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M.L. Narasimhiah Setty Vs. Agricultural Income-tax Officer, Chikmagalur - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberWrit Petition Nos. 913 of 1959 and 499, 581 and 582 of 1961
Judge
Reported in[1964]53ITR757(KAR); [1964]53ITR757(Karn)
ActsMysore Agricultural Income Tax Act, 1957 - Sections 64
AppellantM.L. Narasimhiah Setty
RespondentAgricultural Income-tax Officer, Chikmagalur
Appellant AdvocateK. Srinivasan, Adv.
Respondent AdvocateD.M. Chandrasekhar, Adv.
Excerpt:
- karnataka panchayat raj act, 1993.[k.a. no. 14/1993]. sections 43 & 168: [mohan shantanagoudar, j] membership of gram panchayat- held, seat of member becomes vacant on expiry of fifteen days from date of receipt of such resignation, unless he withdraws resignation letter. where there is nothing on record to show that petitioner had withdrawn his resignation letter subsequently, petitioner had vacated his office as a member of gram panchayat within fifteen days from the date of his letter as prescribed under law. burden of proof heavily lies on one who files a petition for declaring the seat vacant. impugned order passed by state election commissioner declaring that seat of petitioner has become vacant based on assumptions and surmises is liable to be quashed. -- sections 167(2) & 168.....k.s. hegde, j.1. these petitions raise more or less common question of law. the principal question that arise for consideration is whether the 'dividends' received by the assessees in the relevant 'previous years' in respect of coffee delivered to the coffee board in prior years can be considered, for the purpose of agricultural income-tax, as their agricultural income of the year in which the 'dividends' were received. the concerned agricultural income-tax officers have taken or appears to take the view that the 'dividends' in question should be considered as the agricultural income of the assessees in the year of their receipt. 2. the petitioners in these petitions except in w.p. no. 913 of 1959 prayed for writs of mandamus or mandatory directions to the concerned agricultural.....
Judgment:

K.S. Hegde, J.

1. These petitions raise more or less common question of law. The principal question that arise for consideration is whether the 'dividends' received by the assessees in the relevant 'previous years' in respect of coffee delivered to the coffee Board in prior years can be considered, for the purpose of agricultural income-tax, as their agricultural income of the year in which the 'dividends' were received. The concerned Agricultural Income-tax Officers have taken or appears to take the view that the 'dividends' in question should be considered as the agricultural income of the assessees in the year of their receipt.

2. The petitioners in these petitions except in W.P. No. 913 of 1959 prayed for writs of mandamus or mandatory directions to the concerned Agricultural Income-tax Officer, to forbears from levying or collecting taxes under the Mysore Agricultural Income-tax Act, 1957. On their cash receipts ('dividends') relating to their coffee crop of 1955-56 or earlier seasons and delivered to the Coffee Board before October 13, 1957, the date on which the Mysore Agricultural Income-tax Act, 1957, came into force. In W.P. No. 913 of 1959 the petitioner had already been assessed holding that the 'dividends' received by him during the relevant 'previous year' was a part of his agricultural income of that year.

3. It will convenient if we first deal with W.P. No. 499 of 1961 (M/s. Volkart Bros., Tellicherry v. The Agricultural Income-tax Officer, Chickmagalur) and thereafter apply the principals decided in that case to the facts of the other cases.

4. In none of these cases, the facts are in dispute. One Sri B. Narayana Rao, the Internal Auditor of M/s. Volkart Bros., Tellicherry, had filed an affidavit in support of the application, W.P. No. 499 of 1961, wherein he has set out the relevant facts.

