MOHANPURA TEA COMPANY, LIMITED, Vs. RE

JUDGEMENT

(1.) The assesse are a company incorporated under the Indian Companies Act with their registered office in Calcutta. Their income, profits, and gains, are derived from the sale of tea grown and manufactured on a tea estate in the Indian State of Tipperah, and then sent to Calcutta and sold there. For the year 1935-36 the Income-tax Officer assessed the company on the taxable income of Rs 1,029 on which an income-tax of 162-10 has been demanded. The assessees claim that 60 per cent. of their assessed income is not liable to tax.

(2.) The assessees rely on the principle laid dowm in the Killing Valley Tea Company Ltd. v. Secretary of State for Indian (I.L.R. 48 Cal. 161) where it was held that when tea is grown and manufactured in British India a portion of the income, profits and gains derived from its sale in British India must be regarded as "agricultural income" and therefore, outside the scope of the Indian must be regarded as "agricultural income" and therefore, outside the scope of the Indian In-come Tax Act by reason of Section 4(3)(viii) of the Indian Income Tax Act. This principle has subsequently been recognised by Rule 24 made under Section 59 of the Act. The material paragraph of the Rule is as follows : "Income derived from the sale of tea grown and manufactured by the seller in British Indian shall be computed as if it were income derived from business and 40 per cent. of such income shall be deemed to be income, profits and gains liable to tax."

(3.) In the present case, however, the assessees are admittedly not entitled to the exemption provided by Section 4(3)(viii) of the Act because tea grown in an Indian State is not "agricultural income" as defined in the Section 2, sub-section (1), which limits agricultural income to income derived from land which is used for agricultural purposes and is either assessed to land revenu in British India, or subject to a local rate assessed and colllected by officers of Government as such. Accordingly, if the income of the assessee is income, profits or gains, accruing or arising or received in British India within the meaning of Section 4, Sub- secti on (1), the charging sections of the Act will apply.