Case: Karimtharuvi Tea Estates Limited, Kottayam &amp; Another Vs. State of Kerala &amp; Others

be different and higher than such agricultural income when calculated in accordance with the provisions of the Income-tax Act and rule 24.The different provisions of an Act are to be construed in such manner as to make them harmonious. Explanation 2 to S. 5 should be so construed as makes it harmonious with Explanation to sub-cl. (2) of cl. (a) of S. 2 of the Agricultural Income-tax Act which provides a special definition for agricultural income for tea plantations; such income being that portion of the income derived from land by the cultivation manufacture and sale of tea as is defined to toe agricultural income for the purposes of the enactments relating to Indian income-tax. Explanation 2, if applied to income from tea, would create an agricultural income which is not contemplated by the Income-tax Act and the Constitution and would then be void. Though wide in terms Explanation 2 to S. 5 should therefore be construed not to apply to the computation of agricultural income derived from land by the cultivation of tea. Such a construction would made it harmonious with the Explanation to sub-cl. (2) of cl. (a) of S. 2 of the Agricultural Income-tax Act.12. It is true, as urged for respondents that the State Legislature has full freedom to enact such provisions as it considers fit in respect of tax on agricultural income and that such power includes the power to enact for matters subsidiary and incidental to the taxation of agricultural income. We also agree that the State Legislature is free to provide the method of computation of the taxable agricultural income and is free to allow any particular deductions from the gross income as it considers fit. It is not disputed for the respondent that the power of the State Legislature to enact a law in respect of agricultural income relates only to such agricultural income as is defined in Art. 366 of the Constitution.13. It is however urged that for the purpose of this definition, one has to look to the definition of Agricultural income in the Income-tax Act and not to the rules made thereunder. We do not agree. Agricultural income as defined in the Constitution means agricultural income for the purpose of the enactments relating to income-tax. One such enactment is the Income-tax Act. Rule 24 of the Income-tax Rules has been made under the powers conferred by S. 59 of the Income-tax Act and has effect as if enacted in that Act. When S. 59 of the Income-tax Act provides for the rules made under that Act to prescribe the proportions of income from business, and income from agriculture in the entire income derived in part from agriculture and in part from business, the proportion so prescribed must be taken to be prescribed by the Act. These rule were in existence in 1950 when the Constitution incorporated the definition of agricultural income from the Income-tax Act by reference. The definition of the term was bound up with the rules.14. It has been further submitted for the respondents that cl. (xv) of sub-s. (2) of S. 10 of the Income-tax Act is a general provision and should give way to the special provision of the agricultural Income-tax Act with respect to the deductions from the gross income for the purpose of computing the agricultural income. This cannot be, as we have to take the definition of agricultural income from what it is in the Income-tax Act. The provisions of the Income-tax Act and the rules made thereunder will control the provisions of the Agricultural Income-tax Act enacted by a State Legislature.15. The contention that the amount spent for the upkeep and maintenance of the immature plants till they become mature is in the nature of a capital expenditure is also not sound. It is a running expenditure and not of the nature of capital expenditure.16. It is further contended that if such expenditure be held to be deductible expenditure, the proviso to rule 24 would be redundant. Again, we do not agree. The proviso allows the deductions of the cost of planting bushes in replacement of bushes which died or became permanently useless in an area already planted. It deals with the cost of planting bushes and not with the expenses incurred in the upkeep and maintenance of bushes already planted. These petitions are not with respect to the expenses incurred in the planting of immature tea bushes but are with respect to expenses incurred in the upkeep and maintenance of immature plants.17. We therefore construe Explanation 2 to S. 5 of the Agricultural income-tax Act not to extend to the computation of agricultural income derived from tea plantations and hold that in computing such agricultural income for the purpose of taxation under the Agricultural Income-tax Act, the explanation to S. 2 of that Act must be kept in mind and the income must be taken to be as defined for the purposes of the enactments relating to Indian income-tax.18. In view of our opinion it is not necessary to consider the other contention for the petitioner that Explanation 2 to S. 5 is discriminatory and contravenes the provisions of Art. 14 of the Constitution.19. We therefore allow these petitions to this extent that we declare that Explanation 2 to S. 5 of the Agricultural Income-tax Act added by the Amendment Act does not cover the expenses incurred in the upkeep or maintenance of immature tea plants from which no income has been derived during an accounting year and that the agricultural income derived from tea plantation will be computed in accordance with the provisions of the Income-tax Act and the Income-tax Rules. We order that a writ be issued to the respondents restraining them, their agents and servants from enforcing or acting upon the provisions of Explanation 2 to S. 5 of the Agricultural Income-tax Act against the Karimtharuvi Tea Estates Ltd., Kottayam, viz., petitioner No. 1. We direct the respondents to pay the costs of petitioner No.1, one set.

