Agricultural income tax on tea income is confined to the statutory agricultural portion, not the whole sale proceeds.

Article 366(1) adopts the meaning of agricultural income used in the Central income-tax law, so tea income must be split under the statutory rule treating 40 per cent as business income and 60 per cent as agricultural income. State Legislatures may levy agricultural income-tax only on that agricultural portion and cannot tax the whole income from tea grown and manufactured by the assessee. Earlier tea income decisions were treated as governing this constitutional scheme, while reliance on a sales tax ruling and on deletion of a State statutory explanation was rejected as not expanding the constitutional field of agricultural income.

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Issues: Whether the State Legislatures could levy agricultural income-tax on the entire income from the sale of tea grown and manufactured by the assessee, or whether their power was confined to the portion treated as agricultural income under the Central income-tax law and rules.

Analysis: Article 366(1) of the Constitution adopts the meaning of agricultural income as defined for the purposes of the enactments relating to Indian income-tax. The relevant Central enactments and rules provided that income from tea grown and manufactured by the seller is to be computed as business income, with only 40 per cent deemed liable to income-tax and the balance treated as agricultural income. The earlier decisions on tea income treated those rules as bound up with the constitutional definition of agricultural income and held that State power extends only to the agricultural portion so determined. The attempt to rely on the deletion of the State statutory explanation and on the decision in the sales tax case was rejected, because that case dealt with a different statute and a different question. The State rules could not enlarge the constitutional field of agricultural income or permit taxation of the whole tea income.

Conclusion: The State Legislatures were competent to levy agricultural income-tax only on 60 per cent of the tea income computed under the Central income-tax law and rules, and not on the entire income.

Final Conclusion: The petitions substantially succeeded and the impugned State amendments did not confer any wider taxing power over tea income than that permitted by the constitutional and Central law framework.

Ratio Decidendi: For tea grown and manufactured by the assessee, the constitutional expression agricultural income includes the Central statutory and rule-based apportionment, so State taxation is confined to the agricultural portion of the income as so computed.

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