COMMISSIONER OF AGRICULTURAL INCOME TAX Vs. KERALA ESTATE

JUDGEMENT

(1.) A somewhat difficult question has been referred to us by the Kerala Agricultural Income Tax Appellate Tribunal, Trivandrum. The question is this:

(2.) The assessees, seven in number, have the status of tenants in common. They owned an estate from which they derived agricultural income liable to be assessed in the year 1963-64. The assessees then claimed that a sum of Rs. 33,747-09 was payable towards interest on a loan of Rs. 4 lakhs taken by them from M/s. Associated Planters Ltd., Calicut. In computing the agricultural income liable to be assessed to tax in the year 1963-64, this sum was allowed to be deducted. In the accounting period relating to the assessment year 1964-65 M/s. Associated Planters Ltd., waived the claim for interest and, therefore, the amount was credited to the revenue accounts of the assessees. The assessees were admittedly following the mercantile system of accounting. The question that arose for decision before the Tribunal was whether this sum of Rs. 33,747.09 credited towards interest in the relevant previous year could be assessed in the year 1964-65. The Tribunal, by a majority, held that it was not agricultural income.

(3.) The question to be decided is whether the view of the Tribunal is correct. The departmental member who wrote the dissenting order relied on the decision of the Bombay High Court in In re Union Bank of Bijapur and Sholapur Ltd. (10 ITR 21) in support of his view that the amount credited to the account viz., Rs. 33,747.09 is agricultural income. Before us, counsel on behalf of the Revenue and counsel for the assessees have referred to a large number of decisions, most of which had been noticed and dealt with in the judgment of the Mysore High Court in Commissioner of Income Tax, Mysore v. Lakshmamma (52 ITR 789). A reference to these decisions would show that there is apparent conflict between the set of decisions in In re Union Bank (10 ITR 21), Gajapathi Naidu v. Commissioner of Income Tax (40 ITR 282), Sheikh Rahmat Ali v. Commissioner of Income Tax (39 ITR 506) on the one hand, and the decisions in Mohsin Rehman Penkar v. Commissioner of Income Tax (16 ITR 183), Agarchand Chunnilal v. Commissioner of Income Tax (16 ITR 430) and Orient Corporation, Bombay v. Commissioner of Income Tax (18 ITR 28) on the other. This apparent conflict was explained by the decision in 52 ITR 789 (cited supra) on the basis that in the former class of cases there were receipts actual or constructive and in the latter class of cases there were no receipts but only remissions. It is also mentioned with reference to the decision in Mohsin Rehman Penkar v. Commissioner of Income Tax (16 ITR 183) that: