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PETITIONER: TRAVANCORE RUBBER & TEA  CO. LTD. & ANR.

       Vs.

RESPONDENT: STATE OF KERALA & ANR.

DATE OF JUDGMENT: 01/11/1962

BENCH: DAYAL, RAGHUBAR BENCH: DAYAL, RAGHUBAR DAS, S.K. KAPUR, J.L. SARKAR, A.K. HIDAYATULLAH, M.

CITATION:  1964 AIR  572            1963 SCR  Supl. (1) 836

ACT: Agricultural  Income  Tax-Rubber  Plantation-Computation  of agricultural      income-Deductions-Statute      disallowing expenditure     on    immature     plants-Validity     of-if discriminatory--Agricultural  Income  Tax  (Amendment)  Act, 1961  (Ker.  IX of 1961), s. 2-Constitution of  India,  Art. 14.

HEADNOTE: Under  the Agricultural Income Tax Act,  1950,  agricultural income  from rubber plantations was to be computed  in  the same  manner as under the Indian Income-tax Act,  1922.   In December  1960, the Supreme Court held that the  petitioners were entitled to deduct the expenses incurred in the  upkeep and maintenance of immature rubber plants in the  assessment of  their agricultural income under the Agricultural  Income Tax  837 Act.  Thereafter, by the Agricultural Income Tax (Amendment) Act, 1961 an Explanation 2 was added to s. 5 of the original Act which provided that no deduction shall be allowed of any expenditure laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income   was   derived  during  the  previous   year.    The petitioners contended that Explanation 2 was ultra vires and discriminatory. Held,  that Explanation 2 to s. 5 was validly enacted.   The State  Legislature  had  full  power  to  tax  "agricultural income" as defined in the Agricultural Income Tax Act, which definition  was  in conformity with the  definition  in  the Indian   Income-tax  Act,  1922.   It  was  for  the   State Legislature to provide for such deductions from such  income as  it  considered fit.  The word "income" had a  very  wide meaning.   The word "income" in Entry 46, List 11.   Seventh Schedule   of  the  Constitution  which  empowers  a   State Legislature   to   legislate  with  respect  to   taxes   on agricultural income could not be confined to gross  receipts after deduction of necessary expenses incurred to get  those receipts.

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Travancore  Rubber  &  Tea  Co.  Ltd.  v.  Commissioner   of Agricultural  Income-tax, Kerala, [19611 3 S. C. R. 279  and Navinchandra Mafatlal v. Commissioner of Income-tax, Bombay, [19551 1 S. C. R. 829, referred to. Held,  further, that Explanation 2 to s. 5 was  not  discri- minatory and did not contravene Art. 14.  Though Explanation 2  was  applicable  to rubber plantations  and  not  to  tea plantations,  the  distinction was based  upon  the  special provisions  of  the  Income-tax  Act  and  the  rules   made thereunder.   The  income derive from the sale  of  tea  was partly  derived  from land by agriculture  and  partly  from business.   Such  is not the case with income  derived  from sale of rubber, The  Karimtharuvi  Tea Estates Ltd., Kottayam  v.  State  of Kerala, [1963] Supp.  1 S. C. R. 823, referred to.

JUDGMENT: ORIGINAL JURISDICTION: Petitions Nos. 237 to 239 of 61. Petition  under  Art. 32 of the Constitution  of  India  for enforcement of Fundamental Rights. S.   T.  Desai,  J. B. Dadachanji, O.  C.  Mathur,  Ravindar Narain, for the petitioners. 838 A.   V.  Viswanatha  Sastri and V. A.  S.  Muhammed,for  the respondents. 1962. November 1. The Judgment of the Court was delivered by RAGHUBAR.DAYAL,J.-The  Travancore Rubber and Tea Co.,  Ltd., hereinafter  called the company, and one of  ’Its  directors and  members,  have  filed these  petitions  praying  for  a declaration  that  the Agricultural Income  Tax  (Amendment) Act, 1961 (Act IX of 1961), hereinafter called the Amendment Act,  enacted by the Kerala State Legislature, is  null  and void  and  for  the  issue  of  appropriate  orders  to  the respondents  viz.,  the State of Kerala  and  the  Assistant Commissioner    of   Agricultural   Income-tax,    Kottayam, restraining  them, their agents and servants from  enforcing or acting upon the provisions of the aforesaid Amendment Act against the company and for refund of tax illegally assessed and collected from the company. The business of the company consists of owning and  managing rubber and tea estates situate in Kerala State.  The company was   assessed   to  agricultural   income-tax   under   the Agricultural Income-tax Act 1950 (originally the Travancore- Cochin Agricultural Income-tax Act XXII of 1950, amended  as the Agricultural Income-tax Act, 1950 by Act VIII of 1957 of the Kerala Legislature), hereinafter called the Agricultural Income-tax Act, with respect to its income derived from  its rubber  plantations in the accounting years 1950,  1951  and 1952, corresponding to the assessment years 1951-1952, 1952- 53 and 1953-54.  The assessing authority did not deduct  the expenses incurred in the upkeep and maintenance of the imma- ture  rubber plants in the assessment of the income for  the assessment  year 1953-54, but allowed it in  the  assessment with respect to the other two years.  At the request of  the Income-tax Department and of the 839 company, cases were referred to the High Court of Kerala  in accordance  with s. 60 of the Agricultural  Income-tax  Act. The High court decided against the company holding that such expenditure  was  not  to  be  deducted  in  computing   the agricultural income.  The company came to this Court against the  order  of the High Court and this Court  held,  by  its judgment  dated December 15, 1960 The Travancore Rubber  and

