Agricultural income includes produce grown on land and used in business, and residuary valuation can apply without sale.

Bamboo, thatching grass and fuel timber grown on agricultural land were treated as agricultural income when produced by agricultural operations, even though the assessee used them in its own tea business. The definition was read broadly: the first limb covered income derived from land by agriculture, while sale-based wording in later clauses showed that sale was not required in every case. The same produce could also be valued under the residuary computation rule, because it applied where the produce was not sold in the market. On that basis, the value of the internally used produce was upheld for assessment.

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Issues: (i) Whether bamboo, thatching grass and fuel timber grown on agricultural land and utilised by the assessee in its own tea business constituted agricultural income within section 2(1)(b)(i) of the Bengal Agricultural Income-tax Act, 1944; (ii) Whether, if so, such income could be computed under rule 4 of the rules framed under the Act.

Issue (i): Whether bamboo, thatching grass and fuel timber grown on agricultural land and utilised by the assessee in its own tea business constituted agricultural income within section 2(1)(b)(i) of the Bengal Agricultural Income-tax Act, 1944.

Analysis: Section 2(1)(b) defines agricultural income as income derived from land by agriculture, by specified processes, or by sale after such processes. The first limb is expressed in wide and plain terms and does not import any requirement of sale. The structure of clauses (ii) and (iii) shows that where sale was intended, the legislature said so expressly. The produce here was grown by agricultural operations and used by the assessee in its business; that use did not prevent it from being income derived from land by agriculture.

Conclusion: The produce was agricultural income within section 2(1)(b)(i), and this issue is answered against the assessee.

Issue (ii): Whether, if the produce was agricultural income, such income could be computed under rule 4 of the rules framed under the Act.

Analysis: Rule 4(1) applies where the produce is sold in the market. Rule 4(2) is residuary and applies to cases not falling under rule 4(1), including where the produce has not been sold at all. The rule therefore provided a method for determining market value even in a case of internal use of produce by the assessee.

Conclusion: The income could be computed under rule 4, and this issue is also answered against the assessee.

Final Conclusion: The assessment of the value of the produce used by the assessee in its business was upheld and the appeal failed.

Ratio Decidendi: Where a taxing definition includes income derived from agriculture in broad terms and separately provides for sale-based situations, agricultural produce grown by the assessee and used in its own business can still constitute agricultural income, and a residuary valuation rule may be applied even though the produce was not sold.

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