Full Judgment Text
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PETITIONER:
COMMISSIONER OF INCOME TAX, WEST BENGAL, CALCUTTA
Vs.
RESPONDENT:
M/S. HANTAPARA TEA CO., LTD., CALCUTTA
DATE OF JUDGMENT03/04/1973
BENCH:
HEGDE, K.S.
BENCH:
HEGDE, K.S.
KHANNA, HANS RAJ
CITATION:
1973 AIR 2495 1973 SCR (3) 889
1974 SCC (3) 202
CITATOR INFO :
R 1979 SC 376 (2)
ACT:
Income-tax-Assessee’s agricultural produce used in
assessee’s business-Market value of produce if deductible
expenditure for purposes of income-tax.
HEADNOTE:
For the assessment year 1961-62 the assessee-a tea company,
was assessed to income-tax under r. 24 of the Income-tax
Rules on its profits as per its Profit and Loss Account with
certain modifications. In the expenses debited in its
accounts only the expenses for raising thatch, bamboo, fuel
etc. grown in the tea estate and used in the tea business
were included. The assessee contended that the market value
of the agricultural produce grown in the tea estate and
utilised by the assessed in the tea business, which had been
assessed at 100% to agricultural income-tax, must be taken
into consideration in the computation of the allowable
expenditure. The Appellate Assistant Commissioner, the,
Tribunal and the High Court, on reference, held in favour of
the assessee
Dismissing the appeal to this Court,
HELD : in the matter of computing the agricultural income it
was not necessary that the agricultural produce should be
sold and profit of gain made from such sale, before it is
considered as agricultural income. it is sufficient if the
assessee gets any benefit from the produce, and what is to
be taxed is the market value of the benefit received by the
assessee and not the costs incurred by the assessee for
raising the agricultural produce in question. If the
assessee has to pay agricultural income-tax on the market
value of the agricultural produce raised in his estate and
used in his tea business, it stands to reason, that while
determining the deductible expenditure incurred for the
purpose of his business, the same rule, namely, the market
value of the produce used for the tea business should be
taken into consideration, because, in terms of money, what
he expended was the market value of the produce used in
connection with his business. The fact that he used his own
goods is immaterial. [891 F-H]
Dooars Tea Co. Ltd. v. Commissioner of Agricultural
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Income,tax, West Bengal, [1962] XLIV I.T.R. 6, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 79 of 1970.
Appeal by special leave from the judgment and order dated
February 26, 1969 of the Calcutta High Court in Income-tax
Reference No. 37 of 1965.
N. D. Karkhanis and S. P. Nayar, for the appellant.
V. S. Desai, T. A. Ramachandran and D. N. Gupta, for the
respondent.
9-L797Sup. Cl/73
890
The Judgment of the Court was delivered by
HEGDE, J.-This is an appeal by special leave. It relates to
the assessment of the assessee for the assessment year 1961-
62, for which the relevant previous year was the calendar
year 1960.
The assessee is a Tea Company. Upto the assessment year
1950-51 the Agricultural Income-tax Officer was accepting
the computation of the, total income from the growth,
manufacture and sale of tea made by the Income Tax Officer
and taking 60 per cent of the income determined as’ the
agricultural income under Rule 24 of the Income-tax Rules.
On and from the assessment year 1951-52 the agricultural
income-tax authorities started taking the market value of
thatch, bamboo and fuel etc. grown in the tea estate and
used in the tea business as 100 per cent agricultural income
and after deducting the cost of cultivation thereof, taxed
the whole of the resulting income on the basis of the market
value of those articles. So, from that assessment year the
computation of the total income from tea by the Income-tax
authorities was varied by the Agricultural Income-Tax
Officer and the assessee had to pay on a total income which
was more than the income disclosed in the Profit and Loss
Account.
For the assessment year 1961-62, the assessee company was
assessed to Income-tax under Rule 34 of the Income-tax
Rules, on its pronts as per its Pront and Loss Account with
certain modifications, by the Income-tax Officer. In the
expenses debited in Its accounts, only the expenses for
raising thatch, bomboo, fuel etc. grown in the tea estate
and used in the tea business were included.
Before the Appellate Assistant Commissioner, the assessee
raised the contention that the market value of agricultural
produce grown in the tea estate and utilised by the assessee
in the tea business, which had been assessed at 100 per cent
to agricultural income-tax, must be taken into consideration
in the computation of allowable expenditure. In support of
that contention reliance was placed on the, decision of this
Court in the case of Dooars Tea Co. Ltd. v. Commissioner of
Agricultural Income-tax, West Bengal(1). The Appellate
Assistant Commissioner accepted that contention and directed
the Income-tax Officer to modify the assessment accordingly.
In appeal by the Revenue the finding, of the Appellate
Assistant Commissioner was accepted by the Tribunal.
Thereafter at the instance of the Revenue the following
question was referred to the High Court for its opinion :
"Whether, on the facts and in the
circumstances of the case, the Tribunal was
right in holding that the
(1) [1962] XLIV 1. T. R. 601.
891
decision of the Supreme Court in Dooars Tea
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Co. Ltd. (1962) 44 I.T.R. 6, was applicable to
the computation of the assessee’s total income
under the provisions of the Indian Income-tax
Act, 1922 and in directing the Income-tax
Officer to make a fresh assessment according
to law in the light of the aforesaid decision
of the Supreme Court."
The High Court answered that question in the affirmative and
in favour of the assessee. Hence this appeal by the
Revenue.
It is true that, the question formulated by the Tribunal
does not accurately bring out the real contention between
the parties. The real contention between the parties is
whether the assessee is entitled to the market value of the
agricultural produce grown by it but utilised for the
purpose of tea business. Dooars Tea Co’s. case related to
the levy of agricultural income-tax. The facts of that case
are as follows
The assessee, who is a tea grower, grew in its estate
bamboo, thatched grass, fuel timber etc. and utilised the
same for tea business. At the time of the assessee’s
assessment under the Bengal, Agricultural Income-tax Act the
assessee contended that only the cost of growing the produce
in question should be taken into consideration and not its
market value as the same was used for the purpose of
assessee’s tea business. This contention was rejected by
the Revenue and this Court upheld the decision of the
Revenue. This Court came to the conclusion that the
agricultural income should be computed on the basis of the
market value of bamboos, thatched grass and fuel timber etc.
in accordance with rule 4(2) of the Bengal Agricultural
Income-tax Rules. The ratio of that decision is that in the
matter of computing the agricultural income it was not
necessary that the agricultural produce should be sold and
profit or gain made from such sale before it is considered
as agricultural income. It is sufficient if the assessee
gets any benefit from the same, and what is to be taxed is
the market value of the benefit received by the assessee and
not the costs incurred by the assessee for raising the
agricultural produce in question. It the assessee has to
pay agricultural income-tax on the market value of the
agricultural produce raised in his estate and used in his
tea business it stands to reason that while determining the
deductible expenditure incurred for the, purpose of his
business, the same rule viz. the market value of the produce
used for the tea business should be taken into
consideration, because in terms of money what he expended
was the market value of the produce used in connection with
his business. The fact that he used his own goods is
immaterial.
892
Now, turn back to the question referred to-the High Court,
even though the question is not properly framed, the
question is sufficiently wide to decide the real point in
issue. The later part of the question covers the point that
calls for decision. In that view. there is no need either
to reframe the question or to direct the Tribunal to submit
a separate statement of case.
For the reasons mentioned above this appeal fails and the
same is dismissed with costs.
V.P.S. Appeal dismissed.,
893