Case: Anglo American Direct Tea Trading Co.Ltd Vs. Commissioner Of Agricultural Income-Tax,Kerala State, Triv

1. The appellant carry on the business of cultivation, manufacture and sale of tea. They own tea plantations in the State of Kerala. Some of them own tea plantations both within and outside the State. They are assessed to non-agricultural as well as agricultural incometaxFor all the assessment years, the central income-tax authorities computed the total tea income of the appellants and 40 per cent thereof representing the non-agricultural income was assessed to non-agricultural income-tax and the balance 60 per cent was left unassessed as agricultural income. The appellants produced before the Agricultural Income-tax Assistant Commissioner, Kerala, the central income-tax assessment orders, and requested him to take 60 per cent of the tea income computed by the central income-tax authorities as the gross income derived from agriculture. The Agricultural Income-tax Assistant Commissioner disregarded the central income-tax assessments, and on independent computation of the tea income determined the agricultural income of the appellants. The agricultural income so determined by the Agricultural Income-tax Assistant Commissioner was much higher than 60 per cent of the total tea income assessed by the central income-tax authorities. On appeal, the Deputy Commissioner of Agricultural Income-tax and Sales Tax, South Zone, Quilon held that the Agricultural Income-tax Officer could make an independent computation of the tea income and was not bound to adopt the assessment made by the central Income-tax officer. On further appeal, the Kerala Agricultural Income-tax Appellate Tribunal, Trivandrum held that the Agricultural Income-tax Officer was bound to accept the computation of tea income by the central income-tax authorities. On the application of the respondents, the Appellate Tribunal referred the following question of law to the High Court under Section 60 (1) of the Kerala Agricultural Income-tax Act, 1950: "Whether the Agricultural Income-tax Officer is to follow the computation of income from tea made by the Central Income-tax Officer or whether he can find out the income from tea plantations applying the provisions of the Income-tax Act and make the assessment exercising his powers under the Agricultural Income-tax Act?". Following its earlier decision in Commr. of Agricultural Income-tax, Kerala v. Perumal Plantations Ltd., (1965) 56 ITR 193 (Ker), the High Court held that the Agricultural Income-tax Officer was not obliged to accept the computation of the tea income made by the Income-tax Officer acting under the Income-tax Act, and it was open to him to compute the income independently applying the relevant provisions of the income-tax Act and the Agricultural Income-tax Act. From these orders the present appeals have been filed by special leave.

Reasoning: We think that this question should be answered in the affirmative. Income from sale of tea grown and manufactured by the seller is derived partly from business and partly from agriculture. This income has to be computed as if it were income from business under the Central Income-tax Act and Rules, 40 per cent of the income so computed is deemed to be income derived from business and assessable to non-agricultural income-tax. Having regard to the decision in 1963 Supp 1 SCR 823 = (AIR 1963 SC 760  ), we are bound to hold that (a) the Explanation to S. 2 (a) (2) of the Kerala Agricultural Income-tax Act adopts this rule of computation and (b) the balance 60 per cent of the income so computed is agricultural income within the meaning of the Central Income-tax Act and the Constitution. The agricultural income taxable under the Kerala Act is 60 per cent of the income so computed after deducting therefrom the allowances authorised by S. 5 of the Kerala Act in so far as the same has not already been allowed in the assessment under the Central Income-tax Act. There is no provision in the Kerala Act authorising the Agricultural Income-tax Officer to disregard the computation of the tea income made by the income-tax authorities acting under the Central Income-tax Acts. The Agricultural Income-tax Officer in making an assessment of agricultural income is bound to accept the computation of the tea income already made by the Central Income-tax authorities and to assess only 60 per cent of the income so computed less allowable deductions as agricultural income taxable under the Kerala Act. Where the agricultural income is derived from lands partly within the State of Kerala and partly outside the State, the portion of the income attributable to lands within the State is determined under S. 6 of the Kerala Agricultural Income-tax Act read with R. 15 of the Kerala Agricultural Income-tax Rules. Under some Acts and Rules, the Agricultural Income-tax Officer is bound to adopt the assessment of the tea income made by the Central Income-tax authorities. But under some other Acts and Rules he is authorised in special cases to disregard this assessment and to make a fresh computation of the tea income.We express no opinion on the construction of these Acts and Rules. For the purpose of these appeals, it is sufficient to say that the Kerala Agricultural Income-tax Act and Rules do not confer upon the Agricultural Income-tax Officer the power to disregard the assessment of the tea income already made by the Central income-tax authorities. We are unable to introduce by way of implication in a taxing statute a provision which requires explicit statement6. Difficulties may arise in making an assessment of agricultural income under the Kerala Agricultural Income-tax Act on the basis of the Assessment of the tea income made by the Central income-tax authorities. The previous year under S. 2 (o) (i) of the Kerala Act may be different from the previous year under the Indian Income-tax Act. This difficulty may be resolved by fixing the previous year for this class of income under S. 2 (o) (ii) in conformity with the previous year under the Indian Income-tax Act. But the artificial previous year under S. 2-A is not subject to the provisions of S. 2 (o) (ii). Moreover, S. 22 authorises the assessment of income for the period from the expiry of a previous year to the probable date of the departure of the assessee from the State. It may be difficult to make an assessment under S. 22 or on the basis of the previous year under S. 2-A in the absence of any rule fixing the income for a broken part of the year with reference to an assessment made under the Indian Income-tax Act. In spite of these and other difficulties in the working of the Act, we are unable to agree with the decision in (1965) 56 ITR 193 (Ker) or to hold that the Agricultural income-tax Officer can ignore the assessment of the tea income already made by the Central income-tax authoritiesThis wider question does not arise for decision and is left open. In all the cases before us, the assessments by the Central income-tax Officer were completed before the Agricultural Income-tax Officer proceeded to assess the agricultural income.For the purpose of these appeals, it is sufficient to say that the Agricultural Income-tax Officer acting under the Kerala Agricultural Income-tax Act 1950 is bound to follow the assessment of income by the Central Income-tax Officer under R. 24 of the income-tax Rules, 1922 and R 8 of the Income-tax Rules 1962 where such assessment has been made before the Agricultural Income-tax Officer proceeds to make the assessment under the Kerala Act.The question referred to the High Court is answered accordingly. We must not be understood to say that the assessment made by the Central Income- tax Officer under R 23 of the Income tax Rules, 1962 or R 7 of the Income-tax Rules, 1962 is in any way binding on the Agricultural Income-tax Officer8. In Civil Appeals Nos. 585 to 588 of 1966 and 589 to 591 of 1966, the Agricultural Income-tax Officer made a surcharge of 5 per cent for the assessment year 1957-58 under the Kerala Surcharge on Taxes Act, 1957. On appeal, the Deputy Commissioner held that the surcharge was rightly made. On further appeal, the Appellate Tribunal held that the levy of the surcharge was illegal. On the application of the respondent, the Appellate Tribunal referred the following additional question of law to the High Court. "Whether on the facts and circumstances of the case the Tribunal is justified in holding that surcharge on agricultural Income-tax cannot be levied for the assessment year 1957-58?" The High Court answered this question in favour of the Revenue and against the assessee. This decision must be set aside.In Karimtharuvi Tea Estate Ltd. v. State of Kerala, (1966) 60 ITR 262   = (AIR 1966 SC 1385  ) this Court held that no surcharge on agricultural income can be levied under the Kerala Surcharge on Taxes Act, 1957 in respect of the assessment year 1957-58. The second question is answered accordingly in favour of the assessee and against the Revenue.