Partly exempt agricultural income remains includible for rate purposes, with tax computed proportionately under the statutory formula.

A notification granting exemption or reduction in respect of agricultural income-tax on income spent for public medical, veterinary and educational institutions did not remove that amount from total agricultural income. It remained part of the aggregate income for rate purposes and fell within the statutory scheme for partly exempt income under section 17 of the Rajasthan Agricultural Income-tax Act, 1953. Tax was therefore to be computed proportionately on the unexempted portion of the agricultural income, and the same method applied to super-tax under section 78.

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Issues: Whether the amount of agricultural income spent on the maintenance of medical, veterinary and educational institutions for the public, and exempted under the Government notification dated 30 August 1956, was to be included in the total agricultural income for determining the rate of agricultural income-tax under sections 3 and 17 of the Rajasthan Agricultural Income-tax Act, 1953.

Analysis: The notification was issued under section 80 of the Rajasthan Agricultural Income-tax Act, 1953, which empowered the State Government to grant exemption, reduction in rate, or other modification in respect of agricultural income-tax. The Court held that the notification did not exclude the relevant amount from the ambit of total agricultural income altogether. Instead, the case fell within section 17, which deals with income included in total agricultural income but exempted from tax under the Act. On that basis, the tax had to be computed proportionately on the unexempted portion of the total agricultural income. The same approach applied for calculating super-tax under section 78.

Conclusion: The amount spent on the specified institutions remained includible in the total agricultural income for the limited purpose of determining the rate of agricultural income-tax, and tax was correctly computed under section 17 of the Act.

Ratio Decidendi: Where a notification grants only a reduction or exemption in respect of agricultural income-tax on a portion of agricultural income, the exempted amount is not excluded from total agricultural income but is taken into account for rate purposes, with tax chargeable proportionately under the statutory formula applicable to partly exempt income.

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