TaxTMI 
TaxTMI 
1960 (4) TMI 79
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....the Act is to provide for the levy of a tax on agricultural income from land in the State of Madras. Section 2 contains the definitions. Clause (x) defines "total agricultural income" as follows: "'Total agricultural income' means the aggregate of all agriculture income mentioned in section 4 computed in accordance with the provisions of section 5 and includes all income of the description specified in section 9 and all the receipts of the description specified in sub- section (2) of section 10." Section 3 is the charging section. Sub-section (1) of section 3 runs thus: "Agricultural income-tax at the rate or rates specified in Part 1 of the Schedule to this Act shall be charged for each financial year commencing from 1st April, 1955, in accordance with and subject to the provisions of this Act, on the total agricultural income of the previous year of every person." Section 4 declares that subject to the provisions of the Act, the total agricultural income of any previous year of any person comprises all agricultural income derived from land situated within the State which is received by him or which accrues to him with in or without the....
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.... such commencement. Under section 16(1) of the Act every person who held land in excess of the exempted extent at any time during the previous year shall furnish to the Agricultural Income-tax Officer so as to reach him before the 1st June of every year a return in the prescribed form and verified in the prescribed manner setting forth his total agricultural income during the previous year. Section 17 relates to the assessment of the income. Section 31 confers a right of appeal to the Assistant Commissioner on any assessee objecting to the amount of income assessed or tax determined or loss computed or denying his liability to be assessed objecting to particular specified orders. Section 32 confers a right of appeal against an order passed by the Assistant Commissioner to the Appellate Tribunal. Section 34 provides for revision by the Commissioner in particular cases. Section 35 deals with income escaping assessment, and runs thus: "If for any reason agricultural income chargeable to tax under this Act has escaped assessment in any financial year or has been assessed at too low a rate or has been under assessed, the Agricultural Income-tax Officer may, at any time, within fi....
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....ed, took proceeding for the year of assessment, 1955-56 (accounting period being the year ended 31st March, 1955), and completed the assessment by his order dated 21 March, 1956. In and by the said order the net taxable agricultural income of the appellant company was fixed at ₹ 3,13,335 and under section 17 of the Act the tax was fixed at ₹ 1,07,716. The said amount of tax was duly paid. There was no appeal against the order of assessment. On 1st May, 956, the Agricultural Income-tax officer wrote to the appellant stating that as rule 10 of the Rules had been deleted with retrospective effect, he proposed to reassess the income of the appellant for the year 1955-1956 under section 35 of the Act and called for certain particulars. The appellant protested that the proposed action was illegal and invalid. But in spite of his protests the officer by his order dated 31st May, 1956, revised the assessment already made on 21st March, 1956, and added to the income already computed a further sum of ₹ 2,39,206-8-6, being the excess amount realised during the year ending 31st March, 1955 on prior year's coffee crops. There was an additional tax demand for payment of ....
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....5 does not apply. The second item objected to is a sum of ₹ 06,061-7-1 being the Central income-tax claimed on coffee but disallowed. As this item does not form part of the subject-matter of the appeal it is not necessary to set out the contentions of the appellant regarding thereto. The appellant prayed that a writ of certiorari be issued to quash the order of the Agricultural Income-tax Officer, Coimbatore, dated 23rd December, 1956. On behalf of the State counter-affidavits were filed in the two petitions. The view put forward in these affidavits was that under section 4, all agricultural income received during the previous year was taxable and there is no warrant for the assumption that only the income earned from the crops raised during the previous year can be taxed. All items of agricultural income realised by a person during the previous year could be taken into account irrespective of the year to which the crop relates. The assessee who is adopting the mercantile system of accounting should have brought into account income received during the year even though the income might have related to the crops of earlier years. As the income received by the company during th....
