Case: The Dooars Tea Co., Ltd Vs. Commissioner Of Agricultural,Income-Tax, West Bengal

to be included within the definition of income under S. 2(1) (b) we apprehend that the whole clause would have been very differently worded. Where income derived from sale was intended to be prescribed the Legislature has done so in terms by cl. (iii) of S. 2(1)(b). Where the marketable condition of the produce resulting from the employment of the specified processes and income derived from the adoption of such processes was intended to be included in the income the Legislature has done so by cl. (ii); and so those two cases having been specifically provided for by the two respective clauses there would be no justification for introducing the concept of sale in construing cl. (i) of S. 2(1)(b). The words in S. 2(1)(b) (i) are, in our opinion, wide, plain and unambiguous and they cannot be construed to exclude agricultural produce used by the appellant for its business. In this connection we may incidentally refer to the provisions of sub-cls. (i), (ii) and (iii) of S. 7(1) of the Act which provide for the computation of tax and allowances under the head "agricultural income from agriculture". These three sub-clauses in terms correspond to the three sub-clauses of S. 2(1)(b) and lend some support to the conclusion that cl. (i) in S. 2(1)(b) does not require that the agricultural produce should be sold and profit or gain received from such sale before it is included in the said clause. Therefore, we do not think that Mr. Mitra is justified in contending that the answer made by the High Court in reference to question 1 is wrong.The second question relates to the computation of agricultural income for the purposes of the Act. Rule 4 with the construction of which the second question is concerned reads thus :"4. For the purposes of the Act the market value of any agricultural produce shall, except in the case referred to in clause (a) of the proviso to sub-section (1) of section 8, be determined in the following manner, namely:-(1) if the agricultural produce was sold in the market the market value shall be deemed to be the price for which such produce was sold; . .(2) if the agricultural produce has not been sold in the market, the market value shall be deemed to be-(a) where such produce is ordinarily sold in the market in its raw state, or after the performance of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render it fit to be taken to market, the value calculated according to the average price at which such produce has been so sold in the locality during the previous year in respect of which the assessment is made;(b) where such produce is not ordinarily sold in the market in the manner referred to in sub-clause (a), the aggregate of-(i) the expenses of cultivation;(ii) the land revenue or rent, paid for the area in which it was grown; and(iii) such amount as the Agricultural Income-tax Officer finds having, regard to all the circumstances in each case, to represent a reasonable rate of profit on the sale of the produce in question as agricultural produce."It is clear that R. 4(1) cannot apply to the appellants case for the agricultural produce in question has not been sold in the market but has been used by the appellant for its own business. The appellant contends that R. 4(2) cannot also be invoked against it, and so there is no rule under which the agricultural income in question can be computed. Incidentally the appellant suggested that if its construction of R 4(2) is right it indirectly supports its case as to the true scope and effect of S. 2(1)(b)(i). The Legislature knew that agricultural produce is not taxable unless it is sold, and so it has not made any rule for the computation of agricultural income alleged to have been received by the assessee from agricultural produce used by the assessee for its own purpose. On the other hand, the respondent contends that R. 4(2) covers the present case, and if that, is so, according to the respondent, that would incidentally support his construction of S. 2(1)(b)(i).15. The argument urged by the appellant assumes that the two rules are based on a kind of basic dichotomy. Rule 1 deals with agricultural produce sold in the market, and R. 2 with the agricultural produce which has been sold but not in the market. In other words, according to the appellant, both the rules assume that the agricultural produce has in fact been sold R. (1) deals with cases where it has been sold in the market and R. (2) with cases where it has been sold but not in the market. If this argument is right then of course cases where agricultural produce has not been sold would remain outside the purview of both the rules; but is this argument right? We have no hesitation in holding that it is not. In our opinion, R. (2) deals with cases where agricultural produce has been sold outside the market as well as cases where agricultural produce has not been sold at all. The effect of reading the two sub-rules together is that the cases of market sales are covered by R. (1) and all other cases are covered by R. (2), Rule (2) is a residuary rule which applies to all cases not falling under R. (1). Therefore, we must hold that the answer given by the High Court to question 2 is also right. It is obvious that the rules framed in exercise of the power conferred by . 57 of the Act cannot legitimately be pressed into service for the purpose of construing the relevant provisions of the Act; even so, incidentally it may be permissible to observe that the construction of R. 4(2) which we are inclined to adopt is consistent with the respondents case that S. 2(1) (b) (j) includes agricultural produce utilised by the appellant for its own business.

