Commissioner Of Income Tax, West ... vs M/S. Hantapara Tea Co., Ltd., Calcutta on 3 April, 1973 Equivalent citations: 1973 AIR 2495, 1973 SCR (3) 889, AIR 1973 SUPREME COURT 2495, 1973 TAX. L. R. 1322, 89 ITR 258, 1973 3 SCR 889, 1973 SCC (TAX) 526, 1974 3 SCC 202 Author: K.S. Hegde Bench: K.S. Hegde, Hans Raj Khanna PETITIONER: COMMISSIONER OF INCOME TAX, WEST BENGAL, CALCUTTA Vs. RESPONDENT: M/S. HANTAPARA TEA CO., LTD., CALCUTTA DATE OF JUDGMENT03/04/1973 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. KHANNA, HANS RAJ CITATION: 1973 AIR 2495 1973 SCR (3) 889 1974 SCC (3) 202 CITATOR INFO : R 1979 SC 376 (2) ACT: Income-tax-Assessee's agricultural produce used in assessee's business-Market value of produce if deductible expenditure for purposes of income-tax. HEADNOTE: 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 certain modifications. In the expenses debited in its accounts only the expenses for raising thatch, bamboo, fuel etc. grown in the tea estate and used in the tea business were included. The assessee contended that the market value Commissioner Of Income Tax, West ... vs M/S. Hantapara Tea Co., Ltd., Calcutta on 3 April, 1973  1 of the agricultural produce grown in the tea estate and utilised by the assessed in the tea business, which had been assessed at 100% to agricultural income-tax, must be taken into consideration in the computation of the allowable expenditure. The Appellate Assistant Commissioner, the, Tribunal and the High Court, on reference, held in favour of the assessee Dismissing the appeal to this Court, 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 what is to be taxed is the market value of the benefit received by the assessee and not the costs incurred by the assessee for raising the agricultural produce in question. If the assessee has to pay agricultural income-tax on the market value of the agricultural produce raised in his estate 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 connection with his business. The fact that he used his own goods is immaterial. [891 F-H] Dooars Tea Co. Ltd. v. Commissioner of Agricultural Income,tax, West Bengal, [1962] XLIV I.T.R. 6, referred to. JUDGMENT: 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. N. D. Karkhanis and S. P. Nayar, for the appellant. V. S. Desai, T. A. Ramachandran and D. N. Gupta, for the respondent. 9-L797Sup. Cl/73 The Judgment of the Court was delivered by HEGDE, J.-This is an appeal by special leave. It relates to the 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 1950-51 the Agricultural Income-tax Officer was accepting the 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 determined as' the agricultural income under Rule 24 of the Income-tax Rules. On and from the assessment year 1951-52 the agricultural income-tax authorities started taking the market value of thatch, bamboo and fuel etc. grown in the tea estate and used in the tea business as 100 per cent agricultural income Commissioner Of Income Tax, West ... vs M/S. Hantapara Tea Co., Ltd., Calcutta on 3 April, 1973  2 and after deducting the cost of cultivation thereof, taxed the whole of 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 Income-tax Rules, on its pronts as per its Pront and Loss Account with certain modifications, 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 used in the tea business were included. Before the Appellate Assistant Commissioner, the assessee raised the contention that the market value of agricultural produce grown in the tea estate and utilised by the assessee in the tea business, which had been assessed at 100 per cent to agricultural income-tax, must be taken into consideration in the computation of 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(1). 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 was accepted by the Tribunal. Thereafter at the instance of the Revenue the following question was referred to the High Court for its opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the (1) [1962] XLIV 1. T. R. 601. decision of the Supreme Court in Dooars Tea Co. Ltd. (1962) 44 I.T.R. 6, was applicable to the computation of the assessee's total income under the provisions of the Indian Income-tax Act, 1922 and in directing the Income-tax Officer to make a fresh assessment according to law in the light of the aforesaid decision of the Supreme Court." The High Court answered that question in the affirmative and in favour of the assessee. Hence this appeal by the Revenue. It is true that, the question formulated by the Tribunal does not accurately bring out the real contention between the parties. The real contention between the parties is whether the assessee is entitled to the market value of the agricultural 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. The facts of that case are as follows The assessee, who is a tea grower, grew in its estate bamboo, thatched grass, fuel timber etc. and utilised the 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 not 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 Commissioner Of Income Tax, West ... vs M/S. Hantapara Tea Co., Ltd., Calcutta on 3 April, 1973  3 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 the costs incurred by the assessee for raising the agricultural produce in question. It the assessee has to pay agricultural income-tax on the market value of the agricultural produce raised in his estate 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 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, turn 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 the Tribunal to submit 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., Commissioner Of Income Tax, West ... vs M/S. Hantapara Tea Co., Ltd., Calcutta on 3 April, 1973  4