CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 11751178 of 1970. Appeals from the judgment and order dated December 9, 1964, of the Madras High Court in Tax Case No. 146 of 1963 and Writ Petitions Nos. 698 to 700 of 1963. S.T. Desai and A. V. Rangam, for the appellant (in both the appeals). M.C. Chagla, B. D. Datta, J. B. Dadachanji, 0. C. Mathur, Ravinder Narain and Jay Jesepp, for the respondent (in all the appeals). The Judgment of the Court was delivered by Grover, J.-These appeals from a common order of the High Court of Madras are by certificate. The assessee, who is the respondent is a limited company carrying on business of tea planting. It owns several tea estates in the States of Tamil Nadu, Kerala and Assam. Its head office is in Munnar in the State of Kerala. One of the tea estates owned by the assessee is called Chittavurai Tea Estate and comprises 1043 -acres of tea plantations. Out of this an area of 1006.60 acres is situate in Kerala and the remaining 36.40 acres, in Tamil Nadu. According to the assessee Chittavurai Estate is working as one unit. There is only one factory manufacturing tea grown in the Madras and Kerala portion of the estate. The expenses are incurred for the maintenance of the whole estate as one unit and common accounts are maintained for it, there being no separate account for the Madras portion. Section 2(1) of the Indian Income tax Act 1922 hereinafter called the ’Income tax Act’ defines ’agricultural income’. The 119Sup. Cl/72
per acre. According to him apportionment of expenditure by treating the whole of Chittavurai Estate as one unit had resulted in a loss for the Madras portion and a profit for the Kerala portion. As pointed out by the High Court the computation by the Central, Income tax Officer showed a loss for the entire Chittavurai Estate. It is not necessary to go into details of how the computation was made by the Agricultural Income tax Officer. The net result, however, was that whereas the Central Income tax Officer had worked out the loss for the purpose of the Income. tax Act treating the Chittavurai Estate as one unit, the Agricultural Income tax Officer took the valuation of the produce from the Madras portion as the gross receipt. He deducted from it the.expenditure allowed by the Central Income tax Officer and recalculated it from the Madras portion on the basis of acreage. That led to a profit from the Madras portion. Learned counsel for the Revenue has drawn our attention to s. 6 of the Agricultural Income tax Act and Rules 7 and 8 framed under that Act. Section 6 provides that where agricultural income is derived from land situated partly within the State and partly without the State agricultural income tax shall be levied:-
(i)Where the portion of such income
attributable, to the land situated within the
State can be determined from the accounts
maintained by the assessee, on the portion so
determined;
(ii)Where the portion of the income so
attributable cannot be determined by the
method specified in clause (i), on such
portion as may be determined in the prescribed manne r."
Rules 7and 8 are as follows:-
R.7 "Computation of income from tea.-In
respect of agricultural income from tea grown
and manufactured by the seller in the State of
Madras, the portion of the income worked out
under the Indian Income tax Act and left
unassessed as being agricultural shall be
assessed under the Act after allowing such
deductions under the Act and-the rules made
thereunder :
Provided that the computation made by the
Indian Income tax Officer shall ordinarily be
accepted by the Agricultural Income tax
Officer who may, for his satisfaction under
sections 16 and 16 of the Act, obtain further
details from the assessee or from the Indian
Income tax Officer but shall not without the
previous sanction of the Assistant
Commissioner of Agricultural.
Income-tax require under section 3 9, the
production of account books already examined
by the Indian Income tax Officer for
determining the agricultural income from tea
grown and manufactured in the State of Madras
or refuse to accept the computation of the
Indian Income tax Officer :
R.8 "Computation of income derived from
lands situated partly within the State and
partly without."-Where an agricultural. income
is derived from lands situated partly within
the State and partly without the State and
the-income attributable to the lands situated
within the State cannot be determined by the
assessee but where the value of the produce
grown within or without the State can be
separately determined from the accounts
maintained by the assessee such income shall
be computed in proportion to the value of the
respective quantity of produce raised within
or without the State. In other cases such
income shall be computed in proportion to the
respective cultivated acreage of the crop
lying within and without the State if the crop
grown is the same, subject to such modifica-
tions as may be necessary with reference to
the yield per acre, the quality of the produce
and the price fetched within and without the
State." The High Court rightly pointed out that R. 7 is applicable only to agricultural income from tea grown and manufactured in the State of Madras. It can have no applicability in the present case where even though tea is grown inside that State but it is manufactured in Kerala which is outside that State., As regards R. 8 it is a moot point whether the same would be applicable to tea. ’So far as tea is concerned the tea leaves alone can be the produce but as such they have no value. They become valuable only after they are subjected to a special process from which emerge various brands of tea. Rule 7 has specifically been framed for ,computation of income from tea. Therefore, R. 8 can have no applicability particularly when the language employed in it cannot cover the case of tea. We are unable to see how these two rules can be of any avail or assistance to the Agricultural Income tax Officer in the present case. It must be remembered that Chittavurai Estate being of tea falls in a special class. It is only a very small area of that estate which is in Madras even though that is more fertile and gives much more yield. than the area in Kerala but the unit has to be assessed as a whole and the High
Court, in our opinion, rightly thought that the rule that the Agricultural Income tax Officer should accept the computation of the Central Income tax Officer furnishes the only satisfactory basis for computation of agricultural income tax in respect of Chittavurai Estate. It is noteworthy that even in the first proviso to R. 7 the Agricultural Income tax Officer has been enjoined to ordinarily accept the computation made, by the Central Income tax Officer. Moreover the High Court which went into the facts and figures of the various assessments came to the conclusion that the. Agricultural Income tax Officer had not given sufficient reasons for not accepting the Central Income tax Officer’s computation. That court, therefore, declined to give a finding on thequestion whether the Central Income tax Officer’s computation should be held to be legally binding in all cases and in all circumstances on the Agricultural Income tax Officer. Our attention has been invited on behalf of the assessee to a decision of this Court in Anglo-American Direct Tea Trading Co. Ltd. etc. etc. v. Commissioner of Agricultural Income tax Kerala(1). In that case it was held that agricultural income taxable under the Kerala Agricultural Income tax Act 1950 was 60% of the income computed under the Income tax Act after deducting therefrom the allowances authorised by s. 5 of the Kerala Act insofar as the same had not been allowed in the assessment under the Income tax Act. There was no provision in the Kerala Act or the Rules authorising the Agricultural Income tax Officer to disregard the computation of the tea income made under the Income tax Act. If, therefore, an assessment had been made by the Central Income tax Officer before the assessment of income by the Agricultural Income tax Officer the latter was bound to accept the computation of the income made by the Central income tax authorities. The principle which has been applied in the present case by the High Court is on the same lines and it is unnecessary for us to express any opinion on the question whether in every case the Agricultural Income tax Officer is bound to accept the computation made by the Central Income tax authorities and only allow additional deduction which may be permissible under the Agricultural Income tax Act. The appeals fail and are dismissed with costs. Hearing fee, one set. S.N.C. (1)69 I.T.R. 667. Appeal dismissed.