Market value of self-produced tea estate produce governs deductible business expenditure, not mere cultivation cost.

Agricultural produce grown in a tea estate and used in the assessee's tea business is to be valued at market value, not merely at cost of cultivation, where that same produce has already been treated as agricultural income on a market-value basis. The commercial measure applied is that the value of goods consumed in the business represents the real expenditure incurred for business purposes, even though the goods were self-produced. On that basis, the assessee could not exclude the market value of the produce from deductible expenditure under rule 24, and the issue was answered against the assessee.

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Issues: Whether, in computing the assessee's business income under rule 24, the market value of agricultural produce grown in the tea estate and used in the tea business had to be taken into account as allowable expenditure.

Analysis: The dispute turned on the principle that agricultural produce used by the assessee in its own business is not to be valued at mere cost of cultivation where the same produce has already been treated as agricultural income on the basis of its market value. The earlier decision concerning tea estate produce established that, for agricultural income-tax purposes, the taxable benefit is the market value of the produce and not merely the cost incurred in raising it. Applying the same commercial measure, the value of produce consumed in the business represents what the assessee in substance expended for the business, even though the goods were its own.

Conclusion: The assessee was not entitled to exclude the market value of the produce from the computation of deductible expenditure; the question was answered against the assessee.

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