5. Messrs. Volkart Bros. (a registered partnership firm) have their branch officer at Tellicherry, in the State of Kerala. They have also Coffee plantations in the State of Mysore. Their Karadibetta Estate is situate in Hassan district. In Chickmagalur District, they own Arabidacool Estate. The then Mysore Legislature enacted the Mysore Agricultural Income-tax Act, 1955 (Mysore Act No. 4 of 1955) to be referred to hereinafter as the 'previous Act' : the said Act received the assent of the Rajpramukh on May 3, 1955. Section 3 of that Act is the charging section. It prescribed that agricultural income-tax at the rate or rates specified in part I of the schedule to that Act shall be charged for each financial year commencing from the 1st April, 1955, in accordance with and subject to the provisions of that Act, on the total agricultural income of the 'previous year' of every person. Section 5 provided for the computation of agricultural income of a person after giving deductions as provided therein. Section 7 provided that agricultural income shall be computed for the purpose of section 5 and 6 in accordance with the method of accounting regularly employed by the assessee. Chapter IV provided for return of income, assessment, etc. Section 64 of that Act is important for our purpose. Section 64(1) is as follows :

'64. (1) Any person who derives agricultural income from land not exceeding five thousand acres in extent of the first class of land or an extent equivalent thereto consisting of any one or more of the lasses of land specified in part II of the schedule, may apply to the prescribed officer for permission to compound the agricultural income-tax payable by him and to pay in lieu thereof a lump sum at the rates specified in part III of the schedule in respect of the first class of land.'

6. Sub-section (3) of that section says that the prescribed officer, after satisfying himself that the particulars specified in the application are correct, shall grant the permission prayed for, by an order in writing. Sub-section (5) of that section reads :

'(5) The permission granted under sub-section (3) shall be for the year for which it is granted; and in respect of that period the provisions of this Act regarding the submission of returns, accounts or other documents, the assessment to agricultural income-tax or any other matter incidental thereto shall not apply in relation to the grantee.'

'Agricultural income' is defined in section 2(a). The portion that is material for our purpose is section 2(a) (1), which says :

''Agricultural income' means any rent or revenue derived from land 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 Government as such.'

''Previous year' is defined in section 2(p), which says :

'Previous year' means -

(i) the twelve months ending on the 31st day of March next preceding the year for which the assessment is to be made or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of any year ending in any date other than the said 31st day of March, then, at the option of the assessee, the year ending on the day to which his accounts have so been made up :

Provided that, if the option has once been exercised by an assessee, he shall not exercise it again so as to vary the meaning of the expression 'previous year' as then applicable to him except with the consent of the Agricultural Income-tax Officer and upon such conditions as he may think fit; or

(ii) such period as may be determined by the Commissioner in the particular case of any person or class of persons.'

7. The 'previous Act' was replaced by the Mysore Agricultural Income-tax Act, 1957, which will be hereinafter referred to as the 'Act'. That Act came into force on October 1, 1957. It repealed the 'previous Act'. Section 69 of the 'Act' saves the previous operation of the enactments repealed thereunder or anything duly done or suffered thereunder or any right, privilege, obligation or liability acquired or incurred under the repealed enactments. In the 'Act' there is no provisions similar to section 64 of the 'previous Act'. Section 4 of that Act says :

'4. Save as hereinafter provided, this Act shall apply to all agricultural income derived from land situated in the state of Mysore by any person whether in the state or not.'

8. At this juncture, it may be remembered that the present State of Mysore came into being only on November 1, 1956.

9. From the affidavit above referred to, it is gathered that, for the first assessment year 1955-56, M/s. Volkart Bros. compounded their tax liability and paid to the respondent a lump sum of Rs. 35,001, which was accepted by him in full satisfaction. For the assessment year 1956-57, their return showed a loss and that return was accepted by the respondent and they were exempted from paying any agricultural income-tax for that year. For the assessment year 1957-58, they again compounded their tax liability and paid to the respondent a sum of Rs. 35,001. The same was accepted by him in full satisfaction of the tax liability of the assessee for that year. M/s. Volkart Bros. have been maintaining their accounts according to the mercantile system. Their year of account closes on the 31st of August of every year. Their first assessment year under the 'previous Act' was 1955-56, the 'previous year' being from September 1, 1953, to August 31, 1954; similarly, the 'previous year' of the second assessment year (1956-57) was from September 1, 1954, to August 31, 1955, and the 'previous year' of the third assessment year (1957-58) was from September 1, 1955, to August 31, 1956.

