TaxTMI 
TaxTMI 
2005 (12) TMI 66
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....Constitution of India the rule-making authority has no legislative competence, to tax as agricultural income receipts which are incapable of being construed as agricultural income within the meaning of section 2(1A) of the Income-tax Act. Accordingly, sub-clauses (ii) and (iii) of section 4(2) of the Agricultural Income-tax Act are unconstitutional. The petitioners also submit that in any view section 4(2) of the Act, if at all, would apply in respect of computation of income made under the Agricultural Income-tax Act in respect of agricultural produces other than tea and cannot apply to computation of income made under the Income-tax Act including in relation to the computation of tea income. The petitioners also point out as far as income from tea grown and manufactured is concerned, the authorities are empowered to tax only 60 per cent, of such income as computed by the Central Income-tax Officer under the Income-tax Act and the State and the authorities, by resorting to section 4(2) of the Act, cannot vary the computation of income from tea grown and manufactured as computed under the Central Income-tax Act. The petitioners further point out that if section 4(2) of the Act i....
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....(c) share income received by a partner from any firm on which tax has been paid by the firm. (2) The following income shall be deemed to be agricultural income received in the previous year, namely:- (i) any amount received in the previous year from the Indian Coffee Board in respect of coffee delivered in any year for sale in pool auction, excluding any amount on which tax was levied in any previous year; (ii) when an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or liability incurred by the assessee; and where the assessee has obtained, either in cash or in any other manner, any amount in respect of such loss, expenditure or some benefit in respect of such liability during the previous year the amount obtained by him, or the value of benefit accrued to him; (iii) any amount received in the previous year in respect of bad debts written off in any previous year regarding which deduction under clause (j) of section 5 has been allowed." The question which is germane for consideration in these cases is whether sub-section (2) of section 4 if incorporated as deeming provision would make inroads into the powers of the ....
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....the provisions of the Income-tax Act be not deducted and be considered to be a part of the taxable agricultural income." Further the apex court also held that the State Legislature is free to provide the method of computation of the taxable agricultural income and is free to allow any particular deductions from the gross income as it considers fit. The court also took the view that the power of the Legislature to enact a law in respect of agricultural income relates only to such agricultural income as is defined in article 366 of the Constitution. The court held that the provisions of the Income-tax Act and the Rules made thereunder will control the provisions of the Agricultural Income-tax Act enacted by the State Legislature. The court declared that Explanation 2 to section 5 of the Agricultural Income-tax Act added by the amendment Act does not cover the expenses incurred in the upkeep or maintenance of immature tea plants from which no income has been derived during an accounting year and that the agricultural income derived from tea plantations would be computed in accordance with the provisions of the Income-tax Act and the Income-tax Rules. The abovementioned decision was....
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....ision found in such Act. Therefore, it is fundamental that a delegate on whom such power is conferred has to act within the limits of the authority conferred by the Act and it cannot enlarge the scope of the Act ... We have already noticed that none of the provisions of the Act has contemplated any power to be vested in the State Officers to recompute the agricultural income from tea while the proviso to rule 5 of the Rules in specific terms empowers the State Officers to recompute the agricultural income from tea different from that which is computed by the Central Officers under the Central Act. Thus, it is seen that this rule is not only made beyond the rule-making power of the State under section 50 of the Act but also runs counter to the object of the Act itself, and, enlarges the scope of the Act. The same also suffers from the other vices pointed out by us hereinabove, hence such a rule, in our opinion, is ultra vires the Act. Therefore, the proviso to rule 5 of the State Rules to the extent it empowers the State Officers to recompute the agricultural income already computed by the Central Officers is ultra vires the State Act." Holding so, the apex court expressed the op....