TaxTMI 
TaxTMI 
1985 (1) TMI 289
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....o impose tax on the turnover of sale of toddy under entry 54 of List II of the Seventh Schedule to the Constitution. 3.. We will deal with the question whether the turnover in the sale of toddy in their shops or taverns does not constitute sale in order to attract the levy of tax under the Act later and we will now deal with the last two contentions first. 4.. Grounds Nos. 2 and 3 relate to the question whether the petitioners are agriculturists and toddy is an agricultural produce and if so whether the State Legislature is competent to make a law with respect to levy of tax on the sale of toddy under the Act. It is the petitioners' contention that toddy is an agricultural produce and the petitioners are agriculturists referred to in the exception to explanations to section 2(k) of the Act. 5.. Section 2(k) defines who is a dealer for purposes of the Act. "Dealer" means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration. "Goods" as defined by the Sale of Goods Act means: "Goods" means every kind of movable pro....
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.... goods, article, chattel, personal chattel, commodity, movable (corporal and tangible) and thing are more or less synonymous. 6.. Sri Nayak has urged that all the toddy that was sold by the petitioners was tapped from the trees belonging to them. There is a discernible distinction when toddy is tapped by the owner of the trees and when the toddy is collected by further person by himself or through his agent and then sold in the course of their business. The further question is whether it makes any difference if the toddy from one's own trees is sold by the owners and the sale of toddy by a different person other than the owner after collecting the same does or does not amount to a sale of goods as contemplated under the Act. It is unnecessary to deal with this contention any further since no proper averments are found in the petitions nor any foundation is laid for this argument. 7.. We are, therefore, left with the next contention urged on behalf of the petitioners, viz., whether toddy is an agricultural produce and the petitioners are agriculturists and if so whether they are entitled to the exemption in respect of the sale of toddy under the Act. 8.. In order to appreciate th....
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.... cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause. It is therefore necessary to see how agricultural income is understood for the purpose of the Income-tax Act since under article 366 of the Constitution, agricultural income has to be understood in the manner in which the said phrase is understood for purposes of the Income-tax Act. That evidently is for the purpose of avoiding conflict as to the legislative power of the States in regard to agricultural income. The essential idea underlying the definition of "agricultural income" under the Income-tax Act is that it must be derived from land which is used for agricultural purposes and is also assessed to land revenue. Having regard to the definition of "agricultural income" in section 2(1)(a), an income to be "agricultural income" should be derived from land and the land should be used for agricultural purposes. In one of the earliest cases in which "agricultural income" came up for interpretation is a case decided by the Privy Council in Raja Mustafa Ali Khan v. Commis....
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....In Karimtharuvi Tea Estates Ltd. v. State of Kerala [1963] 48 ITR 83 (SC), the Supreme Court held: "Entry 46, List II, of the Seventh Schedule to the Constitution, relates to taxes on agricultural income. In view of clause (3) of article 246 the State Legislature can enact laws about these taxes. Article 366 provides that, unless the context otherwise requires, the expression 'agricultural income' in the Constitution means agricultural income as defined for the purpose of the enactments relating to Indian income-tax. Therefore, the agricultural income about which a State Legislature may enact under entry 46 of List II would be such income as defined in the Indian Income-tax Act." 15.. It is the contention of Sri Nayak that toddy is an agricultural income and that therefore its sale by the owner of the trees should not be taxed under the Act. Toddy is a liquid which is tapped from various palm trees. It is a liquid which exudes from the palm trees which is collected and consumed as a beverage. Applying the tests laid down by the Supreme Court and the Privy Council cited above, toddy cannot be treated as agricultural income for purposes of the Act. Sri Nayak has placed strong reli....
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.... lands, as is sought to be made out by the petitioners in these cases, is not agricultural income and that therefore the petitioners are not entitled to claim exemption from tax in respect of the turnover in sale of such toddy in their shops or taverns. As already stated, no sufficient facts are brought about in these petitions in support of the said contention. 18.. We shall now take up the first contention, namely, that sale of toddy in the petitioners' taverns is a part of the service rendered by the petitioners and is therefore not a sale to attract the levy of tax under the Act. In support of this contention, Sri Nayak has submitted that the toddy so supplied to the consumers cannot be taken out, but has to be consumed in the premises itself and that the toddy is served to the consumers wherever they are and that thus there is no sale of toddy as such but a service rendered to the consumers. Even this contention is devoid of any merit and the mere ipsi dixit of the petitioners that this is a service rendered by the petitioners to its customers is not sufficient and the argument without any particulars of the service so rendered cannot be entertained. Sri Nayak has also sought....