Case: Tata Tea Ltd. &amp; Anr. Etc Vs. State Of West Bengal &amp; Ors. Etc

2. The Petitioners in Civil Writ Petitions Nos.0 of 1980 are the Tata Tea Limited and a shareholder of the said Company. These petitions are directed against the State of West Bengal, Commissioner of Agriculturalx of West Bengal, West Bengal Agriculturalx Officer, Calcutta, Union of India andx Officer,, Companies, Calcutta. The Petitioners in Civil Writ Petitions Nos.2 of 1980 are also the Tata Tea Limited and a shareholder thereof. The Respondents are State of Kerala, Commissioner and Assistant Commissioner of Agriculturalx atKerala,Union of India andthe concernedx Officer. The Petitioners in other writ petitions are Tea Companies and shareholders thereof and the Respondents are ranged on similar lines as above3. The Petitioners are Public Limited Companies growing as well as manufacturing tea and selling the same. As far as the petitions directed against the State of West Bengal are concerned, the challenge therein is to the constitutional validity of Sections 3 &5 of the Bengal Agriculturalx (Amendment) Act, 1980. The Bengal Agriculturalx Act, 1944 provides for the levy and collection of agriculturalx in the then Province of Bengal, the predecessor Province to the present State of West Bengal and, after the coming into force of the Constitution, th e State of West Bengal. By the said amending Act, for the first time,subsections (2)&(2A) of Section 8 of the Bengal Agriculturalx Act were omitted and always deemed to have been omitted. It is alleged by the Petitioner s that as a result of the omission ofsubsections (2)&(2A) of Section 8 of the Bengal AgriculturalIncome tax Act,1944, the State Legislature has sought to assume the power, competence and jurisdiction to impose agriculturalx on the entire income derived from the sale of tea grown and manufactured by a seller and has thereby transgressed the constitutional limitations contained in Article 246(3) of the Constitution of India read with Entry 46 of List II of t he Seventh Schedule to the Constitution of India.In the aforesaid Writ Petitions Nos.0 of 1980 the process of manufacturing tea has been described in some detail. To put it very briefly, the green tea grown by the tea growers is withered by exposure to air under natural or controlled conditions. Certain machinery and equipment is required for the aforesaid process. The object of withering is partial dehydration of shoots to make them leathery and flaccid for rolling and chemic al changes. The change brought about is the increase in caffeline, soluble sugars and amino acids. The second process involves rupture and distortion of tea shoots into smaller sizes to allow mixing of enzymes and substrates. This is known as rolling. The process of rolling is carried out by mechanical bruising, tearing, cutting, crushing breaking and twisting tea leaves for which crank roller/rotorvane/C.T.C. machines are employed. The third process is of fermentation which involves exposure to air under controlled temprature. For this the equipment required is fermentation chamber/trags/floor/troughs. As a result of this process, the colour of tea changes from green to coppery. The next process is of drying or roasting for stoppage of fermentation: dehydration to ensure keeping the quality of the product. Drying or roasting has to be done at a temperature of 30 degree celsius and humidity exposure to blast of hot air in a counter current dryer. The equipment required for this is a conventional tea dryer. As a result of this process, the moisture in the tea is reduced to 4 per cent and it becomes black in colour. This manufacturing process is applied to tea leaves in a factory which is situated within the garden area owned by the Petitioner and licensed under the Factories Act. It is averred that the carrying out of the aforesaid processes is a specialised operation involving the application of modern methods ofl engineering. The cleaning of the tea is then done with machines according to various sizes like broken pekoe, broken orange pekoe, pekoe dust, dust, churmani dust and so on. There are other also other brands of tea produced by the aforesaid process. It is needless to consider these processes in detail except to state that they are quite elaborate and, in the cases before us, valuable machinery is being used for carrying out these processes which are carried out in factories.The case o f the Petitioners is that the income derived from the sale of tea grown and manufactured as aforesaid is derived partly from agriculture and partly from manufacture. Under the Indianx Act, 1922 (referred to hereinafter as "the Act of 1922") and the Rules framed thereunder the income derived from the sale of tea grown and manufactured by a seller, has to be computed in the manner laid down in Rule 24 of thex Rules, 1922 and 40 per cent of the income so computed is treated as income other than agricultural income and the remaining 60 per cent is treated as agricultural income. In respect of the income other than agricultural income, it is the Union Parliament which has and before the coming into force of the Constitution the Centre Legislature which had the power to legislate in respect of taxes; and in respect of the agricultural income, the legislative power in respect of taxation was left to the Provinces under the Government of India Act, 1935 and to the States under the Constitution. The Bengal Agriculturalx Act, 1944 enacted by the Provincial Legislature of Bengal defined agricultural income in identical terms as contained in Section 2(1) of the Act of 1922. The Bengal Agriculturalx Act further provided bysubsection(2) of Section 8 that notwithstanding anything contained that Act, in the case of tea grown in West Bengal and sold by the grower himself or his agents after manufacture, the agricultural income derived therefrom shall be