Market value for agricultural produce must be the accounting year open market price, not a subsequent procurement rate.

Valuation of agricultural produce for an accounting year must reflect the price that the assessee could realise during that year; rule 4(2)(a) prescribes the market value as the average locality price when produce was not sold in the year, and section 7 requires determination for the accounting year. Consequently, subsequent compulsory seizure and payment at a later procurement rate do not alter the accounting year value. Where the farmer was free to sell in the open market during the accounting year, the open market price prevailing in that accounting year is the applicable valuation.

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Issues: Whether, for assessment of agricultural income of the accounting year 1358 B.S., paddy harvested in that year but seized and paid for by procurement authorities in the next year should be valued at the procurement price or at the open market price prevailing in 1358 B.S.

Analysis: Section 7 requires determination of agricultural income for the accounting year and rule 4(2)(a) prescribes market value where produce has not been sold during the accounting year as the average price at which such produce was sold in the locality during the previous year. The relevant time for valuation is the accounting year; therefore the value is the price the assessee could realise in that year. Subsequent events in the following year, including compulsory seizure and payment at a lower procurement rate, do not alter the value of the receipt in the accounting year. Where the assessee was free during the accounting year to sell in the open market at the prevailing rate, that open market rate is the applicable market value under rule 4(2)(a).

Conclusion: The valuation must be at the open market price for 1358 B.S., not at the later procurement rate; decision favours the assessee.

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