Valid apportionment of tea income upheld where tax law authorised rule-based split between agricultural and business income.

Rule 24 of the Indian Income-tax Rules, 1922 and the corresponding provisions of the Assam Agricultural Income-tax Act, 1939 validly apportioned tea income between agricultural income and business income. The statutory scheme treated tea income as partly agricultural and partly business income, and section 59 of the Indian Income-tax Act, 1922 authorised rules for determining the proportion where exact ascertainment was not practicable. The delegation was held to be guided by legislative policy and standards, not naked or uncontrolled, and the Assam Act's Explanation and rule 5 merely gave effect to the same apportionment framework. The challenge on grounds of excessive delegation and arbitrariness failed, and the provisions remained operative.

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Issues: Whether rule 24 of the Indian Income-tax Rules, 1922 and the corresponding provisions of the Assam Agricultural Income-tax Act, 1939, including the Explanation to section 2(a), the proviso to section 8, and rule 5, were unconstitutional or ultra vires on the ground of excessive delegation and arbitrary apportionment of tea income between agricultural income and business income.

Analysis: The scheme of the relevant enactments showed that tea income was not treated as wholly agricultural or wholly business income. Section 59 of the Indian Income-tax Act, 1922 authorised the Central Board of Revenue to make rules for determining classes of income, and expressly contemplated rules prescribing the manner of arriving at income derived partly from agriculture and partly from business, including the proportion of income deemed liable to tax where exact ascertainment was not practicable. Rule 24 was framed within that statutory framework and merely worked out the legislative policy by apportioning tea income on a rational basis. The Assam Act adopted the same definition of agricultural income as the Indian Income-tax Act and its Explanation and rule 5 only gave effect to the apportionment already recognised by the Income-tax rules. The constitutional and statutory definitions of agricultural income were read as incorporating the existing rule-making scheme. The power conferred was therefore guided by policy and standards, and did not amount to naked or uncontrolled delegation.

Conclusion: The challenge to rule 24 of the Indian Income-tax Rules, 1922 and to the corresponding provisions of the Assam Agricultural Income-tax Act, 1939 failed; they were held valid and operative against the petitioners.

Ratio Decidendi: Where a taxing statute lays down the policy, the class of income, and the circumstances in which apportionment is to be made, it may validly delegate to the rule-making authority the task of fixing the proportion and working out the details of income derived partly from agriculture and partly from business.

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