COMMISSIONER OF INCOME TAX versus M/S ALL INDIA TEA AND TRADING CO. LTD.

Citation: [1996] 3 S.C.R. 156 · Decided: 01-03-1996 · Supreme Court of India · Bench: J.S. VERMA · Disposal: Dismissed

Judgment (excerpt)

A 
B 
c 
COMMISSIONER OF INCOME TAX 
I'. 
MIS ALL INDIA TEA AND TRADING CO. LTD. 
MARCH 1, 1996 
[J.S. VERMA AND B.N. KIRPAL, JJ] 
Income Tax Act, 1922: Section 2( 1). 
Assam Land (Requisition and Acquisition) Act, 1948 : Sections 3,4, 
and 7. 
Agricultural income-Agricultural land-Requisitiott-Allotment to 
refugee;--Cultivation by refugee~ompensation amount-Held agricultural 
income-Not liable to tax. 
The respondent's agricultural lands were requisitioned under the 
D Assam Land (Requisition and Acquisition) Act, 1948. Refugees were put 
in possession and an amount of Rs. 1,24,638 was given to the respondents 
as compensation. The respondent's claim that the said amount being 
agricultural income was exempt from levy of income tax was rejected by 
the Income Tax Officer. On appeal the Appellate Assistant Commissioner 
E held that the compensation for the said land was agricultural income and 
thus not liable to tax. The Tribunal upheld the order of Appellate Assistant 
Commissioner and found as a fact that the land in question was being used 
by the respondent for agricultural purposes in the relevant accounting 
year, and also in the earlier years, and the said land even aller requisition, 
F 
was being cultivated by the refugees. Therefore, the agricultural character 
of the land did not undergo any change. The High Court held that the 
source of compensation was the land itself and though the payment was 
discharged under statutory liability, none.the less, it was the liability which 
arose directly from the requisition of the agricultural land. Therefore the 
amount of compensation was agricultural income exempted from the levy 
G of Income Tax. Hence this appeal by the Revenue. 
Dismissing the Revenue's appeal, this Court 
HELD : The decision of the High Court calls for no interference. 
Agricultural income is defined under section 2(1) of the Income Tax Act, 
H 1922. The finding of fact in the present case is that even aller the requisi· 
156 
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C.l.T. v. ALL INDIA TEA lliDG. CO LTD. [KIRPAL, J.] 
157 
lion or the land, the refugees were carrying out agricultural operations on A 
the land in question. Th.erefore, one of the requirements of Section 2(1) 
namely; that the land is used for agricultural purposes stands satisfied. 
Further the compensation clearly had the character or rent or in any case, 
has to be regarded as being revenue which was derived from the land. The 
land in question continued to vest with the respondent during the relevant B 
assessment year. On the requisitioning of the land, possession of the same 
was taken and the refugees were put in possession for which compensation 
was paid to the respondent. -In a sense the refugees became statutory or 
compulsory tenants and for parting with the physical possession of the 
land, on which agricultural operations continued to be carried on, com· 
pensation was paid. The amount received is directly related to the requi- C 
sitioned land on which agritultural operations continued to be carried ou 
by the refugees during the year in question. Therefore, compensation paid 
for the use by the refugees of the said land for agricultural purposes can 
only be regarded as agricultural income which admittedly is not taxable. 
(159-G; 160-B, D, C, E, F; 162-A] D 
Pydah Suryanarayane Murthy v. Commissioner of Income Tax, 42 ITR 
83; Senairam Doongarmall v. Commissioner of Income Tax, Assam 42 ITR 
392 and Board of Agricultural Income Tax v. Sindhurani, AIR (1957) SC 729, 
distinguished. 
Commissioner of Income-tax, West bengal-ll v. All India Tea and E 
Trading Co. Ltd., 117 ITR 525, relied on. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2136 of 
1979. 
F 
From the Judgment and Order dated 12.9.77 of the Calcutta High 
Court in l.T.R. No. 109 of 1%9'. 
A. Raghuvir, S.N. Terdol and Ms. Luxmi Iyengar for the Appellants. 
Amlan Ghosh for the Respondent. 
G 
The Judgment of the Courtwas delivered by 
KIRPAL, J. The only question for consideration in this appeal is 
whether the compensation received by the respondent, on its agricultural 
land being requisitioned, was exempt from the levy of income tax or not. 
H 
A 
B 
158 
SUPREME COURT REPORTS 
[1996] 3 S.C.R. 
The respondent is a company having tea estates in Assam. In order 
to accomodate refugees and other landless persons, the Assam Legislature 
passed the Assam Land (Requisition and Acquisition) Act, 1948 
(hereinafter referred to as 'the Act'). Section 3 of this Act provided for 
requisitionin

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