two firms with common partners entered into an agreement according to which Gatoonga Tea Estate should manage Samaguri Tea Estate. This agreement was effective from January 1, 1963, though the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the aforesaid mortgage in their favour (which such interest is payable by instalments on 31st March and 30th September in each year) shall be borne and paid by Messrs. Gatoonga Tea Company and the same will not be deducted from the guaranteed income of Rs. 10,000 per annum payable by them to Messrs. Haroocharai Tea Company as aforesaid." The assessee-firm thus is to receive Rs. 10,000 annually from M/s. Gatoonga Tea Company irrespective of whether there is any profit or not. Before the Income-tax Officer the assessee submitted that it was not taxable being agricultural income. The Income-tax Officer, however, taxed it cent. per cent. On appeal, the Appellate Assistant Commissioner held that rule 8 of the Income-tax Rules, 1962, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 was payable annually as guaranteed profits by the firm, M/s. Gatoonga Tea Estate to the assessee-firm, M/s. Haroocharai Tea Company. This sum of Rs. 10,000 may be either profit from the business of growing and manufacturing tea or, taking the worst view, lease rent for leasing out Samaguri Tea Estate. Both the firms, namely, the assessee and M/s. Gatoonga Tea Estate, do the business of growing and manufacturing tea. Similarly, in Samaguri Tea Estate also tea is grown and green leaves are taken to some other tea estate for manufacturing purpose as Samaguri Tea Estate itself does not own any factory. Whatever that may be, all the three tea estates are engaged in producing agricultural product, namely, tea. Section 2(1)(a) and (b) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the generality of the foregoing power, such rules may provide for all or any of the following matters ;...... (b) the manner in which and the procedure by which the income shall be arrived at in the case of-- (i) income derived in part from agriculture and in part from business ;........" Under section 295 of the Act, rule 8 of the Income-tax Rules, 1962, has been framed, which reads as follows : " 8. Income from the manufacture of tea.--(1) Income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent. of such income shall be deemed to be income liable to tax........." In a tea garden, it is well known, growing of green tea l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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