1. The assessee is borne in the registers of the Agrl. ITO, Srivilliputtur. For the assessment years 1968-69 to 1972-73, he applied for compounding the agrl. income-tax payable by him. The compounding application made under Section 65 of the Tamil Nadu Agrl. I.T. Act, 1955, was accepted and the tax due under that provision was collected from the assessee. Subsequently, during the course of audit, the staff of the Accountant-General noticed that the lands contained valuable teak trees and reported that these lands also should be taken into account as tope for computation of tax under Section 65 of the Act. There would be a difference in the assessment if the lands are, classified as topes as the computation of standard acres would differ. In pursuance of the observation of the Accountant-General, the Agrl. ITO took action under Section 65A(3) and classified the land as 'tope'.
2. During the course of the, proceedings taken by him for revising the earlier compounding, he inspected the land along with the special revenue inspector. He found that there were teak plants varying in height between 3 to 6 feet standing in the field. . The teak plants could be used assticks in constructing thatched houses and as fuel. He, therefore, heldthat the assessee would have derived income from these teak plants, andhe rejected the objection petition filed by the assessee and brought tocharge the escaped extent of tope. The difference in tax was as follows :
YearDifference of tax
3. The reassessment was made on September 30, 1974.
4. The assessee field petitions under Article 226 of the Constitution of India, praying, in the circumstances stated in the writ petitions and the affidavits, for the issue of writs of certiorari calling for the records of the Agrl. ITO and for quashing the orders passed by him revising the earlier compounding orders.
5. In an order dated December 11, 1974, in W.P. Nos. 6297 to 6300 of 1974, this court observed :
'The petitioner has a remedy under the Act by way of a revision. There is no reason why he should be allowed to bypass that remedy which is adequate.'
6. The said writ petitions were, accordingly, dismissed.
7. After the said order, the assessee filed revision petitions before the Commissioner of, Agrl. I.T., Madras, for the several years that are now before us. The Commissioner passed an order on July 30, 1975, covering the assessment years 1968-69 to 1973-74. The Commissioner held that the order of the Agrl. ITO treating the lands as tope was incorrect and, therefore, though the order of the Agrl. ITO was set aside, the Agrl. ITO was directed to pass fresh orders treating the lands as dry lands subject to computation as per Section 2(vv)(vii) or Section 2(vv)(viii). While passing the revised orders, the officer was directed to observe the necessary formalities. It is against the orders of the Commissioner that the revision petitions were filed in this court.
8. When the revision petitions came up for hearing, the learned Govt. pleader contended that a revision would not lie to this court against an order of the Commissioner of Agrl. IT. Section 54 of the Agrl. I.T. Act enables an assessee to file a revision to the High Court, against an order of the Commissioner passed under Section 34 of the Act. The revision would liein the case of an order under Section 34, only if there is an enhancement of assessment or there is any prejudice to the assessee. It is contended that the Commissioner's order has done neither and that, therefore, there can be no revision. In support of this submission, the learned Govt. pleader relied on a decision of a Full Bench of this court in Seshadrinathan v. State of Madras : 60ITR482(Mad) .
9. Learned counsel for the revision petitioner, when he was posed with this preliminary objection, took time for filing petitions under Article 226 of the Constitution of India. He has filed petitions for converting the revision petitions into writ petitions. These petitions for conversion came up for hearing today. On behalf of the Government, a counter had been filed and after hearing the objections of the learned Govt. pleader, we consider that these revision petitions may be permitted to be converted as writ petitions. Accordingly, the writ petitions were directed to be numbered and were taken up for hearing today.
10. The prayers in the writ petitions are to quash the respective orders of the Commissioner of Agrl. I.T. The learned counsel for the assessee contended that the Agrl. ITO had no jurisdiction to revise the compounding orders, that he had already exercised his powers with reference to these years in respect of the lands under consideration and that the lands under consideration were not even agricultural lands so as to come within the scope of the Agrl. I.T. Act.
11. Learned Govt. pleader contended that the lands were dry lands, that they were subjected to dry assessment and that, consequently, the Agrl. Income-tax Act would apply. He pointed put that the assessee himself had applied for compounding on the basis that there was a liability to the agricultural income-tax and that the assessee cannot be now heard to say that there was no liability under the Act.
