Agricultural income can include produce used in the business without sale, and Rule 4 may still govern valuation.

Bamboo, thatch and fuel timber grown on the assessee's own land and habitually used in its tea business were treated as agricultural income under the Bengal Agricultural Income-tax Act even though they were not sold. The Act recognises agricultural produce derived from land as income in itself, and sale is not a necessary condition where the produce is raised by agricultural operations and regularly appropriated for business use. Rule 4 also applies as a machinery provision for valuing such produce, because its wording covers both sold and unsold produce and enables computation of market value for assessment purposes.

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Issues: (i) Whether bamboo, thatch and fuel timber grown by the assessee on its own land and habitually utilised in its tea business, though not sold, constituted agricultural income under the Bengal Agricultural Income-tax Act; (ii) Whether such income could be computed under rule 4 of the Rules framed under the Act.

Issue (i): Whether bamboo, thatch and fuel timber grown by the assessee on its own land and habitually utilised in its tea business, though not sold, constituted agricultural income under the Bengal Agricultural Income-tax Act.

Analysis: The definition of agricultural income in section 2(1)(b) treats agricultural produce derived from land as income in itself. Clause (i) covers income derived from agricultural land by agriculture, while clauses (ii) and (iii) separately deal with income from sale of processed produce. On the facts found, the produce was raised by agricultural operations and was regularly appropriated for business use every year. Sale was not essential for the produce to be income under the Act. The charging scheme in section 7 also supports taxation of agricultural income derived from land when received by the assessee.

Conclusion: Yes. The produce constituted agricultural income, and this issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether such income could be computed under rule 4 of the Rules framed under the Act.

Analysis: Rule 4 provides a method for determining the market value of agricultural produce for the purposes of the Act. Its language covers produce sold in the market and produce not sold in the market, and therefore extends to produce not sold at all. The rule is a general machinery provision meant to enable computation of the market value of agricultural produce for assessment and return purposes, including where the produce itself forms the income. The construction advanced by the assessee would defeat the working of the Act and the prescribed return format.

Conclusion: Yes. Rule 4 applied to the computation of such income, and this issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered in the affirmative on both questions, confirming that agricultural produce habitually used by the assessee in its business could be taxed as agricultural income and valued under the prescribed rule.

Ratio Decidendi: Agricultural produce derived from land may itself be agricultural income even without sale if it is habitually appropriated for the assessee's own use, and the prescribed valuation rule applies as a machinery provision to compute its market value for assessment.

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