10. The marketing of coffee is controlled by the coffee Act, 1942. Under that Act more or less all growers of coffee must get themselves registered and it is obligatory for the registered growers to deliver their marketable coffee to the coffee Board and the Coffee Board became the owner of that coffee. The coffee collected from the growers is pooled together and sold by the Coffee Board. The growers are only entitled to 'dividends' as and when the 'dividends' are declared by the Coffee Board. These 'dividends' represent the price of the coffee delivered to the Coffee Board. These 'dividends' were and are received in driblets. It generally takes two to three years to get the entire value of the coffee delivered in any year. As mentioned earlier, M/s. Volkart Bros. are adopting the mercantile system of accounting, i.e., they estimate the value of the 'points' awarded to them by the Coffee Board and credit the same in their accounts and thus arrive at the profits or losses of any particular year.

11. For the assessment year 1958-59, M/s. Volkart Bros. submitted their return on the basis of the estimated value of their coffee marketed during the 'previous year'. Therein, they did not included the 'dividends' received by them from the Coffee Board in the 'previous year' in respect of the coffee delivered on or before August 31, 1957. The Agricultural Income-tax Officer has opined that those 'dividends' form part of the 'agricultural income' of the assessee derived during the 'previous year'. The sum in dispute amounts to Rs. 5,73,920.85 nP. That amount was received between September 1, 1956, to August 31, 1957. The question for consideration is whether that sum is liable to be taken into consideration in computing the 'agricultural income' of the assessee for the assessment year 1958-59.

12. It was urged on behalf of M/s. Volkart Bros. that, before an income can be considered as 'agricultural income', for the purpose of taxation under the 'Act', the same must have been 'derived' from their agricultural lands during the 'previous year'; the disputed sum does not represent such an income and, therefore, was not liable to be taxed. It was next urged that, in view of the composition under section 64 of the 'previous Act' as referred to above, the State has no right to claim any tax in respect of the income derived in the years to which the composition relates. Thirdly, it was urged that, as the accounts of M/s. Volkart Bros. were maintained according to the mercantile system and tax paid on that basis, it is not open to the State to take into consideration the 'dividends' realised during the 'previous year'. Lastly, it was urged that the 'Act' purports to tax and in fact could only tax the income 'derived' from lands which are situate in the present Mysore State : the Mysore State mentioned in the 'Act' came into being only on November 1, 1956, and, therefore, the disputed sum cannot said to represent the value of coffee crops raised in that state. We shall now consider these contentions one by one.

13. What the 'Act' purports to charge is only the agricultural income of the assessee derived from lands during the 'previous year' and those lands must be in the Mysore State. We have to first see whether the disputed amount can be considered as income derived by the assessee during the 'previous year'. The dictionary meaning of the word 'derived' is : 'to draw, take, obtain, or receive from a source or origin.' 'Income' need not be necessarily cash. It only means a periodical receipt from one's business, land or work or investment. Therefore, the coffee gathered is also income derived. In taxation statutes, the word 'derived' is used synonymously with the words 'arising' or 'accruing'. In Commissioner of Taxation v. Kirk, Lord Davey dealing with section 15(3) of the New South Wales Income-Tax Act, 1895, observed : 'Their Lordships attach no special meaning to the word 'derived' which they treat as synonymous with arising or accruing.' Dealing with the meaning of the words 'arises' and 'accrues', Mukherjea J. (as he then was) observed thus in Commissioner of Income-tax v. Ahmedbhai Umarbhai & Co. :

