ANGLO AMERICAN DIRECT TEA TRADING CO. LTD. versus COMMISSIONER OF AGRICULTURAL INCOME-TAX, KERALA STATE, TRIVANDRUM

Citation: [1968] 2 S.C.R. 745 · Decided: 10-01-1968 · Supreme Court of India · Bench: K.N. WANCHOO · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
ANGLO AMERICAN DIRECT TEA TRADING CO. 
B 
c 
D 
E 
F 
G 
ff 
LTD. 
v. 
COMMISSIONER 
OF 
AGRICULTURAL 
INCOME-TAX, 
KERALA STATE, TRIVANDRUM 
lanuary IO, 1968 
[K. N. WANCHOO, C.J., 
R. S. BACHAWAT, 
J. M. SHELAT, 
G. K. MI.TTER AND C. A. VAIDIALINGAM, JJ.j 
Kera!a ARricultr1rr.l l11co111e-tax Act (20 Of 1950), ss. 
2 and 5-Jn-
co1ne-tat Act (11 of 1922), s. 10 and lnco111e-tax Rules, 1922, r. 24--
lnco1ne derived by cultivation, 
n1an11facture 
and 
sale 
of 
teG~Non­
tlf?ricultural inco111e detennined under s. 10 of the lncon1e-tax Act and r. 
24 of the lncon1e-tax Ru/es-Whether con1putation binding on At?ricultural 
Income-tax Officer. 
Kera/a Surcltar,;e on Taxes Act (11 of 1957), Surcharge on agricul-
tural inco1ne for assess1nent year 1951-58-lf can be lei·ied. 
The appellants "W'crc ·carrying on the business of cultivation, manufac-
ture and sale of tea. Some of them owned tea plantations h<:°'th within and 
outside the State of Kerala. Income derived from the sale of tea grown 
and manufactured by the sell~r is derived partly from bu·siness and partly 
from agriculture, and. has to be computed under r. 2.4 
of the Indian 
Income-tax Rules, 1922 (corresp011ding to r. 8 of the 1962 Rules) as if 
it were income derived from business in accordance with the provisions 
of s. 10 of the lncome,-tax Act, 1922. On the basis of r. 24, the. central 
income-tax authorities Computed the total tea income of the appellants and 
40% thereof, representing the non-agricultural income, was 
as~esscd to 
non-agricultural income-tax and the balance 60% was le'ft una~sesscd as 
agricultural income. In proceedings under the Kerala Agricultural Incomc-
tax Act, 1950, the agricultural income of the appcilants was determined 
on an independent computation of their 1ca income. 
The agricultural 
income so determined was higher than that arrived at by th·: central 
income-tax authorities. 
In some of the ap~als, the Agricultural Income-tax Officer levied a 
surcharge of 5% for the assessment year 1957-58 
under 
the 
Kerala 
Surcharge on Taxes Act, 1957. 
On the questions : ( 1) whether the Agricultural Income-tax Officer was 
bound to follow the computation of income from tea made by the Central 
Income-tax Officer; and (2) whether the surcharge could be levied, the 
High Court held against the a.ppellants. 
In appeal to this Court, 
HELD : There is no provision in the Kcrala Act authorising the Agri-
cultural Income-tax Officer to disregard the computation of the tea income 
made by the Central income-tax authorities acting under the Central Act, 
and, the Agricultural Income-tax Officer, in making an 
assessment of 
agricultural income is bound to accept the computation of tea income 
already made by the central income.tax authorities and to assess only 60% 
of the income so computed, less allowable deductions, 
~c:. agricultural in-
come taxable under the Kerala Act. 
[751 B-C] 
746 
SUPREME COURT REPORTS 
(1968] 2 s.c.R. 
(a) In view or Arts. 274(1) and 366(1) or the Constitution. the 
power of the State Legislature to make a law in respect of taxes on agri-
cultural income arising from tea plantations is limited to legislating with 
respect to the agricultural income determined under s. 10 of the Income-
tax Act and r. 24 of the Income-tax Rules. 
In fact, the E•planation to 
s. 2(a) (2) of the Kerala Act adopts this rule of computation and there-
fore, the agricultural income tuable under tho Kerala Act is 60% of the 
income so computed after deducting therefrom the allowances authorised 
by s. 5 of the Kerala Act, in so far as the same has not already been 
allowed in the assessment under the Central Income-tu Act. 
Where the 
agricultural income :s derived from lands panly within and partly without 
the State the portion of the income attributable to lands within the State 
is determined under s. 6 of the Kerala Act read with r. 15 of the Kerala 
A8ficultural Incom...tax Rules. (750 B-D; 751 A, CD} 
Karimthill'uvi Tea Estatts Ltd. Ko11a;·am v. State o/ K.trala, 
[1963] 
Supp. 1 S.C.R. 823, followed. 
(b) It may be difficult to make an use.ument under •. 22 of the Kerala 
Act or on the ba.sil of the ,previous year under 1. 2A of the Kerala N:t 
in the absenee of any rule fixin1 the income for a broken part of the year 
with reference to an assessmmt made under the Indian Income-tu Act. 
In spite of these and other difllculties in the working of the Ac~ the Agri-
cultural Income-tu Ofllcer cannot ignore the assessment of the t

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