LexCOMMISSIONER OF AGRICULTURAL INCOME-TAX, TRIVANDRUM versus KERALA ESTATE MOORIAD CHALAPURAM
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COMMISSIONER OF AGRICULTURAL INCOME-TAX,
TRIVANDRUM
v.
KERALA ESTATE MOORIAD CHALAPURAM
JULY !5, 1986
[R.S. PATHAK AND SABYASACHI MUKHARJI, JJ.)
Kera/a Agricultural Income Tax Act, 1950, ss. 4 and 5-Agri-
cultura/ Income-Deductions allowed under s. 5-Whether subsequent
remission thereof could be treated as "agricultural income"-Remission
and Refund-Distinction between.
The Kerala Agricultural Income Tax Act, 1950 provides for the
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levy of tax on agricultural income in the State of Kerala . Section 5
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details the deductions to be made in computing the agricultural income.
Clauses (e), (g), (h) and (i) refer to interest paid by the assessee in
different kinds of cases. The interest in all these cases, has to be de-
ducted from the agricultural income of a person before the levy is
imposed.
The respondents-assessees claimed a deduction of Rs.33,747.09
from their agricultural income under s. 5 of the Kerala Agricultural
Income Tax Act 1950 towards interest on a loan of Rs.4 lakhs taken
from a creditor. The deduction was. allowed. However, in the next
accounting period relating to the assessment year 1964-65, the said
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cr~ditor waived payment of the interest of Rs.33,747.09 and accord·
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ingly the amount was credited to the revenue accounts of the res-
pondents-assessees. The Assessing Authority brought the amount to
tax. But, the Tribunal as well as the High Court took the view that the
case was not one of an actual or constructive receipt or any"receipt at all
but only one of remission and a remission could not give rise to a credit
item in the accounts of the assessees and that what bad been given by the
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creditor in favour of the assessees or returned to them could not consti·
tute the income of the assessees.
Dismissing the appeal of the Revenue,
HELD: (I) The view taken by the High Court is right. The remis·
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SUPREME COURT REPORTS
11986] 3 S.C.R.
sion cannot be considered as amounting to the receipt of agricultural
income. What was allowed to be deducted from the total agricultural
income of the assesses was interest pursuant to s. 5 of the Act. It was a
deduction made permissible by the Act. To be regarded as taxable in the
hands of the assessee, the amount which was the subject of remission
must be capable of being described as agricultural income. I 164F-G I
In the instant case, what was returned to the assessees has nothing
to do with the activities of the assessees; it does not arise from business
nor does it arise from agricultural operations when the assessee is an
agricnltnrist. [164G-H]
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Commissioner of Income-tax, Mysore v. Lakshmamma, 11964]
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52 !TR 789, approved.
Mohsin Rehman Penkar v. Commissioner of Income-tax,
Bombay City, 11948] 16 !TR 183, referred to.
(2) In order to eliminate such a controversy in cases falling Wider the
Indian Income-tax Act, 1922, sub-s. (2A) was added ins. IO of that Act,
whereby a receipt such as this was expressly made liable to tax by legal
fiction as profits and gains of business, profession or vocation. Sub. s.
(2A) of s. IO of the Indian Income Tax Act, 1922 has been replaced by
an even wider provision as sub-s. (I) of s. 41 of the Income Tax Act,
1961. No provision of that nature'finds place in the Kerala Agricultural
Income Tax Act. [ 165A-B; D]
CIVIL APPELLATE JURISDICTION: Civil
Appeal
No.
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From the Judgment and Order dated 28.2.1973 of the Kerala
High Court in l.T. Reference No. 84 of 1971.
T.S. Krishnamurthy Iyer, V.J. Francis and N.M. Popli for the
Appellant.
S. Balakrishnan for the Respondent.
The Judgment of the Court was delivered by
PA, THAK J. This appeal by special leave is directed against the
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judgment of the High Court of Kerala disposing of an Agricultural
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C.l.T. (AGRL.) v. KERALA ESTATE {PATHAK,J.J
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Income-tax Reference and answering the following question in favour
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of the assessee and against the Revenue:
"Whether on the facts and circumstances of the case the
Tribunal was justified in holding that the amount of Rs.
33,747 .09 is not agricultural income for the assessment
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year 1964-65."
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The assessees Kerala Estate Mooriad Chalapuram, is a broad
description of seven persons possessing the status of tenants-in-
common under the Kerala Agricultural Income-tax Act, 1950. They
owned an estate from which they derived agricultural income liable to
be assessed in the year 1963-64. The assessees folloExcerpt shown. Read the full judgment & AI analysis in Lexace.