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Tea Co. Ltd. v. The Commissioner of Agricultural Income-tax, Kerala  (1) that such expenses were allowable under s.  5(j) of   the  Agricultural  Income-tax  Act  in  computing   the assessable income.  Thereafter, the Governor of Kerala State promulgated an ordinance which was subsequently repealed  by the Amendment Act of 1961.  The Amendment Act was deemed  to have  come  into effect from April 1, 1951.  By  its  s.  2, Explanation 2 was added to s. 5 of the Agricultural  Income- tax Act.  That Explanation reads :               "Nothing  contained in this section  shall  be               deemed   to   entitle   a   person    deriving               agricultural   income  to  deduction  of   any               expenditure  laid  out  or  expended  for  the               cultivation, upkeep or maintenance of immature               plants  from which no agricultural income  has               been derived during the previous year." By S. 3, assessments previously made on the basis that  such expenses  were not to be allowed in  computing  agricultural income were deemed to be valid. On  February  22,  1961, the company, on the  basis  of  the judgment of this Court, wrote to the Income-tax Commissioner for  refunding the excess tax which had been  realised. It got  the  reply,  dated June 20, 1961, that  its  claim  for refund  was  not  maintainable  so long  as  the  orders  of assessment  were  not varied or reversed  by  any  competent authority and that the claim was also not tenable in view of the provisions contained in the Amendment Act. (1)  (1961) 3 S.C.R. 279. 840 The  effect  of the impugned Explanation  is  that  expenses incurred  on the upkeep and maintenance of  immature  rubber plants  from which no agricultural income is derived  during the accounting year are not to be deducted in computing  the agricultural income. The  State  Legislature derives power  to  tax  agricultural income by virtue of Entry no. 46, List 11, Seventh Schedule, of  the Constitution.  Article 366(1) defines  ’agricultural income’  to  mean "agricultural income as  defined  for  the purpose  of the enactments relating to  Indian  income-tax.’ The  definition  in the Income-tax Act  is  incorporated  by reference  in the Constitution and serves, to demarcate  the bounds  of "agricultural income’.  The relevant  portion  of the definition of ’agricultural income’ in the  Agricultural Income-tax   Act   is  also  in  the  same  terms   as   the corresponding definition of ’agricultural income’ in the Indian Income-tax Act, 1922. Section 5(j) of   the     Agricultural Income-tax Act provides that the   agricultural income of  a person  shall  be computed after making  deductions  of  any expenditure (not being in the nature of capital  expenditure or  personal expenses of the assessee) laid out or  expended wholly  and  exclusively  for the purpose  of  deriving  the agricultural income. The State Legislature has full powers to tax such income  as income  within  the  expression  "agricultural  income’   as defined  in the Agricultural Income-tax Act, the  definition being  in  conformity with the definition  of  ’agricultural income’  in  the  Income-tax  Act.   It  is  for  the  State Legislature  to provide such deductions from such income  as it considers fit.  Section 5 of the Agricultural  Income-tax Act makes provisions for the deductions considered necessary by  the  Legislature.  Explanation 2 added to s.  5  by  the Amendment  Act  makes it clear that the Legislature  was  of opinion that no deduction should be allowed for the expenses incurred in the upkeep and  841

