The judgment of the court was delivered by
RAMAKRISHNAN J. - In this case, the assessee had granted a lease for the cultivation of his agricultural lands to certain lessees. A certain portion of the arrears of lease due for the period 1951-52 to 1955-56 about Rs. 3,000 and odd was received by him during the period 16th July, 1956, to 15th July, 1957. It is common ground that this last mentioned period is the first 'previous year' for the assessment of the agricultural income of the assessee after the Madras Agricultural Income-tax Act (after the amendment of the Act in 1958) came into force with effect from April 1, 1958. Section 2(t) of the Act defines 'previous year' as meaning '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 on 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 been so made up.' In the present case the accounts of the assessee have been maintained for each Fasli from 16th July of one year to 15th July of the next year.
As mentioned above, it is not in dispute that the arrears of lease fell due from the lessees to the assessee for a period anterior to the passing of the Madras Agricultural Income-tax Act. The assessing officer (the Agricultural Income-tax Officer) held that since the arrears were received in the course of the previous year, the assessee was liable to pay agricultural income-tax thereon without reference to the fact that the period, to which the arrears related, was a period anterior to the coming into force of the Act. The Assistant Commissioner of Agricultural Income-tax however allowed the appeal relying upon the decision of this court in Puthutotam Estates (1943) Ltd. v. Agricultural Income-tax Officer. The Commissioner of Agricultural Income-tax took up the case in revision so motu, reversed the finding of the Assistant Commissioner of Agricultural Income-tax, and restored the finding of the assessing authority. In view of the Commissioner, since the assessee had chosen to maintain his accounts on the basis of 'cash system' as distinguished from 'mercantile system', he could not demur to the assessment on the basis of the actual receipt of the sums in question during the previous year. Certain other reasons have been given by the Commissioner, but the last-mentioned reason alone has been pressed on us prominently by learned Government Pleader appearing for the State to support the order of the Commissioner at the time of the revision case.
The assessee has filed this revision case against the decision of the Commissioner of Agricultural Income-tax.
Learned counsel appearing for the petitioner has drawn our attention to the decision of this court in Puthutotam Estates (1943) Ltd. v. Agricultural Income-tax Officer. In that case coffee grown by the assessee was sold to the Coffee Board, but the Coffee Board remitted only a part of the sale proceeds immediately after the sale, and the balance of the sale proceeds was paid in succeeding years. In the view of the Bench of this court, for the purpose of the assessment of agricultural income-tax, the time of the sale was the governing factor because according to the very definition (of agricultural income) the income was derived by the sale of the produce. Therefore, if the sale was made before the 1st of April, 1954, although the proceeds of such sale were received subsequent to April, 1954, such receipts were not taxable in the year of receipt. Therefore, the year of sale is the relevant factor to be taken into account. There is also a decision of the Supreme Court in Doars Tea Co. Ltd. v. Commissioner of Agricultural Income-tax, which arose out of the Bengal Agricultural Income-tax Act and which has interpreted an analogous provision of that Act. The view was expressed in that decision that the agricultural produce itself was agricultural income within the meaning of clause (i) of section 2(1) (b) of the Bengal Agricultural Income-tax Act and that clause did not require that the agricultural produce should be sold and profit or gain received from such sale before it was included in the income. In any view of the matter, it is obvious that the several clauses of section 2 of the Madras Agricultural Income-tax Act, which begin with 'rent or revenue derived from land' and proceed to other definitions, deal with a state of affairs subsequent to the coming into force of the Madras Agricultural Income-tax Act. The Act cannot have retrospective operation so as to take into account an amount which a lessee had become indebted to pay by way of rent to the landlord, on a date long anterior to the coming into force of Act. What happened after coming into force of the Act was only a realisation of a part of the arrears due from the lessee to the landlord towards the lease amount. That circumstance alone will not render taxable amount which would otherwise fall outside the entire scope of the Act. The manner of the keeping of the accounts by the assessee, whether on the basis of 'cash system' or 'mercantile system' will apply only to such income as is properly chargeable to agricultural income-tax after the Act came into force but cannot bring in for the purpose of levy, the realisation of a claim for arrears of rent which arose long before the Act came into force. On this short ground, we allow the revision case, set aside the order of the Commissioner and restore that of the Assistant Commissioner of Agricultural Income-tax. There will be no order as to costs.