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Issues: (i) Whether the Tribunal's finding that there was no market for the sugarcane produced by the assessee was unsupported by evidence or otherwise perverse. (ii) Whether the income from conversion of sugarcane into jaggery was agricultural income within the meaning of the Indian Income-tax Act, 1922.
Issue (i): Whether the Tribunal's finding that there was no market for the sugarcane produced by the assessee was unsupported by evidence or otherwise perverse.
Analysis: The question was treated as one of fact, and the court limited its review to whether there was any evidence supporting the Tribunal's conclusion. The record contained oral and documentary material on both sides regarding the nature of the sugarcane, the absence of a practical market for its sale in the natural condition, and the limited utility of a single nearby mill as a purchaser. The Tribunal's reasoning showed awareness that a formal market-place was not the test, and its conclusion was not shown to rest on any misconception of law or to be one that no reasonable tribunal could reach.
Conclusion: The finding was supported by evidence and was not perverse. The answer was in favour of the revenue.
Issue (ii): Whether the income from conversion of sugarcane into jaggery was agricultural income within the meaning of the Indian Income-tax Act, 1922.
Analysis: The statutory test required that the process employed be one ordinarily used by cultivators to render the produce marketable, and that where no market existed for the produce in its natural condition, conversion into jaggery could be treated as such an ordinary process. On the facts found, the sugarcane could not be profitably marketed as sugarcane and had to be converted into jaggery to be made saleable. The income was therefore connected with agricultural produce and fell within the exemption claimed.
Conclusion: The income from sale of jaggery was agricultural income. The answer was in favour of the assessee.
Final Conclusion: The reference was answered on the basis that the Tribunal's factual finding on marketability stood, and the assessee's income from jaggery was held to be agricultural income under the Act.
Ratio Decidendi: In a reference under section 66, a finding of fact by the Tribunal can be interfered with only if there is no evidence to support it or if it is perverse; and where agricultural produce has no real market in its natural condition, conversion by an ordinary cultivator's process to make it saleable may retain its agricultural character for exemption purposes.
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