Sabyasachi Mukharji, J.
1. The assessee is a limited company engaged in growing and manufacturing tea. In the assessment year 1960-61, the corresponding previous year being the calendar year 1959, the assessee received a sum of Rs. 15,465 from Messrs. London Assurance for damage caused to green leaf forming part of the assessee's garden called ' Bundook-mara Tea Estate ' in the district of Cachar, Assam. Damage was caused by hail storm some time in May, 1959, and on the basis of the assessment it was found that 773 mds of green leaf had been lost by the assessee. There was an insurance policy. It appears from the said insurance policy that the insurance primarily covered the risks against fire, theft, pilferage and non-delivery, fresh water damage and also loss or damage occasioned by collision, breakage of bridges, derailment or accidents of a like nature whilst being conveyed by train or motor-truck. The said insurance policy contained a special clause called ' Hail Clauses ' which, inter alia, provided as follows :
' In the event of any crop being damaged by hail the assured's garden manager shall forthwith summon two neighbouring planters who shall certify to the area so damaged (in acres) and furnish an estimate in (green leaf) of the season's loss consequent thereon, detailing fully their reasons for the conclusions arrived at...'
2. Under the policy the insurance company undertook the liability to pay 50 per cent. of such loss suffered. In fact in the instant case the amount actually received by the company roughly represents 50 per cent. of the total loss assessed in respect of the damaged green leaf by hail storm.
3. Before the Income-tax Officer it was contended by the assessee that this sum of Rs. 15,465 is exempt from taxation being agricultural income. The Income-tax Officer disallowed this claim and included this receipt in the total income of the assessee. It appears from the assessment order that the taxable income was computed at the rate of 40 per cent. of the total income as computed. The same has been done by applying the provisions of Rule 24 of the Indian Income-tax Rules, 1922.
4. There was an appeal before the Appellate Assistant Commissioner who upheld the order of the Income-tax Officer. The Appellate Assistant Commissioner was of the opinion that the said receipt was incidental to the assessee's carrying on business of manufacture of tea and as such could not be treated as agricultural income.
5. There was a further appeal to the Income-tax Appellate Tribunal. The Tribunal came to the conclusion that the insurance against damage tostanding crops by hail storm has got nothing to do with the manufacturing business of the assessee and as such is connected with the agricultural operation, namely, planting, growing and maintaining tea bushes. The Tribunal, therefore, came to the conclusion that the receipt in question was entirely a receipt connected with the agricultural operation and as such represented agricultural profit. Therefore, it is entitled to exemption from income-tax under Section 4(3)(viii) of the Indian Income-tax Act, 1922.
6. On an application being made, the Tribunal referred to this court the following question under Section 66(1) of the Indian Income-tax Act, 1922 :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 15,465 was agricultural income within the meaning of Section 2(1) of the Indian Income-tax Act, 1922, and was, therefore, exempt from income-tax under Section 4(3)(viii) of the said Act '
7. In our opinion, Rule 24 of the Income-tax Rules, 1922, is not applicable to the receipt of this nature. The same rule is only applicable when the income is derived from the sale of tea grown and manufactured by the seller. When tea is sold by one who both grows tea and manufactures it, the income therefrom is resultant from the combined operations of agriculture and manufacture. In cases of this type the income must be apportioned and until the appropriate rules, we have now, were framed under the Income tax Act, it was apportioned by stating that the portion of it which conies from the manufacturing process is assessable. In the case of Killing Valley Tea Co. Ltd. v. Secretary of State, A.I.R. 1921 Cal. 40a Division Bench of this court held that where in a tea garden tea is grown and made ready for the market by mechanical process, the income must be apportioned and that portion of it which comes from the manufacturing process is assessable. Sir Ashutosh Mookerjee, A.C.J., observed in the said judgment at page 41 :
' The earlier part of the operation when the tea bush is planted and the young green leaf is selected and plucked may well be deemed to be agriculture. '
8. There his Lordship referred to the well-known principles which should be applicable to the cases of this character and observed that no rules had yet been framed to guide this apportionment but if the rules were framed and operated as statutory rules, an assessment might be made on such portion of the profits of the company as did not fall within the description ' agricultural income '. The Indian Income-tax Rules, 1922, were framed thereafter.
9. Reading the insurance policy we are of the opinion that this sum of money which has been paid by the insurance company under ' Hail Clauses ' was in respect of the crop being damaged by hail and that relatesto the agricultural operations carried on by the assessee. In the case of Raghuvanshi Mills Ltd. v. Commissioner of Income-tax 0043/1952 : 22ITR484(SC) the assessee-company had insured its mills with certain insurance companies and also had taken out certain policies of the type known as 'consequential loss policy' which insured against loss of profit, standing charges and agency commission. The mills were completely destroyed as a result of fire and a certain amount was paid to the assessee by the insurance companies. The question was whether this amount which was treated as paid on account of loss of profits was assessable to income-tax. It was held by the Supreme Court that the amount received by the assessee was income and so was taxable. At page 488 of the said judgment the Supreme Court observed :
' It was argued on behalf of the assessee that it cannot be called profits because the money is only payable if and when there is a loss or partial loss and that something received from an outside source in circumstances like these is not money which is earned in the business and if there are no earnings and no profits there cannot be any income. But that only concentrates on the word 'profits'. This may not be a 'profit' but it is something which represents the profits and was intended to take the place of them and is therefore just as much income as profits or gains received in the ordinary way. '
10. If it represents the profit we are to see it is profit of what It appears from the clause of the insurance policy that this amount was paid in respect of the damage done by hail storm to the growing crop only and that crop represented agricultural operation. Therefore, any sum which represents profits of agricultural operations must be considered to be income from agricultural operations. In that view of the matter we are of opinion that the sum received from the insurance company represented nothing but agricultural income and as such exempt under Section 4(3)(viii) of the Indian Income-tax Act, 1922.
11. In that view of the matter we are of the opinion that the Tribunal was right in coming to the conclusion it did and the question referred to us must be answered in the affirmative and against the revenue. The Commissioner of Income-tax will pay the costs of this reference.
12. I agree.