Mercantile accrual and compulsory coffee delivery: income arose on delivery treated as sale, not on later receipt.

Coffee compulsorily delivered to the Coffee Board under the Coffee Market Expansion Act was treated as a sale by operation of law, because the registered owner retained only a right to receive payment and ceased to own the coffee on delivery. For an assessee maintaining mercantile accounts, income accrued when the sale entry was made in the books on delivery, not when cash was later received. The receipts therefore related to earlier years in which the taxable sale had already occurred, so they were not assessable in the relevant assessment years under the Madras Plantations Agricultural Income-tax Act, 1955.

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Issues: Whether the amounts received from the Coffee Board in respect of coffee delivered under the Coffee Market Expansion Act, 1942 were assessable as agricultural income in the relevant assessment years under the Madras Plantations Agricultural Income-tax Act, 1955, when the assessee maintained mercantile accounts.

Analysis: The statutory scheme showed that coffee delivered to the Coffee Board under section 25 was placed in the surplus pool, the registered owner retained no rights except the right to receive payment under section 34, and the Board could deal with the coffee as its own. On that footing, delivery to the Board amounted to a sale by operation of law, and the assessee ceased to be the owner when the coffee was handed over. Since the assessee followed the mercantile system, the income was taken to arise when the sale entry was made in the books on delivery, not when cash was later received. The receipts related to earlier years in which the sale had already occurred.

Conclusion: The receipts were not taxable in the relevant assessment years because the taxable sale had taken place in the earlier years.

Ratio Decidendi: Where coffee is compulsorily delivered to the Coffee Board under the Coffee Act and the assessee follows the mercantile system, income accrues on delivery because the delivery operates as a sale and the owner's right is only to receive payment.

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