'It was pointed out by Mukherji J. in Rogers Pyatt Shellac & Co. v. Secretary of State that etymologically the words 'accrues' connotes the idea of a growth, addition or increase by way of accession or advantage, while the word 'arises' suggests the idea of growth or accumulation with a tangible shape so as to be receivable. The two expressions denote almost the same idea and the difference only lies in the fact that one is more appropriate than the other when applied to particulars cases. It is clear, however, as the learned judge pointed out that these words have been used in contradistinction to the word 'received' and both of them represent a stage anterior to the point of time when the income becomes receivable; they cannot a character of income which is more or less inchoate. As I have stated already, in proviso (3) to section 5, Excess profits tax Act, the legislature has deliberately left out the word 'received' and has spoken only of 'accruing' or 'arising'. This shows that the legislature had in mind cases where profits could accrue to parts of a business before they were actually received.'

14. From the foregoing it follows that the value of coffee delivered to the Coffee Board before September 13, 1957, represents the agricultural income of the assessee 'derived' on or before September 13, 1957. Therefore, the 'dividends' received in that regard cannot be said to have been 'derived' during the year 1957-58.

15. Now coming to the second contention of Sri G. K. Govinda Bhat, i.e., the bar under section 64 of the 'previous Act', it was urged that the compositions referred to above debar the State from levying any assessment on the value of crops gathered in the years to which the compositions relate. It was said that for a composition under section 64 of the 'previous Act', the 'income' concept was wholly irrelevant. In lieu of paying tax on the agricultural income 'derived' during the 'previous year', the assessee was permitted to compound his tax liability by paying a lump sum calculated on the basis of the extent of land cultivated. The assessee had availed of the benefit of that provision and paid tax accordingly. It may be remembered that the 'previous Act' came into force only 1958. Therefore, the earliest 'previous year' could have been only 1954-55. As the assessee had compounded his tax liability for the assessment year 1955-56, the value of the coffee crops realised during the 'previous year', i.e., 1954-55, could not be again taken into consideration for the purpose of assessment. The same ratio would apply to the subsequent compositions. Otherwise, it would amount to double taxation. In this view, the contention of the learned counsel for the revenue that the compositions referred to earlier were in lieu of the tax due on the income actually realised during the relevant 'previous year' does not appear to be correct. The stand taken by the revenue, if accepted as correct, would result in defeating the purpose of the computing provision under section 7 of the 'Act'. 'Agricultural income' has to be computed as noticed earlier in accordance with the method of accounting regularly employed by the assessee. It further provides that in the case of coffee crop of an assessee, the agricultural income therefrom may be computed on the basis of the valuation on points declared by the Indian Coffee Board in respect of such crop. Messrs. Volkart Bros., as mentioned earlier, have been maintaining accounts in accordance with the mercantile system. They have been assessed on that basis. In the mercantile system of accounting, income and outgoings of each year except in respect of cash dealings are estimated and profits and losses struck on that basis. That system materially differs from the cash system of accounting. If the assessee maintains his accounts in accordance with the mercantile system of accounting, his cash receipts in respect of the previous year's dealings are irrelevant in determining the tax due from him during the relevant assessment year (see Amalgamated Coffee Estates Ltd. v. State of Kerala; Gajapathi Naidu v. Commissioner of Income-tax and Commissioner of Income-tax v. Shrimati Singari Bai).

