COMMISSIONER OF INCOME TAX, WEST BENGAL,

CALCUTTA

M/S. HANTAPARA TEA CO., LTD., CALCUTTA

April 3, 1973

[K. S. HEGDE AND H. R. KHANNA. JJ.]

Jnco111e-te1x-Assessee's agricultural produce used in assessee's bUsiness-Mc.rket value of p1oduce if deductible expenditure for purposes of i11con1etµx.

For the assessment year 1961-62 the assessee-a tea company, was assessed to income-tax under r. 24 of the Income-tax Rules on its profits as per its Profit and Loss Account with c.ertai:a modifications.

In the expenses debited in its accounts only the expenses for 1aising thtch. bamboo, fuel etc .. grown in the tea estate and u.ed 1n the tea business \vere included.

The assessee contended that .the mark.et value of the agriC'ultural produce grown in the tea estate a:nd utilised by the assessec in the tea business, which had been assessed at lOOo/o to Ctgricultural income-tax, must he taken into considration in the computation of tile allo\vable expenditure.

The Appel1ate Assistant Commissioner, the, Tribunal and the High Court, on reference, held in favour of the

ass, zsse~.

Di .. n1issing the appeal to this Vourt,

HELD : In the matter of computing the agricultural income it was not necessary that the agricultural produce should be sold and profit of gain made from such sale, before it is considered as agricultural income.

It is sufficient if the assessee gets any benefit from the produce, and \Vhat is to be taxed is the markt value of the benefit received by the assl.!Ssce and not the costs incurred by the assessee for raisitig the agricultural produce in. question. If the assessee has to pay agricultural i.ncom.e-tax on the market value of the agricltural produce raised in hi-. est?te and used in his tea business, it stands to reason, that while determining the deductible expenditure incurred for the purpose of his business, the same rule, namely, the market value of the produce used for the tea business should be taken into consideration, because, in terms of money, what he expended was the market value of the produce used in conneclion with his business.

The fact that he used his own goods is immaterial.

[891F-H]

Dooc.rs Tea Co. Ltd. v. Conunissioner of Agricultural" Incon1e-tax, West Bengal, [1962] XLIV I.T.R. 6, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 79 of 1970.

Appeal by special leave from the judgment and order dated February 26, 1969 of the Calcutta High Court in Income->tax Reference No. 37 of 1965.

H N. D. Karkhanis and S. P. Nayar, for the appellant.

V. S. Desai, T. A. Ramachandran and D. N. Gupta, for the respondent. 9-L797Sap, CI/73

The Judgment of the Court was delivered by

HEGDE, J.-This is an appeal by special leave.

It relates to !he assessment of the assessee for the; assessment year 1961-62, for which the relevant previous year was the calendar year 1960.

The assessee is a Tea Company, Upto the assessment year \950-51 the Agricultural Income-tax Officer was accepting th~ computation of the total income from the growth, manufacture and sale of tea made by the Income Tax Officer and taking 60 per

cent of the income dete1mined as the agricu)tural income under Rule 24 of the Income-tax Rules.

On and from the assessment year 1951-52 the agricultural income-tax authorities !tarted talcing

the market value of !hatch, bamboo and fuel etc. grown in the tea estate and used in the tea business as 100 per cent aiJ:icultural income and aHer deducting the cost of cultivation thereof, taxed the whole cJ the resulting income on the basis of the market value of those articles.

So, from that assessment year the computation of the total income from tea by the Income-tax authorities was varied by the Agricultural Income-Tax Officer and the assessee had to pay on a total income which was more than the income disclosed in the Profit and Loss Account.

For the assessment year 1961-62, the assessee company was assessed to Income-tax under Rule 34 of the Incometax Rules, on Its proms as per its Prom ana Loss Accounr witn certain mocftfications, by the Income-tax Officer. In the expenses debited in Its accounts, only the expenses for raising thatch, bomboo, fuel etc. grown in the tea estate and useq in the tea business were included.

Before the Appellate Assistant Commissioner, the asse; see raised the contention that the market value of agricultural produce grown in the tea estate and utilised biy the assessee in the 19a business, which had been assessed at 100 per cent to agriculimal income-tax, must be talcen into consideration in lhe computation ot allowable expenditure. In support of that contention reliance was placed on the decision of this Court in the case of Dooars Tea Co. Ltd. v. Commissioner of Agricultural Income-tax, West Bengal('). The Appellate Assistant Commissioner accepted that contention and directed the Income-tax Officer to modify the assessment accordingly. In appeal by the Revenue the finding of the Appellate Assistant Commissioner w.s accepted by the Tribunal.

Thereafter at lhe instance of the Revenue the following question was re{erred to the High Court for its opinion :

"Whether, on the fact& and in the circumstances of lhe case, the Tribunal wa~ right in holding that the

(I) [1962] XLlV I. T. R. 601.

C.I.T. v. HANTAPARA TEA CO, LTD. (Hegde, J.) 891

A decision of the Supreme Court in Dooars Tea Co. Ltd. ( 1962) 44 I.T.R. 6, was applicable to the computation

c~ the assessee's total income under the provisions of the Indian Income-tax Act, 1972 and in directing the Income-tax Officer to make a fresh assessment according: to law in the light of the aforesaid decision of the B Supreme Court."

The High Court answered that question in the aflinnativc :ind in fa\'our of the asses see.

Hence this appeal by lhe Revenue.

!t i, true that, 1he questi0n formulated by 1.hc Tribunu! does not accur"tely bring out the real contention between the parties.

The real con!entioa between the parties is whether the assessee is entitled to. the market value of the agrici.:1turl produce grown by it but utilised for the purpose of tea business.

Dooars Tea Co's. case related to the levy of agricultural income-tax.

Ti1e .facts of that case are as follows :

The assessee, who is a tea grower, grew in its estate hJmboo, thatched grass, fuel timber etc. and utilised tlle same for tea business.

At the time of the assessee's assessment under the Bengal 'Agricultural Income-tax Act the assessee contended that only the cost of growing the produce in question should be taken into consideration and r.ot its market value as the same was used for the purpose of assessee's tea business.

This contention was rejected by the Revenue and this Court upheld the decision of the Revenue.

This Court came to the conclusion that the agricultural income should be computed on the basis of the market value of bamboos, thatched grass and fuel timber etc. in accordance with rule 4(2) of the Bengal Agricultural Income-tax Rules.

The ratio of that decision is that in the matter of computing the agricultural income it was not necessary that 'the agricultural produce should be sold and profit or gain made from such sale before it is considered as agricultural income.

It is sufficient if the assessee gets any benefit from the same, and what is to be taxed is the market value of the benefit received by the assessee and not !he costs incurred by the assessee for raising the agricultural produce in question. lf the assessee has to pay agricultural income-tax on the market value of the agricuitural produce raised in his estate and used in his tea business it stands to reason that while determining the deductible

expenditure incurred for the purpos<: of his business, the same rule viz. the market value of the produce used for the tea business should be taken into consideration, because in terms of money what he expended was the market value of the produce used in connection with his business. The fact that he used his own goods is immaterial.

Now, tµrning back to the question referred to the High Court, even though the question is not properly framed, the question is sufficiently wide to decide the real point in issue. The later part of the question covers the point that calls for decision. In that view there is no need either to reframe the question or to direct th.e Tribunal tosubmit a separate statement of case.

For the reasons mentioned above this appeal fails and the same is dismissed with costs.

V.P.S.

Appeal dismissed.