Partner salary and loan interest from a tea plantation firm are not agricultural income merely because of the source of funds.

Salary paid to a partner for services rendered to a tea plantation firm is not agricultural income, because it is remuneration under the partnership arrangement and not a share of agricultural profits; the full amount remains outside agricultural income-tax. Interest paid to a partner on a separate loan advanced to the firm is treated the same way, as return on lending rather than agricultural income, and is not apportionable merely because the firm derives funds from tea cultivation. In computing the agricultural component of tea income, the agricultural income-tax authority should follow the Central income-tax computation to avoid inconsistent assessment and double taxation; on these facts, no contrary apportionment was justified.

---

---

Issues: (i) Whether salary paid to a partner for services rendered to a tea plantation firm could be treated, in whole or in part, as agricultural income; (ii) Whether interest paid to a partner on a loan advanced to the firm could be treated, in whole or in part, as agricultural income; (iii) Whether the agricultural income-tax authority should depart from the Central income-tax computation in determining the agricultural component of tea income.

Issue (i): Whether salary paid to a partner for services rendered to a tea plantation firm could be treated, in whole or in part, as agricultural income.

Analysis: The salary was paid as remuneration for services under the partnership arrangement and not as a share of agricultural profits. The fact that the ultimate source of funds was tea plantation income did not convert the payment into agricultural income. The prior judicial view applied the principle that such remuneration is assessable in its entirety as income and no part of it can be excluded as agricultural income merely because the firm carries on plantation activity.

Conclusion: No part of the partner's salary was liable to agricultural income-tax.

Issue (ii): Whether interest paid to a partner on a loan advanced to the firm could be treated, in whole or in part, as agricultural income.

Analysis: Interest on a separate loan advanced by a partner stands on the same footing as salary for services rendered. It is received as return on the loan and not as a share of agricultural profits. The payment therefore could not be split and taxed as agricultural income merely because the firm's underlying business was tea cultivation.

Conclusion: No part of the partner's interest income was liable to agricultural income-tax.

Issue (iii): Whether the agricultural income-tax authority should depart from the Central income-tax computation in determining the agricultural component of tea income.

Analysis: The judgment emphasised the need to avoid conflicting assessments and the risk of double taxation where the Central and State authorities compute the same tea income independently. In the circumstances, the Central computation furnished the proper basis and the agricultural authority was not justified in treating the partner's salary or interest as partly agricultural income.

Conclusion: The agricultural income-tax authority was not entitled to make a contrary apportionment on these facts.

Final Conclusion: The entire salary and interest received by the partners remained outside agricultural income-tax, and the writ petitions succeeded.

Ratio Decidendi: Remuneration or interest received by a partner from a tea plantation firm is not agricultural income merely because the firm's ultimate source of funds is agricultural; such receipts are taxable as income in full unless they constitute a share of agricultural profits.

---