Composite tea income is taxed as mixed income, while direct sale of green tea leaves remains separately agricultural income.

Composite tea income is computed under rule 8 of the Income-tax Rules, 1962 as mixed income, with the taxable agricultural component carried to the State levy under the Bengal Agricultural Income Tax Act, 1944. The scheme requires a combined reading of rule 8 and section 8 of the Bengal Act: the income-tax assessment determines the composite tea business income, and that assessment is conclusive evidence for the State assessment of the agricultural element. Direct sale of green tea leaves, however, is agricultural income in its own right and falls outside the mixed-income formula, so it remains separately taxable under the Bengal Act.

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Issues: Whether income from tea grown and manufactured is to be computed under the Income-tax Rules, 1962 as mixed income, with forty per cent taxable under the Income-tax Act and the balance taxable under the Bengal Agricultural Income Tax Act, 1944, and whether income from sale of green tea leaves is separately assessable as agricultural income under the Bengal Act.

Analysis: The governing scheme required a combined reading of rule 8 of the Income-tax Rules, 1962 and section 8 of the Bengal Agricultural Income Tax Act, 1944, as amended. Rule 8 treats income from the sale of tea grown and manufactured in India as business income for computation, with forty per cent deemed liable to tax, while section 8(1A) of the Bengal Act proceeds on the basis that the corresponding agricultural component is taxable by the State. Section 8(3) further makes the assessment under the income-tax law conclusive evidence for the State assessment. On that framework, the assessment of the composite tea business is made once under the income-tax law, after which the State levies tax only on the agricultural component. The income from direct sale of green tea leaves, being agricultural income and not income from tea grown and manufactured, does not fall within the mixed-income formula and remains taxable under the Bengal Act.

Conclusion: The answer is in the negative on the assessee's main contention. Income from tea grown and manufactured is to be assessed under the income-tax scheme as mixed income, and income from sale of green tea leaves is taxable as agricultural income under the Bengal Agricultural Income Tax Act, 1944; the assessee's challenge fails.

Ratio Decidendi: Where tea business yields composite income from cultivation and manufacture, the income-tax law governs computation of the mixed income and the State can tax only the agricultural component, while direct sale of green tea leaves remains separately taxable as agricultural income under the State enactment.

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