Rule 8 computation allows full deduction of green leaf cess before tea income apportionment.

Rule 8 requires composite tea income to be computed first under the Income-tax Act and only then apportioned into agricultural and taxable components. On that footing, deductions relevant at the computation stage, including cess paid on green leaf, must be allowed in full before the 60:40 apportionment. Restricting the deduction only to the agricultural share after apportionment would undermine the statutory fiction and effectively tax part of the same amount twice in substance. The cess is therefore fully deductible in computing tea income before apportionment, and the Revenue's challenge fails.

---

---

Issues: Whether cess paid on green leaf is deductible while computing income from tea grown and manufactured under rule 8 before apportionment between agricultural and business income.

Analysis: Rule 8 creates a legal fiction under which the composite income from tea is first computed as income under the Income-tax Act, 1961, and only thereafter apportioned into 60 per cent agricultural income and 40 per cent taxable income. All deductions allowable at the computation stage, including cess on green leaf, must therefore be permitted before apportionment. If the deduction were restricted only to the agricultural component after apportionment, the fiction created by rule 8 would be undermined and the agricultural part would be assessed twice in substance. The entire cess paid is thus an allowable deduction in arriving at the total income.

Conclusion: The cess on green leaf is fully deductible in computing tea income under rule 8 before apportionment, and the Revenue's challenge fails.

Ratio Decidendi: Where a statutory fiction requires composite tea income to be computed first and apportioned only thereafter, deductions relevant to the computation stage must be allowed in full before apportionment.

---