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

Explanation:
0[ds]7. Section 2(1) (a) deals with the agricultural income consisting of rent or revenue derived from land which is used for agricultural purposes and is either assessed to land revenue in a State or subject to local rate assessed or collected by officers of the Government as such. We are not concerned with this part of the definition.This argument is based on the assumption that income as defined by S. 2(1) (b) (i) must always be in the nature of profit or gain, and that inevitably postulates a sale transaction made at a profit orthe argument based on the emphasis on the use of the words profits and gains" in Ss. 4 and 6 of the Income-tax Act cannot really assist the appellant in construing S. 2(1)(b)(i) of the Act with which we areis, however, clear that the employment of the process contemplated by the second clause must not alter the character of the produce. The produce must retain its original character and the only change that may have been brought about in the produce is to make it marketable. The said change in the condition of the produce is only intended to make the produce a saleable commodity in the market. Thus cl. (ii) includes within the categories of income derived from the employment of the process falling under that clause. As we have just observed the object of employing the requisite process is to make the produce marketable but in terms the clause does not refer to sale and does not require that the income should be obtained from sale as such though in a sense it contemplates the sale of theis significant that the sale to which cl. (iii) refers must be the sale of produce which has not been subject to any process other than that contemplated by cl. (ii). Thus it may be stated that reading cls. (ii) and (iii) together they contemplate the sale of the produce---cl. (ii) indirectly inasmuch as it refers to the process employed for making the produce marketable and cl. (iii) directly inasmuch as it refers to the price realised by sale of produce which has been subjected to the process contemplated by cl. (ii). Therefore, it is clear that income derived from sale of agricultural produce has been provided for by cls. (ii) and (iii) and prima facie that would show that cl. (i) which does not refer to sale even indirectly cannot be intended to cover cases of income derived from the sale of agriculturalterms the clause takes in income derived from agricultural land by agriculture; and as we have already pointed out giving the material words their plain grammatical meaning there is no doubt that agricultural produce constitutes income under thisour opinion this question must be answered in the negative. Not only is there no indication in the context which would justify the importing of the concept of sale in the relevant clause, but as we have just indicated the indication provided by cls. (ii) and (iii) is all to the contrary. What this clause seems clearly to have in view is agricultural produce itself which has been used by the assessee. In the present case it is common ground that the appellant has utilised for its business the agricultural produce in question and we feel no difficulty in agreeing with the High Court when it held that the agricultural produce utilised by the appellant for its business constitutes income under S. 2(1)(b) (i). If the agricultural produce used by the appellant was not intended to be included within the definition of income under S. 2(1) (b) we apprehend that the whole clause would have been very differently worded. Where income derived from sale was intended to be prescribed the Legislature has done so in terms by cl. (iii) of S. 2(1)(b). Where the marketable condition of the produce resulting from the employment of the specified processes and income derived from the adoption of such processes was intended to be included in the income the Legislature has done so by cl. (ii); and so those two cases having been specifically provided for by the two respective clauses there would be no justification for introducing the concept of sale in construing cl. (i) of S. 2(1)(b). The words in S. 2(1)(b) (i) are, in our opinion, wide, plain and unambiguous and they cannot be construed to exclude agricultural produce used by the appellant for its business. In this connection we may incidentally refer to the provisions of sub-cls. (i), (ii) and (iii) of S. 7(1) of the Act which provide for the computation of tax and allowances under the head "agricultural income from agriculture". These three sub-clauses in terms correspond to the three sub-clauses of S. 2(1)(b) and lend some support to the conclusion that cl. (i) in S. 2(1)(b) does not require that the agricultural produce should be sold and profit or gain received from such sale before it is included in the said clause. Therefore, we do not think that Mr. Mitra is justified in contending that the answer made by the High Court in reference to question 1 isis clear that R. 4(1) cannot apply to the appellants case for the agricultural produce in question has not been sold in the market but has been used by the appellant for its own business.The argument urged by the appellant assumes that the two rules are based on a kind of basic dichotomy. Rule 1 deals with agricultural produce sold in the market, and R. 2 with the agricultural produce which has been sold but not in the market. In other words, according to the appellant, both the rules assume that the agricultural produce has in fact been sold R. (1) deals with cases where it has been sold in the market and R. (2) with cases where it has been sold but not in thehave no hesitation in holding that it is not. In our opinion, R. (2) deals with cases where agricultural produce has been sold outside the market as well as cases where agricultural produce has not been sold at all. The effect of reading the two sub-rules together is that the cases of market sales are covered by R. (1) and all other cases are covered by R. (2), Rule (2) is a residuary rule which applies to all cases not falling under R. (1). Therefore, we must hold that the answer given by the High Court to question 2 is also right. It is obvious that the rules framed in exercise of the power conferred by . 57 of the Act cannot legitimately be pressed into service for the purpose of construing the relevant provisions of the Act; even so, incidentally it may be permissible to observe that the construction of R. 4(2) which we are inclined to adopt is consistent with the respondents case that S. 2(1) (b) (j) includes agricultural produce utilised by the appellant for its own business.