12. Two questions arise for our consideration.
(1) Whether the lands can be treated as agricultural lands and
(2) Whether the assessee can be permitted to urge the contention that the lands not being agricultural lands cannot be brought within the scope of the compounding provisions at all
13. As far as the first point is concerned, we may set out a few more facts. There was an inspection, by the Asst. Commissioner, of the lands in the year 1960, and he sent a report. Some portions of his report have been extracted in the order of the Commissioner of Agrl. I.T. under consideration. In one portion of his report, it is stated:
'I inspected the lands in question. They contain small teak plants. It will take at least more than a decade to yield any income. It was represented by the owner that they are of spontaneous growth. I made enquiries among the persons available in the neighbouring fields. One man says that the cultivation of teak plants might have been made in that area about 50 or 60 years ago and after that no cultivation or agricultural operation is made. At the time of my inspection I found a man in the adjacent field carting small twigs of teak and he told me that they are teak plants cut from his field and they are used only for fuel...... I amof opinion that they (trees) may not be useful for pucca constructions. For about 10 years the owners may not get any substantial income. The petitioner says that the teak plants are not at all cultivated by him and that they are of spontaneous growth and that the lands are being used as grazing ground. At the time of my inspection I did not find any cattle grazing there and I was told that grazing was not allowed since the plants are very small............In this case there is no agricultural operation for about50 or 60 years and the owner denies any operation even prior to that period even though enquiry reveals that there might have been some operation about 50 or 60 years back. It is rather very difficult to prove that there was agricultural operation about 50 or 60 years back in view of the positive assertion of the petitioner that there was no agricultural operation at all for planting the trees.'
14. It is this report which was considered by the Commissioner of Agrl. I.T, and he observed :
'On this point it has to be admitted that at present no agricultural operations are conducted in raising teak trees or any other trees in these lands. But it would appear the trees were once planted......Further, thelands in question are classed as 'dry' in revenue accounts and are subject to dry assessment. They are, therefore, prima facie meant to be used as agricultural lands. The revision petitioner has not been cultivating them, probably because he finds it more advantageous to get the income from the teak rather than from doing a hazarduous cultivation, subject to destruction by wild beasts. So the lands should prima facie be taken as agricultural lands and included for computation of standard acres. Even forest lands are classed as 'lands' as per Section 2(nnn). So, I am of the opinion, that these lands should be included for purposes of computing standard acres.
Further this is a case of compounding of the tax and if the assessee is not willing for compromise on this basis, he may as well prefer to be assessed on actual income basis, in which case agricultural lands which do not yield agricultural income get automatically eliminated.'
15. The finding of the Commissioner of Agrl. I.T. that the trees were once planted has absolutely no evidence to support it. Even the Asst. Commissioner, when he submitted the report in I960, had referred to the instance of a single person telling him that there might have been plantation of the teak plants about 50 or 60 years, ago. However, he himself has fairly stated that there was no agricultural operation for about 50 or 60 years and that it was very difficult to prove that there was agricultural operation even about 50 or 60 years back, in view of the positive assertion of the assessee that there was no agricultural operation at all in planting the trees. Thus, in the absence of any evidence to show that the lands were actually cultivated, the income could not have been treated as agricultural income. The reference to the lands being classified as dry lands in the revenue records and the direction given by the Commissioner of Agrl. I.T. on the said basis, has also no material to support it, except the entry in the relevant revenue records. As pointed out by the Supreme Court in CWT v. Officer-in-Charge (Court of Wards) Paigah : 10ITR133(SC) , the classification in the revenue records is not conclusive.
16. There is absolutely no evidence of any dry crops having been raised in these lands. In the absence of any such dry crop having been raised, the classification in the revenue register would also have no evidentiary value.
17. The preamble of the Tamil Nadu Agrl. I.T. Act, 1955, reads:
'An Act to provide for the levy of a tax on agricultural income from land in the State of Tamil Nadu.
Whereas it is expedient to provide for the levy of a tax on agricultural income from land in the State of Tamil Nadu.
Entry 46 of List II of the Seventh Schedule to the Constitution enables the State to levy 'taxes on agricultural income'. The expression 'agricultural income' is not defined in the Constitution separately, except by reference to the enactments relating to income-tax. Article 366 of the Constitution provides :
'In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say-
(1) 'agricultural income' means agricultural income as defined for the purposes of the enactments relating to Indian Income-tax.'
18. The definition of 'agricultural income' under the I.T. Act is contained in Section 2(1) of the I.T. Act 1961. Section 2(1) of the I.T. Act of 1961 reads :
'(1) 'Agricultural income' means--..
(a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes ;
(b) any income derived from such land by- (i) agriculture:.........' .
19. It is unnecessary to refer to the rest of the definition. The definition requires that the lands must be situated in India. There must be rent or revenue derived from, the land used for agricultural purposes, or there must be income from such land by agriculture.
20. The Supreme Court had occasion to construe Section 2(1) of the Indian I.T. Act, 1922, which corresponds to Section 2(1) of the LT. Act, 1961, in CIT v. Raja Benoy Kwmar Sahas Roy : 32ITR466(SC) . In that case, it was pointed out (headnote):
'Agricultural in its primary sense denotes the cultivation of the field and is restricted to cultivation of the land in the strict sense of the term, meaning thereby tilling of the land, sowing of the seeds, planting and similar operations on the land. These are basic operations and require the expenditure of human skill and labour upon the land itself.'
