Tea plantation income computation excludes disallowance for immature plants' upkeep under the agricultural income-tax scheme.

Tea plantation income must be computed under the Income-tax Act, 1922 and the Income-tax Rules, 1922, with Rule 24 governing the deemed agricultural income component. The constitutional definition of agricultural income does not permit a State agricultural income-tax provision to enlarge that base beyond the income computed under the special tea scheme. Explanation 2 to section 5 of the Agricultural Income-tax Act, 1950 is therefore read harmoniously with the tea-specific provision and does not apply to tea plantation income. Expenditure on upkeep and maintenance of immature tea plants is treated as running expenditure, not capital expenditure, and is not disallowed under that Explanation.

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Issues: Whether Explanation 2 to section 5 of the Agricultural Income-tax Act, 1950 could be applied to tea plantations so as to disallow expenditure incurred for the upkeep and maintenance of immature tea plants and thereby enlarge the taxable agricultural income beyond the income computed under the Income-tax Act and the Income-tax Rules.

Analysis: The constitutional scheme confines State taxation of agricultural income to income that answers the constitutional definition of agricultural income, which is tied to the income-tax enactments. For tea plantations, the relevant computation is controlled by the Income-tax Act, 1922 and the rules made under section 59, especially Rule 24, which treats tea income as business income first and then deems only the stipulated proportion as agricultural income. The deduction under section 10(2)(xv) of the Income-tax Act, 1922 is therefore part of the computation of that income. Explanation 2 to section 5 of the Agricultural Income-tax Act, 1950, if applied to tea, would be inconsistent with that scheme and would create a different and higher concept of agricultural income than the Constitution permits. The proper construction is to read the Explanation harmoniously with the special tea provision in section 2(a) of the Agricultural Income-tax Act, 1950, so that it does not operate on tea plantation income. The expenditure on upkeep and maintenance of immature tea plants was also treated as running expenditure and not capital expenditure.

Conclusion: Explanation 2 to section 5 of the Agricultural Income-tax Act, 1950 does not apply to expenditure incurred for the upkeep or maintenance of immature tea plants, and the agricultural income from tea plantations must be computed in accordance with the Income-tax Act, 1922 and the Income-tax Rules, 1922.

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