16. Prior to November 1, 1956, the Mysore State referred to in the 'Act' was not in existence. The Mysore State is a newly formed state under the States Reorganisation Act, though a Part 'B' State bearing that name was in existence prior to that date. It is not disputed that the Mysore State referred to in the 'Act' is a new state. The 'Act' could not have and in fact does not impose any tax liability on the agricultural income 'derived' at a time when the lands from which they are derived were not part of the present Mysore State. A similar question came up before the Kerala High Court in N. N. Ananthanarayana Iyer v. Agricultural Income-tax and Sales Tax Officer. In this case the material facts are as follows : The former Malabar district was disintegrated from the Madras State and became part of Kerala State on November 1, 1956. The Travancore-Cochin Agricultural Income-tax Act, 1950, as amended by Act 8 of 1957, was extended of August 6, 1957, to the whole of Kerala including the former Malabar District with effect from April 1, 1957. The concerned Agricultural Income-tax Officers required the petitioners therein to include in their income for the financial year 1957-58 their agricultural income 'derived' from land situated in Malabar and received by them during their 'previous year', i.e., year ending on March 31, 1957. The petitioners raised the question that the Travancore Cochin Agricultural Income-tax Act, 1950 as amended by Act 8 of the 1957, has not effectively and validly authorised the levy of agricultural income-tax for the assessment year 1957-58 on the income derived from land situated in Malabar and received by the petitioners during the 'previous year'. It was contended that the combined effect of section 3 and 4 of the Travancore-Cochin Agricultural Income-tax Act, 1950, was that the income assessed for the particular year should not only have reference to the 'previous year' but also must have been derived from land situated within the State during that previous year. Hence, in assessing the income of the financial year 1957-58, the authorities could not have taken into consideration any portion of the income derived from land in the Malabar area during the period before November 1, 1956, when it stood outside the State of Kerala. The Full Bench held that :

'The general principle was well settled that a territorial nexus of connection may be enough to save extra-territorial legislation. However, the test of territorial nexus should be satisfied in respect of every year for which the taxation is proposed. So understood, there would be no territorial connection established in this case unless the statutory test laid down in section 4 of the Travancore-Cochin Agricultural Income-tax Act, 1950, was satisfied by the situation within the State and during the year concerned of the land yielding the income sought to be assessed. In fact, the fetter of extra-territoriality could never be got over because the legislation here was in essence territorial.'

17. Reliance was placed by the learned counsel for the revenue on the decision of Rajagopalan J. in Puthutotam Estates (1943) Ltd. v. Agricultural Income-tax Officer, Coimbatore. Undoubtedly, that decision supports the revenue. The provisions of the Madras Plantations Agricultural Income-tax Act, so far as they are relevant for our present purpose, are in part material with the provisions of the 'Act' with which we are concerned in these cases. The petitioner therein received from the Coffee Board during the relevant year of account 1954-55 an amount of Rs. 2,39,206-8-6, which represented in part the sale proceeds of the coffee produced in the plantations of the petitioner during the years prior to 1st April, 1954; the petitioner had adopted the mercantile system of accounts; it was not disputed that the amount in question was brought to account in the books of the assessee only in the year of account 1954-55, though the coffee of which it was the price had been delivered to the Coffee Board in the prior years in compliance with the provisions of the Coffee Act. The taxing authorities held that the amount in question was liable to be taxed in the account year. Their view was challenged by means of a writ petition.

18. From the foregoing it is seen that the question that came up for consideration before the Madras High Court are the very questions that were debated before us. Dealing with those questions, Rajagopalan J. observed :

'The real question is, whether there is anything in the language and scheme of the statutory provisions to which I have referred to exclude from the total agricultural income, which has been really defined by section 4 and which is what is subjected to tax by section 3, the sale proceeds of agricultural crops grown and gathered by an assessee from his plantation before 1st April, 1954, and also sold before 1st April, 1954, but the sale proceeds of which were received by the assessee and brought to account only subsequent to 1st April, 1954.

