The petitioner, the Arthala Tea Estates Limited, was assessed to tax under the Madras Plantations Agricultural Income-tax Act, 1955, in respect of the assessment year 1955-56. The accounting period covered by the assessment is the period from April 1, 1954, to March 31, 1955.
It is common ground that any agricultural income derived by the assessee from the estates and received prior to April 1, 1954, is not liable to assessment under Act. According to the assessee the income concerned was derived and received prior to April 1, 1954, and, according to the department, subsequent to that date. This is the controversy we are called upon to settle.
That the tea concerned was plucked and processed prior to April 1, 1954, is not disputed by the department. That the tea concerned was sold after April 1, 1954, and prior to March 31, 1955, that is, during the relevant accounting period, is not disputed by the assessee. The only question for determination, therefore, is whether in a case like this the income should be considered as derived and received at the time the tea leases were gathered as contended by the assessee or when the tea was sold as contended by the department.
Section 2(a) of the Act embodies the definition of 'agricultural income'. The relevant portion of the definition reads as follows :
'(a) agricultural income means - ..
(2) any income derived from such plantation in the State by -
(i) agricultural, or
(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or
(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii);
Explanation 1. - Agricultural income derived from such plantation by the cultivation of tea means that portion of the income derived from the cultivation, manufacture and sale of tea as is defined to be agricultural income for the purposes of the enactments relating to Indian Income-tax...'
There can be no doubt that the sale is the taxing event under section 2(a) (2) (iii) of the Act. In order to attract that provision the produce should not have been subjected to any process other than a process of the nature described in section 2(a) (2) (ii). All processes which are ordinarily employed to render the produce fit to be taken to market' are included in section 2(a) (2) (ii).
What exactly is meant by rendering a produce 'fit to be taken to market' Does it mean only those processes which are necessary for a safe transport to the market Or does it means all the processes which render the produce marketable in the commercial sense of the term 'Taking to market' must mean taking to a market with the idea of a sale therein and we think that the latter should be the meaning that we must attribute to the words concerned.
If such is the case, the tea sold by the assessee had not undergone any process other than a process of the nature described in section 2(a) (2) (ii). And we must hold that the sale having taken place during the relevant accounting year the taxable event took place during that year and that the assessment is justified.
Explanation I makes it clear that the sales contemplated are the sales of agricultural produce which have been subjected to a manufacturing process. The Explanation takes us to the Indian Income-tax Act, 1922. Section 59(2) (a) (ii) of that Act provides for the making of rules prescribing the manner in which and the procedure by which the income, profits and gains shall be arrived at in the case of incomes derived in part from agriculture and in part from business. And rule 24 of the Rues framed in pursuance thereof provides - subject to a proviso which is not material - that income driven from the sale of tea grown and manufactured by the seller in the taxable territories shall be computed as if it were income derived from business and that 40 per cent. of such income shall be deemed to be income, profits and gains liable to tax under the Act.
It follows that what is liable to taxation in the light of the Explanation is only 60 per cent. of the sale proceeds. If we incorporate that percentage to Explanation 1, the Explanation will read as follows :
'Agricultural income derived from such plantation by the cultivation of tea means 60 per cent. of the income derived from the cultivation, manufacture and sale of tea.'
Only 60 per cent. of the sale proceeds has been the subject of taxation in this case.
In the light of our conclusions :
(1) that the tea has not undergone any process other than a process of the nature described in section 2(a) (2) (ii);
(2) that the taxing event in such cases is the sale; and the admission that the sale took place during the relevant accounting period, that is, between April 1, 1954, and March 31, 1955, we must hold that the taxation of 60 per cent. of the sale proceeds in the assessment year 1955-56 is proper and that the tax revision case has to be dismissed. Judgment accordingly.
In the view we have taken it is unnecessary for us to consider the other contentions urged on behalf of the department. It is also unnecessary to discuss the cases cited before us, based on analogous processions in other enactment, as we consider section 2(a) - though somewhat unhappy in its wording - as quite definite and clear.
The tax revision case fails and is dismissed with costs. Advocates fee Rs. 100.