1. These are five revision petitions arising under the Karnataka Agricultural Income-tax Act, 1957, hereinafter called 'the Act', and they relate to the assessment years 1964-65, 1965-66, 1966-67, 1967-68 and 1968-69. The assessee is Hiranyakeshi Sahakari Sakkare Karkhane Niyamit, which is a society registered under the Co-operative Societies Act. The accounting years of the assessee is a co-operative sugar factory carrying on the business of manufacture of sugar for which purpose it purchases sugarcane from growers. The assessee acquired through the State Government 147 acres 30 guntas of land in Sankeshwar in Belgaum District, pursuant to the Government notification dated May 25, 1959. The land was khane Niyamit. The assessee obtained an order from the Deputy Commissioner allowing conversion of the said land for non-agricultural purposes. The relevant order of the Deputy Commissioner, Belgaum, is dated December 30, 1961. The said order, inter alia, provided that the assessee shall pay normal non-agricultural assessment at Rs. 80 an acre per annum on the entire area of 147 acres 30 guntas for a period of 10 years from 1962-63 and, thereafter, at such rates as would be fixed by the Deputy Commissioner under the provisions of the Land Revenue Code and the Rules made thereunder. The order was made under sections 66 and 67 of the Bombay Land Revenue Code read with rule 87(4) of the Rules which governed the Bombay area of the State. The rate of non-agricultural assessment fixed by the Deputy Commissioner while allowing the conversion was challenged by the assessee before this court in W.P. No. 1521 of 1966, which was allowed by this court holding that the rate of non-agricultural assessment fixed was not in accordance with the Rules. It was observed by this court that the State Government through its appropriate officers may determine the rate of non-agricultural assessment in accordance with the provisions of the Act and the Rules. It was stated by Sri Narayan, learned Government Pleader, that the said order is under appeal before the Supreme Court and, therefore, final order has not yet been passed. The Bombay Land Revenue Code which was in force on the date on which permission for conversion of land was granted has been repealed and replaced by the Karnataka Land Revenue Act, 1964, which came into force on April 1, 1974. The provisions of the Karnataka Act, so far as they relate to conversion, are in pari materia with the provisions of the Bombay Code.
2. The assessee, notwithstanding the fact that it obtained an order allowing conversion of its land, raised sugarcane crop during the accounting years relevant to the five assessment years. The Agricultural Income-tax Officer levied tax under the Act on the income of the assessee for the five assessment years. The said assessments were challenged on several grounds, inter alia, that the land having been allowed to be converted for non-agricultural purposes, no tax could be levied under the Act. That contention was rejected by the Income-tax Appellate Tribunal, holding that the land in question was used for agricultural purposes, viz., growing sugarcane during the relevant accounting years and, further, that the land was not exempted from land revenue. The Tribunal made a common order for all the assessment years. Aggrieved by the said order the assessee has preferred the above revision petitions.
3. It is undisputed that during the relevant years the assessee raised sugarcane, which is an agricultural crop, and derived income therefrom. The only question is whether the income derived from the land converted for non-agricultural purposes but used for agricultural purposes is liable to be brought to tax under the Act.
4. Section 3 of the Act levies a charge on the total agricultural income of the previous year of every person at the rate or rates specified in Part I of the Schedule to the Act for each financial year commencing from April 1, 1957.
5. The term 'agricultural income' is defined in section 2(1)(a) and it mean :
'(1) any rent or revenue derived from land which is used for growing all or any of the commercial crops and is either assessed to land revenue in the State or subject to a local rate assessed and collected by officers of the State Government as such;
(2) (Omitted as not necessary),
(3) (omitted as not necessary)',
6. Under the distribution of powers made in the Constitution of India, the power to levy tax on agricultural income is of the exclusive competence of the State Legislature. Article 366(1) of the Constitution defines the term 'agricultural income' to mean 'agricultural income as defined for the purposes of the enactments relating to Indian Income-tax'. In the Income-tax Act, 1961, as also the 1922 Act, 'agricultural income' has been defined to mean 'any rent or revenue derived from land which is used for agricultural purposes and is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such'. By virtue of the definition of the term 'agricultural income' incorporated in article 366 of the Constitution, the definition of that term in the Indian Income-tax Act is deemed to be a part of the definition given in the Constitution and it is not open to the State legislature to extend the meaning that is given to the term in the Indian Income-tax Act. In view of the definition of the term 'agricultural income' as given in the Indian Income-tax Act 1961, in order to come within the scope of the Act, the income must satisfy two conditions, viz., (1) it must be income derived from land which is used for agricultural purposes; and (2) the land must be either assessed to land revenue in India or be subject to a local rate assessed and collected by officers of the Government as such. It is not sufficient if one of these conditions is satisfied. Both conditions have to be satisfied in order to exclude the income from the operation of the Indian Income-tax Act and to bring the income within the net of the State Act.
7. It was rightly not disputed by Sri Sarangan, learned counsel for the assessee, that the land in question was used for agricultural purposes. The Tribunal has also held that it was not exempted from land revenue though the actual rate had not been quantified. Since the order allowing conversion of agricultural land for non-agricultural purposes was made when the Bombay Land Revenue Code was in force in the Bombay area of the State, we have to look to the provisions of the said Code in order to determine whether the land, after conversion, was exempted from land revenue.
8. Section 48 of the Bombay Land Revenue Code provide :
'(1) The land revenue leviable on any land under the provisions of this Act shall be assessed, or shall be deemed to have been assessed, as the case may be, with reference to the use of the land -
(a) for the purpose of agriculture,
(b) for the purpose of building, and
(c) for a purpose other than agriculture or building
(2) (Not necessary).'
9. In the Karnataka Land Revenue Act, there is a provision in section 95(7) empowering the Deputy Commissioner to levy a fine, popularly called as 'conversion fine' and if such fine is paid no assessment shall be levied on such land thereafter except under sub-section (2) of section 83. The assessee has not produced any order levying such fine which exonerates the land from any future liability to pay assessment. In Srish Chandra Sen v. Commissioner of Income-tax : 41ITR340(SC) it has been laid down that in order to free the land from liability to land revenue, it must be shown that the land was revenue-free in fact and in law. If it is shown that the land was revenue-free in fact and in law during the relevant accounting years, then one of the conditions of the definition of 'agricultural income' is not satisfied; any income derived by agricultural operation on land converted into non-agricultural purposes cannot bring such income within the net of the Agricultural Income-tax Act. In the instant case, the assessee has not produced any material to show that the land was revenue free in fact and in law. That being the position, the income, admittedly derived by employing the land for agricultural purposes, although the land is allowed to be converted into non-agricultural purposes, is chargeable to tax under section 3 of the Act and is not excluded from its operation. Therefore, the Tribunal was right in upholding the order of the authorities below in levying the tax.
10. Accordingly, these revision petitions fail and are dismissed. In the circumstances the parties are directed to bear their own costs.