deemed to be that portion of the income computed as aforesaid under the Act of 1922 on whichx was not payable under the Act of 1922 and agriculturalx was levied on the whol e of such agricultural income. As a result of this, the position was that the income of an assessee who grew, manufactured and sold tea in West Bengal was computed in the manner laid down in the Act of 1922 read withx Rules, 1922 and agriculturalx was levied only in respect of 60 per cent of that income. On coming into force of thex Act, 1961 which replaced the Act of 1922, the position remained the same. Thex Act, 1961 (referred to hereinafter as "the Act of 1961") came into effect from 1st April, 1962. The definition of agricultural income in the Act of 1961 is contained insubsection(1) of Section 2 of that Act and is in pari materia with the definition of the said term in the Ac t of 1922. Rule 8 of thex Rules, 1962 is in pari materia with Rule 24 of thex Rules, 1922. As a result of this even after the Act of 1961 and thex Rules, 1962 came into force, a State Legislature could only legislate in respect of taxes regarding that part of the income computed by thex Officer concerned as aforesaid which is treated as agricultural income, namely, 60 per cent of it.In 1979, the Legislature of the State of West Bengal enacted the Bengal Agriculturalx (Amendment) Act, 1979. By the said Amendment Act,subsection(2A) was added aftersubsection(2) in Section 8 of the Bengal Agriculturalx Act, 1944. Very briefly put, the saidsubsection(2A) gave powers to the Agriculturalx Officer to make the computation of income derived from tea in cases where it had not been computed for the purposes of assessment ofx under the Act of 1961 or, although computed, the assessment under the Act of 1961 had been annulled or set aside under that Act and no order of assessment under Section 25 had been made within six years from the end of the year in which the agricultural income was first assessable in the manner and subject to the limitations and conditions set out in the said. It is not really necessary for us to consider this provision further in the view which we have taken. Moreover, this Amendment Act remained in force only for the period 10 after which it was replaced by the Amendment Act of 1980. The West Bengal Legislature in 1980 amended the Bengal Agriculturalx Act by the Bengal Agriculturalx (Amendment) Act, 1980. By the said Amendment Act,s (2) and (2A) of Section 8 of the Bengal Agricultural Incometax were deleted and always deemed to have been deleted as already pointed out and Section 25(4) of that Act was omitted. Section 7 of the Amendment Act provided for cases where the assessment under the Act of 1961 of any agricultural income derived from tea was made before coming into force of the Amendment Act but we are not concerned with that section. Under the petition, the challenge is to the validity of Sections 3 and 5 of the Amendment Act whereby the aforesaids (2) and (2A) of Section 8 were omitted with retrospective effect and Section 25(4) was omitted.

Reasoning: This submission has to be rejected. Clause (b) of subsection (2) of Section 295 specifically confers power on the rule making authority to make rules relating to the manner in which and the procedure by which income for the purposes of the Act of 1961 would be arrived at in the case of income derived in part from agriculture and in part from business and Rule 8 clearly provides for the manner in which computation of income for the purposes of the Act of 1961 is to be made in the case of income derived from the sale of tea grown and manufactured by a seller in India and hence we totally fail to see how it can be said that the said rule goes beyond the scope of theg power conferred under Section 295.In view of what we have discussed above, it appears to us that although the Explanation to Section 2(a)(2) of the Kerala Agriculturalx Act, 1950 has been deleted by the Amendment Act of 1980, the result would still be the same, namely, that the Kerala State Legislature can impose tax only in respect of 60 per cent of the income derived by an assessee who sells tea grown and manufactured by him in India and such income has to be computed in the manner laid down in the Act of 1922 and thereafter in the Act of 1961 for computation of business income. The same is the position in respect of the powers of the legislature of the State of West Bengal in spite of the amendments made by the said legislature by the Amendment Act of 1980 and earlier under the amending Act of 1979 which was in force only for one year as we have stated before. It is not necessary to strike down the said amendments because they do not directly conflict with the definition of the term "agricultural income" under the Constitution as we have pointed out earlier, but we may make it clear that they do not confer any wider power on the State Legislature to impose taxes on agricultural income than what we have set out earlier13. Before parting with the matter, it must be mentioned that the validity of the aforesaid amendments to the Bengal Agricultural Inx Act, 1944 made in 1980 and the deletion of the Explanation in Section 2(a)(2) of the Kerala Agriculturalx Act were challenged as being ultra vires and invalid in law on several other grounds. We have not thought it necessary to go into these grounds in view of what we have held, as set out aboveIt also appears to us unnecessary to go into this question in view of what we have already held.In the result, although none of the prayers in the petitions is granted in terms, the Petitioners substantially succeed in the Petitions. There will be a declaration in terms of the last but one paragraph in favour of the Petitioners. Considering the facts and circumstances of the case, however, we feel that the parties should bear and pay their own costs and we direct accordingly.