Case: State Of Kerala And Others Vs. Bhavani Tea Produce Co. Ltd

delivered for inclusion in the surplus pool for any purposes for which it is authorised to expend money from the pool fund." The failure to register, contravention of S. 25, making of a false return, obstruction and contravention of the other provisions of the Coffee Act, some of which we have not found necessary to mention here, are constituted offences and there is provision for punishment and penalty. The Coffee Board is also given the power to seize coffee withheld from inclusion in the surplus pool.In this way, the marketing of coffee is made the duty of the Coffee Board and the right of a party who has made contributions to the surplus pool is merely to receive payment for coffee which is handed over. The quantum of payment is determined, at first according to the differential scale of valuation prepared by the Coffee Board. It must be remembered that under S. 34 (2) the payment is in the proportion which the value of coffee delivered by the owner bears to the value of all coffee delivered to the surplus pool out of one years crop. But an owner need not wait and may accept an immediate settlement for his coffee. It follows that coffee delivered to the Coffee Board becomes the property of the Board no sooner it is delivered. The Coffee Board can borrow money by pledging it and is not required to return any part of that coffee to the producer. It only sells it and gives to the planter price proportionate to the value of all coffee in the surplus pool for that year, unless the planter settles for an immediate payment. 8. The appellant Company maintains its accounts on the mercantile system. When it handed over coffee to the Coffee Board it entered the price of the coffee according to the valuation of the Coffee Board in its books of account although it did not receive payment immediately because as has been shown above the payment is delayed unless immediate settlement is made. The payment for coffee handed over before April 1, 1954 was received after that date. No. doubt actual payment was received in the previous years relevant to the two assessment years, but coffee was handed over to the Coffee Board in the earlier years for which no tax could be demanded. Was there a sale to the Coffee Board? The answer must be in the affirmative. The Coffee Board is neither a trustee nor even an agent of the planter. It is not accountable to the owner, except as to payment for coffee received and valued according to the differential prices. All coffee which the Coffee Board obtains under the Coffee Act is put in a pool and gets mixed up with other coffee. Coffee in the pool is disposed of on behalf of the Coffee Board. The Coffee Board only pays a proportionate price to the planter. Even though the planter does not actually sell coffee to the Coffee Board there is in reality a sale by operation of law as a result of which the planter ceases to be the owner of coffee the moment he has handed over his produce to the Coffee Board. He is then entitled to receive payment and is not concerned any more with his coffee. The unsold coffee is not returned to him and he does not enjoy any rights of ownership in it. The Coffee Board can pledge it and sell it as and when it likes. In these circumstances it is plain that the handing over of coffee by the planter amounts to a sale to the Coffee Board and the payment of the price is from the sale of all the coffee in the surplus pool unless the planter settles for immediate payment. The system of account must make a difference. If it were a cash system income would be taxable when actually received but in the mercantile system it would be taxable in the year in which the relevant entry is made about the sale of coffee to the Coffee Board. 9. We were referred to some rulings of the Madras and the Kerala High Courts. In Puthuthottam Estates (1943) Ltd., v. Agricultural Income-tax Officer, Coimbatore, 1958-34 ITR 764 (Mad), Rajagopalan, J. held that there was nothing in the Madras Plantations Agricultural Income-tax Act or the Rules thereunder, which exempted produce gathered earlier than 1st April 1954 from taxation if payment was received in any previous year relevant to an assessment year under the Madras Plantations Agricultural Income-tax Act. The judgement of Rajagopalan, J., was reversed on appeal in Puthuthottam Estates (1943) Ltd., v. Agricultural Income-tax Officer, 1962-45 ITR 86 (Mad). Rajamannar. C. J. and Jagadisan, J. held that, if the sale took place after 1st April 1954, tax was payable no matter if the produce was of an earlier year but if the sale took place earlier than that date, tax would not be payable even if the price was realized later. In the Kerala High Court distinction was made between entries under cash and mercantile systems of book-keeping. In Amalgamated Coffee Estates Ltd. v. State of Kerala, 1962-45 ITR 358 (Ker), the assessee followed the mercantile system and payments entered in the accounting period April 1, 1953 to March 31, 1954 were held not taxable even though actually received after April 1, 1955. The reasoning in these two cases is the same as in this judgment. It is, therefore, not necessary to refer to them. The judgment under appeal follows the earlier decision of the same Court and the Divisional Bench decision of the Madras High Court, and in our opinion the High Courts have taken the right view of the matter. 10. The High Court was thus right in holding that there was no sale in the years relevant to the assessment years for which the tax was demanded. The sale had taken place in the earlier years over which the Agricultural Income-tax Act did not operate.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]"Plantation" in the Act means any land used for growing certain crops including coffee. Section 3 lays charge of agricultural income-tax and for our purpose we need read only the first sub-sectionThe failure to register, contravention of S. 25, making of a false return, obstruction and contravention of the other provisions of the Coffee Act, some of which we have not found necessary to mention here, are constituted offences and there is provision for punishment and penalty. The Coffee Board is also given the power to seize coffee withheld from inclusion in the surplus pool.In this way, the marketing of coffee is made the duty of the Coffee Board and the right of a party who has made contributions to the surplus pool is merely to receive payment for coffee which is handed over. The quantum of payment is determined, at first according to the differential scale of valuation prepared by the Coffee Board. It must be remembered that under S. 34 (2) the payment is in the proportion which the value of coffee delivered by the owner bears to the value of all coffee delivered to the surplus pool out of one years crop. But an owner need not wait and may accept an immediate settlement for his coffee. It follows that coffee delivered to the Coffee Board becomes the property of the Board no sooner it is delivered. The Coffee Board can borrow money by pledging it and is not required to return any part of that coffee to the producer. It only sells it and gives to the planter price proportionate to the value of all coffee in the surplus pool for that year, unless the planter settles for an immediate paymentIn these circumstances it is plain that the handing over of coffee by the planter amounts to a sale to the Coffee Board and the payment of the price is from the sale of all the coffee in the surplus pool unless the planter settles for immediate payment. The system of account must make a difference. If it were a cash system income would be taxable when actually received but in the mercantile system it would be taxable in the year in which the relevant entry is made about the sale of coffee to the Coffee BoardWas there a sale to the Coffee Board? The answer must be in the affirmative. The Coffee Board is neither a trustee nor even an agent of the planter. It is not accountable to the owner, except as to payment for coffee received and valued according to the differential prices. All coffee which the Coffee Board obtains under the Coffee Act is put in a pool and gets mixed up with other coffee. Coffee in the pool is disposed of on behalf of the Coffee Board. The Coffee Board only pays a proportionate price to the planter. Even though the planter does not actually sell coffee to the Coffee Board there is in reality a sale by operation of law as a result of which the planter ceases to be the owner of coffee the moment he has handed over his produce to the Coffee Board. He is then entitled to receive payment and is not concerned any more with his coffee. The unsold coffee is not returned to him and he does not enjoy any rights of ownership in it. The Coffee Board can pledge it and sell it as and when it likesThe judgment under appeal follows the earlier decision of the same Court and the Divisional Bench decision of the Madras High Court, and in our opinion the High Courts have taken the right view of the matterThe High Court was thus right in holding that there was no sale in the years relevant to the assessment years for which the tax was demanded. The sale had taken place in the earlier years over which the Agricultural Income-tax Act did not operate.