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

Explanation:
1[ds]This definition practically conforms to the definition of agricultural income in(a) and (b) of cl. (1) of S. 2 of theAct. The Explanation added in the definition of agricultural income in the AgriculturalAct in substance adopts what has been provided in rule 24 of theRules about the proportion of agricultural income from tea plantations. It follows therefore that agricultural income from tea plantations is to be computed in the same manner as it is computed under the provisions of theAct.10. Sec. 5 of the AgriculturalAct provides for certain deductions to be made in the computation of the agricultural income of person and its cl. (j) provides for the deduction of any expenditure not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly or exclusively for the purpose of deriving the agricultural income. This clause corresponds to cl. (xv) of(2) of S. 10 of theAct. The proviso at the end of the various clauses of S. 5 states that no deduction shall be made under that section if it has already been made in the assessment under theAct. This avoids a double deduction.11. Now Explanation 2 added to S. 5 by the Amendment Act takes away the advantage of the provisions of cl. (j) of S. 5with respect to theexpenses incurred in the upkeep and maintenance of immature plants from which no agricultural income has been derived during the accounting year. We are not concerned in this case with the validity of this provision so far as agricultural income from land in which crops other than tea are raised. Here we are concerned with its validity with respect to its application to the income from tea plantations. Explanation 2 in tit 5 of the AgriculturalAct is obviously not consistent with the Explanation to(2) of cl. (a) of S. 2 of the Agricultural Income tax Act and also the rule for computing agricultural income made under theAct and result in making the agricultural income from tea plantations for the purpose of the AgriculturalAct to be different and higher than such agricultural income when calculated in accordance with the provisions of theAct and rule 24.The different provisions of an Act are to be construed in such manner as to make them harmonious. Explanation 2 to S. 5 should be so construed as makes it harmonious with Explanation to(2) of cl. (a) of S. 2 of the AgriculturalAct which provides a special definition for agricultural income for tea plantations; such income being that portion of the income derived from land by the cultivation manufacture and sale of tea as is defined to toe agricultural income for the purposes of the enactments relating to IndianExplanation 2, if applied to income from tea, would create an agricultural income which is not contemplated by theAct and the Constitution and would then be void. Though wide in terms Explanation 2 to S. 5 should therefore be construed not to apply to the computation of agricultural income derived from land by the cultivation of tea. Such a construction would made it harmonious with the Explanation to(2) of cl. (a) of S. 2 of the AgriculturalAct.12. It is true, as urged for respondents that the State Legislature has full freedom to enact such provisions as it considers fit in respect of tax on agricultural income and that such power includes the power to enact for matters subsidiary and incidental to the taxation of agricultural income. We also agree that the State Legislature is free to provide the method of computation of the taxable agricultural income and is free to allow any particular deductions from the gross income as it considers fit. It is not disputed for the respondent that the power of the State Legislature to enact a law in respect of agricultural income relates only to such agricultural income as is defined in Art. 366 of the Constitution.13. It is however urged that for the purpose of this definition, one has to look to the definition of Agricultural income in theAct and not to the rules made thereunder. We do not agree. Agricultural income as defined in the Constitution means agricultural income for the purpose of the enactments relating toOne such enactment is theAct. Rule 24 of theRules has been made under the powers conferred by S. 59 of theAct and has effect as if enacted in that Act. When S. 59 of theAct provides for the rules made under that Act to prescribe the proportions of income from business, and income from agriculture in the entire income derived in part from agriculture and in part from business, the proportion so prescribed must be taken to be prescribed by the Act. These rule were in existence in 1950 when the Constitution incorporated the definition of agricultural income from theAct by reference. The definition of the term was bound up with the rules.14. It has been further submitted for the respondents that cl. (xv) of(2) of S. 10 of theAct is a general provision and should give way to the special provision of the agriculturalwith respect to thedeductions from the gross income for the purpose of computing the agricultural income. This cannot be, as we have to take the definition of agricultural income from what it is in theAct. The provisions of theAct and the rules made thereunder will control the provisions of the AgriculturalAct enacted by a Statewe do not agree. The proviso allows the deductions of the cost of planting bushes in replacement of bushes which died or became permanently useless in an area already planted. It deals with the cost of planting bushes and not with the expenses incurred in the upkeep and maintenance of bushes already planted. These petitions are notwith respect to theexpenses incurred in the planting of immature tea bushes but are with respect to expenses incurred in the upkeep and maintenance of immature plants.17. We therefore construe Explanation 2 to S. 5 of the AgriculturalAct not to extend to the computation of agricultural income derived from tea plantations and hold that in computing such agricultural income for the purpose of taxation under the AgriculturalAct, the explanation to S. 2 of that Act must be kept in mind and the income must be taken to be as defined for the purposes of the enactments relating to IndianIn view of our opinion it is not necessary to consider the other contention for the petitioner that Explanation 2 to S. 5 is discriminatory and contravenes the provisions of Art. 14 of the Constitution.19. We therefore allow these petitions to this extent that we declare that Explanation 2 to S. 5 of the AgriculturalAct added by the Amendment Act does not cover the expenses incurred in the upkeep or maintenance of immature tea plants from which no income has been derived during an accounting year and that the agricultural income derived from tea plantation will be computed in accordance with the provisions of theAct and theRules. We order that a writ be issued to the respondents restraining them, their agents and servants from enforcing or acting upon the provisions of Explanation 2 to S. 5 of the AgriculturalAct against the Karimtharuvi Tea Estates Ltd., Kottayam, viz., petitioner No. 1. We direct the respondents to pay the costs of petitioner No.1, one set.