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of immature plants.  Such an intention of the Legislature is manifest as Explanation 2 was enacted after the decision  of this  Court  in  the Travancore Rubber  And  Tea  Co.  Ltd., case(1) to the effect that such expenses are to be  deducted in  view  of  the  provisions or cl. (j)  of  s.  5  of  the Agricultural Incometax Act. We  are therefore of the opinion that the State  Legislature was  competent  to enact Explanation 2 to s. 5  and  thereby provide  for the non-deduction of the expenses  incurred  in the  upkeep or maintenance of immature plants from which  no income has been derived in the accounting year. It  is however contended that apart from the  provisions  of cl.  (j) of s. 5, the word ’income’ does not mean the  gross receipts  of a person but such receipts after deducting  the necessary expenses incurred for the purpose of getting those receipts  and  that  such  had  been  the  concept  of   the Constitution  makers  when they used the  word  ’income’  in Entry  No. 82 of List 1 and Entry No. 46 of List II, of  the Seventh  Schedule to the Constitution.  In support  of  this contention reference was made to the legislative practice in the law of income-tax in England, to the dictionary  meaning of  the word ’income’ and to certain meanings  mentioned  in Stroud’s  Judicial  Dictionary  and  ’Words  &  Phrases’  by Burrows.  We do not consider it necessary to deal with  this contention at length as this Court had occasion to  consider this  aspect  thoroughly  in Navinchandra  Mafatlal  v.  The Commissioner  of Income-tax, Bombay City(2).  Das J., as  he then was, said at p. 833               "Our  attention ha-, not, however, been  drawn               to  any enactment other than  fiscal  statutes               like  the Finance Act and the  Income-tax  Act               where  the  word ’income’ has been  used  and,               therefore, it is not possible to say that  the               critical word               (1) [1961] S S.C.R. 29.               (2] [1955] 1 S.C.R. 829.               842               had acquired any particular meaning by  reason               of  any legislative practice.   Reference  has               been  made  to several cases  where  the  word               ’income’  has  been construed  by  the  Court.               What  is, therefore, described as  legislative               practice     is    nothing    but     judicial               interpretations   of  the  word  ’income’   as               appearing  in  the fiscal  statutes  mentioned               above............  These guarded  observations               quite clearly indicate that they relate to the               term  ’income’  or  ’profit’ as  used  in  the               Income-tax Act.  There is no warrant for  say-               ing  that  these  observations  cut  down  the               natural  meaning of the ordinary English  word               ’income’ in any way." In  discussing  the natural and grammatical meaning  of  the word ’income’, reference was made to its dictionary  meaning and to the interpretation of the word in a wide sense in the United  States of America and in Australia and then  it  was said at p. 837               "’The relevant observations of learned  judges               deciding those cases which have been quoted in               the  judgment of Tendolkar J.,  quite  clearly               indicate that such wide meaning was put on the                             word  ’income’ not because of  any  particular               legislative  practice  either  in  the  United               States or in the Commonwealth of Australia but               because  such was the normal concept and  con-

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             notation   of   the  ordinary   English   word               ’income’.   Its natural meaning  embraces  any               profit or gain which is actually received." It is therefore clear that the word ’income’ in the relevant provisions  of the Constitution has a very wide meaning  and is  not  restricted  in its meaning  as  suggested  for  the petitioner. The  next contention for the appellant is that Explanatin  2 is discriminatory and contravenes the  843 provisions of Art. 14 of the Constitution.  There is nothing discriminatory in the provisions of.  Explanation 2 to s. 5. It  is  applicable to agricultural income derived  from  all crops except tea. The  question of the applicability of Explanation 2 to s.  5 to  the agricultural income derive from tea plantations  was before us for determination in The Karimtharuvi Tea  Estates Ltd.,  Kottayam v. The State of Kerala(1).  We have held  in that  case that Explanation 2 to s. 5 does not apply to  the agricultural  income  from tea plantations.  It  was  argued that  if  such be the view of this  Court,  the  Explanation would  bringing  about discrimination  between  agricultural income  arising from rubber plantations and  similar  income arising   from  tea  plantations  and  that  therefore   the Explanation  would contravene the provisions of Art.  14  of the Constitution.  It was, however, fairly conceded that  in case  the decision that this Explanation does not  apply  to agricultural  income  from tea plantations is based  on  the special provisions in the Income-tax Act and the rules  made thereunder   in   connection   with   the   computation   of agricultural income from tea plantations, there would be  no such  discrimination.  Our decision in The Karimtharuvi  Tea Estates Case(1) is based on such special provisions. The   income  derived  from  the  sale  of  tea  grown   and manufactured  by the seller is partly derived from  land  by agriculture and partly from business.  Such is not the  case with  the  income  derived from the  sale  of  rubber.   The provision  for the computation of agricultural  income  from tea  plantations has to be different and is to be  found  in the  rules  made under s. 59(3) of the  Income-tax  Act  for determining  the  proportions  of  agricultural  income  and income  from business in the entire income from the sale  of tea.  The difference in the provisions for the computation [1963] Supp.  1 S.C.R. 823. 844 of agricultural income from tea plantations and from  rubber plantations is therefore based on good reasons. We  hold  that  the  provisions of  Explanation  2  are  not discriminatory  against  agricultural  income  from   rubber plantations. We   therefore  see  no  force.  in  these  petitions   and, accordingly, dismiss them with costs, one set.                            Petitions dismissed.