Agricultural income valuation turns on accounting-year market value, not later procurement rates or subsequent price changes.

For valuation of agricultural produce under section 7 of the Bengal Agricultural Income-tax Act read with rule 4(2)(a) of the Bengal Agricultural Income-tax Rules, 1944, the controlling factor is the value of the receipt to the assessee in the accounting year of receipt. If the produce was not sold in that year, market value must be determined by the average local price prevailing during that year. A later seizure and compulsory sale at a regulated procurement rate in the next year does not affect the earlier year's valuation, and subsequent price movements are immaterial. The produce was therefore to be valued at the open market price in the accounting year, not the later procurement rate.

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Issues: Whether agricultural produce received in the accounting year, but seized and paid for in a later year at a procurement rate lower than the open market rate, must be valued for tax purposes at the later procurement rate or at the open market price prevailing in the accounting year.

Analysis: The relevant enquiry under section 7 of the Bengal Agricultural Income-tax Act read with rule 4(2)(a) of the Bengal Agricultural Income-tax Rules, 1944 was the value of the agricultural receipt to the assessee in the accounting year in which it was received. Where the produce was not sold during that year, market value had to be ascertained by reference to the average price at which such produce was sold in the locality during the previous year. The later seizure and compulsory sale at a regulated procurement rate in the next year did not alter the value of the receipt in the earlier accounting year. Subsequent fluctuations in price, or events occurring after the close of the accounting year, were immaterial to the assessment of income for that year.

Conclusion: The produce had to be valued at the open market price prevailing in the accounting year, and not at the later procurement rate. The question was answered in the negative, in favour of the assessee.

Ratio Decidendi: For assessment of income from agricultural produce, the decisive factor is the value of the receipt to the assessee in the accounting year of receipt, and later price changes or compulsory purchase at a reduced rate in a subsequent year cannot govern that valuation.

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