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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 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

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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/73 890 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 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.               891               decision  of the Supreme Court in  Dooars  Tea

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             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 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. 892 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., 893