MAHARAJ PRASHAD JAIN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a case stated under Section 66 (1) of the Indian Income-tax Act 1921 hereinafter referred to as the Act. The question referred is :

(2.) THE material facts are these. THE assessee is an individual. He had taken on sublease for a period of 16 years a tea garden known as Banjarwala Tea Garden from Shri Kaushalendra Pratap Singh and Sri Devendra Singh who had a perpetual lease, under an agreement dated the 8th January 1954. THE material covenants of this lease deed are :

(3.) THE assessee returned his net income from the tea business and claimed before the Income tax Officer that under Rule 24 of the Income-tax Rules made under Section 59 (2) (a) that only 40% of the net income was liable to tax and 60% of it was exempt. Under Section 59, powers are given to make Rules, inter alia, for "Incomes derived in part from agriculture and in part from business." Pursuant thereto Rule 24 of the Indian Income-tax Rules, 1922 was framed. This reads "Income derived from the sale of tea grown and manufactured by the seller in the taxable territories shall be computed as if it were income derived from business and 40% of such income shall be deemed to be income profits and gains liable to tax To obtain the benefit of this rule an assessee must fulfil both the conditions.