There appears to be no basis for importing what was referred to during the arguments as the 'time factor' in considering the scope of the definition of agricultural income in section 2(a) of the Act. None of the factors, the year of the produce, the year of sale or the year of receipt of the sale proceeds is relevant in interpreting the scope of agricultural income as defined by section 2(a). I have said that 'total agricultural income', despite the definition attempted in section 2(t), is really explained only in section 4 of the Act. Section 4 explains what is the total agricultural income of the previous year in relation to the relevant year of assessment. Three conditions have to be satisfied : (1) the total agricultural income must be of the previous year; (2) it should be agricultural income derived from as plantation situated within the State; and (3) agricultural income should have been received by the assessee, whether that receipt was within or without the State. I see no basis in the language of section 4 for imposing the limitation of the time factor on the second of these requirements (items). Item 3 makes receipt of income the basis of liability to tax. What constitutes receipt, especially where the system of accounting is mercantile, it is not necessary for me to discuss or decide in these proceedings. Since receipt of income is made the basis of liability to be assessed, the receipt must necessarily be in the previous year to make the income taxable as the income of this previous year; it really gets linked up with item No. 1. But there is no such limiting factor for the second item, which requires that the agricultural income must have been derived from a plantation situate within the State. The Privy Council pointed out in Commissioner of Income-tax v. Kamakhya Narayan Singh :

'The word 'derived' is not a term of Art. Its use in the definition indeed demands an enquiry into the genealogy of the product. But the enquiry should stop as soon as the effective source is discovered.' Judged by this test, the sale proceeds of agricultural produce certainly constitute income derived from a plantation within the meaning of section 4. The use of the expression 'derived' by itself does not postulate that the income must have been derived in the previous year in question. To take an illustrative example, agricultural produce gathered towards the end of the year of account may be sold, and the sale proceeds realised early next year. The sale proceeds may not be liable to tax as part of the total agricultural income since the amount was not received in the year in which this produce was gathered. It does not cease to be agricultural income 'derived' from a plantation merely on the ground that the receipt of the income is in a year subsequent to the year in which the produce was raised and gathered for sale.'

19. The aggrieved assessees appealed against the above judgment. The judgment of the appellate bench was delivered by Rajamannar C.J. The appellate bench reversed the decision of Rajagopalan J. various contentions were raised before the appellate bench. In particular, it was contended that what the Act can charge and purports to charge is only the income of the assessee based on the value of the quantity of the produce raised in the accounting period and any receipt of surplus in relation to crops of years preceding the accounting period is not within the charge; therefore, the assessing authorities cannot bring within the charge any receipt relating to a period prior to the 'previous year' of the assessment year. It was urged before the appellate bench that Rajagopalan J. erred in not attaching any importance to the fact that the assessee therein maintained his accounts according to the mercantile system. In his judgment, the learned Chief Justice elaborately considered as to what is meant by 'mercantile system of accounting'. In the course of the judgment, he referred to the following observations of the Supreme Court in Keshav Mills Ltd. v. Commissioner of Income-tax :

'The mercantile system of accounting or what is otherwise know as the double entry system is opposed to the cash system of book-keeping under which a record is kept of actual cash receipts and cash payments, entries being made only when money is actually collected or disbursed. That system brings into credit what is due, immediately it becomes legally due and before it is actually received and it brings into before it is actually disbursed. The profits or gains of the business which are thus credited are not realised, but having been earned are treated as received though in fact there is nothing more than an accrual or arising of the profits at that stage. They are book profits. Receipts being not the sole test of chargeability and profits and gains that have accrued or arisen or are deemed to have accrued or arisen being also liable to be charged for income-tax, the assessability of these profits which are thus credited in the books of accounts arises not because they are received but because they have accrued or arisen.'

20. He also quoted with approval the following observations of Iqbal Ahmed C.J. in Commissioner of Income-tax v. Shrimati Singari Bai :

'Under this system (mercantile accountancy system) the net profit or loss is calculated after taking into account all the income and all the expenditure relating to the period, whether such income has been actually received or not and whether such expenditure has been actually paid or not. That is to say, the profit computed under this system is the profit actually earned, though not necessarily realised in cash, or the loss computed under this system is the loss actually sustained, though not necessarily paid in cash. The distinguishing feature of this method of accountancy is that it brings into credit what is due immediately it becomes legally due and before it is actually received; and it brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disburse. The 'mercantile accounting system' is the opposite of the 'cash system of book-keeping' under which a record is kept of actual cash receipts and actual cash payments, entries being made only when money is actually collected or disbursed.'