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....t with was whether the sale proceeds received by the company from the Coffee Board in the relevant years of account towards the price of coffee produced and sole before April 1, 1954, could be assessed to tax as agricultural income. After referring to the material provisions of the Agricultural Income-tax Act, the learned judge held that though the amounts in question were paid towards the produce of coffee gathered and sold prior to April 1, 1954, as the amounts were received only in the relevant years of account, namely, 1954-55 and 1955-56, they were liable to be taken into account for computing the total agricultural income of the company of those years. His decision rested on this, namely, that the receipt of income was the basis of liability to tax. The learned judge thought that it was not necessary for him to discuss or decide in these proceedings what constituted "receipt", especially where the system of accounting is mercantile. The learned judge found himself unable to accept the contention that either section 5 or section 12 compelled the requirement that the agricultural income must have been derived in the previous year, in the sense that the income must rel....
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.... on the deletion of rule 10 of the Madras Plantations Agricultural Income-tax Rules, 1955, with retrospective effect. It was not, and it cannot be, contended that the Government in exercise of the powers vested in them by section 61 of the Act could not amend the Rules by directing the deletion or repeal of the said rule, with retrospective effect from 1st September, 1955, that is, from the date the Rules originally came into force. All that was contended was that this undoubted retrospective operation will not have the effect of reopening closed assessments. In Writ Appeal No. 121 of 1957, for instance, the assessment was completed by March 21, 1956. The assessee did not file an appeal from the order of assessment. The amendment by which rule 10 was deleted was on 10th April, 1956, subsequent to the order of assessment. Even assuming that the amendment had retrospective effect, it could not disturb the assessment already made because it was a closed assessment. We are unable to accept this contention. It is impossible to treat any assessment as final or closed so long as the powers conferred on the Agricultural Income-tax Officer under sections 35 and 36 are outstanding and subsis....
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....by the total agricultural income of the previous year. We may mention here that we are equally not impressed by the contention on behalf of the assessee that the term "derived" in section 4 of the Act is of assistance in determining the question. We cannot accept the strained interpretation of Mr. Venugopal that the term "derived" suggests that the income must be from the produce of the previous year. Great reliance was placed on behalf of the assessee on the provisions of section 5 of the Act. As we have seen, that section enumerates the deductions which are permissible in computing the agricultural income of a person for a particular year. Learned counsel urged that deductions relate only to the sums spent in the previous year, that is, the year previous to the year of assessment, and so the income which is assessable must be the income derived from the produce raised in the previous year. In particular clause (g) was pressed upon us. Under that clause one of the deductions is the amount of expenses other than capital expenditure incurred in the previous year of cultivating the crop from which the agricultural income is derived. Attractive though the argument....
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.... this system is the profit actually earned, though not necessarily realised in cash, or the loss computed under this system is the loss actually sustained, though not necessarily paid in cash. The distinguishing feature of this method of accountancy is that it brings into credit what is due immediately it becomes legally due and before it is actually received; and it brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disbursed. The 'mercantile accountancy system' is the opposite of the 'cash system of book-keeping' under which a record is kept of actual cash receipts and actual cash payments, entries being made only when money is actually collected or disbursed." The cases now before us all relate to agricultural income from coffee plantations. Coffee is grown on the land and the berries collected and they are delivered to the Coffee Board. That delivery is in pursuance of a statutory sale. The sale proceeds therefore constitute the income. As the learned Advocate-General put it, the taxable event is the conversion of the coffee produce into money. This kind of income will fall under section 2(a)(2)(iii....
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....ecause the whole or a part of it is actually realised after 1st April, 1954. We rest our decision on the following reasoning. Under the Act the first year of assessment is the year commencing from 1st April, 1955. The tax for that year is levied on the total agricultural income of the previous year, that is, the year commencing 1st April, 1954. There is, therefore, no liability to tax in respect of the agricultural income of any period prior to 1st April, 1954. In the instant cases relating to coffee, the income is derived by the sale of the produce. If the sale takes place prior to 1st April, 1954, then the income derived by such sale would be income derived by the assessee prior to 1st April, 1954. Such income does not fall within the scope of the Act. This would be so whatever system of accounting is adopted by the assessee, mercantile or cash. To give a concrete illustration which will also show the anomaly of adopting any other interpretation: suppose the coffee crop grown in 1948 is sold in 1949 but the price or part of it is not realised till proceedings are taken for its recovery and eventually the amount is realised after 1st April, 1954, will such amount be taxable as th....