21. Their Lordships refer to the basic operation mentioned above, and also the subsequent operations like weeding, digging the soil around the growth, removal of undesirable undergrowth and all operations which foster the growth and preservations of the same from insects and pests. The human labour and skill spent in the performance of these subsequent operations like tending, pruning, cutting, harvesting and rendering the produce fit for the market, though they would be agricultural operations when taken in conjunction with the basic operations, could not be said to have been spent on the land itself and the mere performance of subsequent operations would not be sufficient to characterise them as agricultural operations. In order to invest them with the character of agricultural operations these subsequent operations must necessarily be in conjunction with and in continuation ,of the basic operations which are the effective cause of the products being raised from the land and the subsequent operations divorced from the basic operations cannot constitute by themselves agricultural operations. Only if this integrated activity, which constitutes agriculture, is undertaken and performed in regard to any land, could that land be said to have been used for 'agricultural purposes' and the income derived therefrom be said to be 'agricultural income' derived from the land by agriculture, under Section 2(1). Considered in the light of the definition, as interpreted by the Supreme Court, it would follow that in the present case there are absolutely no basic operations and, therefore, any income derived from the land in question would not be agricultural income.
22. Learned Government pleader contended that we are concerned only with Section 65 of the Act and that so long as the assessee had applied under Section 65, the assessee would be bound by the option exercised for compounding. What is overlooked in this connection is that Section 65 is only a substitute for the computation of the tax payable under the Act. Section 65(1)(a) provides that any person who holds land wholly grown with non-plantation crops, may apply to the prescribed officer for permission to compound the agrl. income-tax payable by him, and to pay in lieu thereof a lump sum at the rate or rates specified in Part II of the Schedule to the Act. Thus, there must be a liability to the agrl. income-tax under the Act and that liability is sought to be compounded by the proceedings under Section 65. When there are no agricultural operations on the lands in the present case there is no question of any agricultural income and, consequently, it follows that there is no liability to agrl. income-tax which would be compounded under the Act.
23. Learned Govt. pleader drew our attention to Section 2(nnn) which defines 'land' as follows :
''land' means agricultural land, that is to say, land which is used for agricultural purposes or purposes subservient thereto and is either assessed to land revenue in the State or is subject to a local rate assessed and collected by officers of the Government as such and includes horticultural land, forest land, garden land and plantations, but does not include house-site, or land used exclusively for pasture.'
24. The definition falls into two parts. The first part contemplates the cases of lands used for agricultural purpose or purposes subservient thereto, and the second part requires that the lands are either assessed to land revenue in the State or subject to a local rate assessed and collected by officers of the Government as such. Thus, there are two cumulative conditions to be satisfied. One is, the land should be used for agricultural purpose or purposes subservient thereto. The other is, it should be either assessed to land revenue in the State or should be subject to a local rate assessed and collected by officers of the State Govt. In the present case, even assuming that there was some collection of land revenue as dry lands by the officers of the State Govt., still the first condition that the land should be assessed for agricultural purpose or purposes subservient thereto has not been satisfied. In the result, the present land would not fall within the first part of the definition.
25. Reliance was placed on the second part of the definition ; that part of the definition includes horticultural land, forest land, garden land and plantations. But even this part of the definition cannot be taken for compounding any land from which agricultural income is not derived. If the contention put forward by the learned Govt. pleader were to be accepted, then the State Legislature would be straying out of its field of taxation and would be indirectly levying tax on income on which it has no power directly to levy tax. The second part of the definition would also have to be understood only in the sense that horticultural land, forest land, garden land and plantation are used for agricultural purposes and income is derived therefrom. In other words, those lands should yield agricultural income as defined in Section 2(1)(a) of the I.T. Act, 1961, which is in identical terms with Section 2(1) of the Indian I.T. Act, 1922. Thus, there is no liability to tax which can be compounded under Section 65.
26. One point may be clarified at this stage. On the earlier occasion, when the matter came before this court in writ petitions the present question as to whether there could be any liability under the law was not canvassed, and, therefore, this court considered that the matter which was raised before it, could be taken before the Commissioner of Agrl. I.T. under revision. As the point has now been raised, we have to decide it in the present writ petitions. Thus, in the absence of anything to show that there was any agricultural income derived from the lands in question, there is absolutely no scope for compounding any tax liability.
27. The result is that though the compounding as originally made, is not to be disturbed, the subsequent revision of the compounding by any Agrl. ITO, as modified by the Commissioner, will have to be set aside. The writ petitions are, accordingly, allowed and rule nisi will issue in terms of the prayers contained in these writ petitions. There will be no order as to costs.