21. The learned Chief Justice proceeded further and observed :

'The cases now before us all relate to agricultural income from coffee plantations. Coffee is grown on the land and the berries collected and they are delivered to the Coffee Board. That delivery is in pursuance of a statutory sale. The sale proceeds therefore constitute the income. As the learned Advocate-General put it, the taxable event is the conversion of the coffee produce into money. This kind of income will fall under section 2(a) (2) (ii) of the Act, that is, it is income derived from land in the State by the sale by a cultivator of the produce raised by him. Now it is obvious that the transaction of sale takes place when the produce is delivered to the Coffee Board. The price is tentatively fixed at the time but it is liable to adjustment subsequent. Often it takes time before the entire sale price is realised. Keeping in mind these facts, if we take a particular accounting year. The computation of income will in a way depend upon the system of account keeping adopted by an assessee. If it is the mercantile system, the income from the sale will be entered as income which has accrued, though the money might not have been actually paid in whole or in part. But if it is the cash system which is adopted by the assessee, then though the transaction of sale might be in a particular year of account, yet only the actual amounts realised from the transaction would be entered in the books of account. If the balance is received in a succeeding year, then it would be entered in the account of the succeeding year. In such a case the actual money received during an accounting year would be the income which would be liable to tax. In the mercantile system, however, the actual receipt of the moneys would not be the decisive factor from the point of view of time.

In our opinion, whether it is the mercantile system or the cash system that is adopted by the assessee, there will be no practical difficulty at all in the computation of income except in the case of income relating to transactions completed before 1st April, 1954. The charge under the Act took effect as and from the 1st April, 1955, and section 3, the charging section, makes the tax leviable for the financial year commencing from 1st April, 1955, on the total agricultural income of the previous year, that is, the year commencing 1st April, 1954. It follows that the Act does not make the agricultural income of any prior to 1st April, 1954, subject to tax. While we agree with the learned Advocate-General that the fact that the crop was grown during a period prior to 1st April, 1954, would not by reason of that fact only take such crop away from the liability under the Act, we do not agree with him that even when the sale of the crop is completed before 1st April, 1954, nevertheless, the income from such sale would be liable to tax merely because the whole or a part of it is actually realised after 1st April, 1954. We rest our decision on the following reasoning : Under the Act the first year of assessment is the year commencing from 1st April, 1955. The tax for that year is levied on the total agricultural income of the previous year, that is, the year commencing 1st April, 1954. There is, therefore, no liability to tax in respect of the agricultural income of any period to 1st April, 1954. In the instant cases relating to coffee, the income is derived by the sale of produce. If these sales take place prior to 1st April, 1954, then the income derived by such sale would be income derived by the assessee prior to 1st April, 1954. Such income does not fall within the scope of the Act. This would be so whatever system of accounting is adopted by the assessee, mercantile or cash.'

22. The learned judges did not accept the contention raised on behalf of the assessee that merely because crop is grown in whole or in part before 1st April, 1954, the income derived by a sale of such crop after 1st April, 1954, will not be liable to tax. In their view, the time of the sale is the governing factor because according to them to definition referred to the income derived by the sale of produce. With great respect to the learned judges we see no justification for that view either in the definition of 'agricultural income' or in the language of sections 3 and 4 of the 'Act'. Further, that view does not accord with the view taken by the Supreme Court in Dooars Tea Co. Ltd. v. Commissioner of Agricultural Income-tax. Therein the court was called upon to consider the scope of section 2(1) (b) of the Bengal Agricultural Income-tax Act which spoke of income 'derived' from land. The Supreme Court held that as the section in terms takes the income 'derived' from agricultural land by agriculture and giving the material words their plain grammatical meaning there is not doubt that agricultural produce constitutes agricultural income under the clause, and there is no indication in the context which would justify the importing of the concept of sale in the clause. The same would be true here.

23. But, we respectively concur with the view that no tax liability is imposed by the charging section on the prices of the crop that had already been sold prior to the 'previous year', though the price was realised in the 'previous year'. We are also in agreement with the view that an assessee who adopts the mercantile system of accounting and pays tax on that basis cannot be again asked to pay tax on his actual cash receipts during the 'previous year' in respect of the crops of the prior years.

24. For the reasons mentioned above, Writ Petition No. 499/1931 is allowed and the respondent therein is directed to forbear from levying or collecting tax under the 'Act' on the cash receipts relating to the petitioner's coffee crop of 1955-56 and earlier seasons, and delivered to the Coffee Board before August 31, 1956. The respondent shall pay the costs of the petitioner. Advocate's fee Rs. 100.

25. W.P. No. 581 of 1961 :

The petitioner herein owns coffee estates in Mudigere taluk of Chikmagalur district. He had compounded his tax liability for the assessment year 1955-56, 1956-57 and 1957-58 and paid tax accordingly. The petitioner received 'dividends' in the year 1957-58 and 1958-59 for the coffee delivered by him to the Coffee Board previously. He did not include those receipts in his return for the assessment years ending March 31, 1958, and March 31, 1959. Accordingly to the revenue, those receipts are liable to be taken into consideration in the years in which they are received in determining the total agricultural income of the assessee in those years. For the reason mentioned above (in W.P. No. 499 of 1961), we hold that this view is erroneous. Hence, the respondent is directed to forbear from levying tax under the 'Act' on the amounts received by the petitioner in his capacity as Administrator of the estate of late A. J. Saldanha during the assessment years ending March 31, 1958, and March 31, 1959, from the Coffee Board for the coffee delivered in 1956-57 and earlier years. The respondent shall pay the costs of the petitioner. Advocate's fee Rs. 100.

26. W.P. No. 582 of 1961 :

The petitioner owns coffee plantations in Chikmagalur district. For the assessment years 1955-56, 1956-57 and 1957-58 he had compounded his tax liability under section 64 of the 'previous Act'. For the assessment year 1958-59, he submitted his return on October 14, 1958. Therein he did not include the amounts received by him as 'dividends' during the 'previous year' for the coffee delivered to the Coffee Board in the year 1956-57 and the earlier years. The respondent directed him to include those 'dividends' also in his return. For the reasons mentioned above, the view taken by the respondent cannot be sustained. Hence the respondent is directed to forbear from levying tax under the 'Act' on the amounts received by the petitioner during the assessment years 1957-58 and 1958-59 for the coffee delivered to the Coffee Board in the year 1957-58 and the earlier years. The respondent shall pay the costs of the petitioner. Advocate's fee Rs. 100.

27. W.P. No. 913 of 1959 :

The petitioner is a partner in the firm, Messrs. Sadashiva Setty & Bros. This partnership firm own coffee plantations in Chikmagalur district. It had compounded under section 64(1) of the 'previous Act' its tax liability and has paid tax accordingly for the assessment year 1957-58. For the assessment year 1958-59, it submitted its return on July 14, 1958. In that return it did not include the 'dividends' received by it during the year ending March 31, 1958, but pertaining to the coffee delivered to the Coffee Board in the years 1955-56 and 1956-57. The respondent has included that amount in his order and taxed the same. In this writ petition, the correctness of that inclusion is challenged. For the reasons mentioned above, that amount should not have been taken into consideration in ascertaining the tax liability of the petitioner. The other contentions raised in the petition were not urged at the time of the hearing. Therefore it is not necessary to refer to them.

28. In the result, we issued a writ quashing the impugned order of assessment, i.e., the order passed by the respondent on September 30, 1959, in Assessment No. 88-(3)/59-60 in so far as it imposes any tax on the 'dividends' above-mentioned. It is open to the respondent to correct the order of assessment to make the same conform with the requirements of law, as interpreted in this judgment. The respondent shall pay the costs of petitioner. Advocate fees Rs. 100.


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