STATE OF TAMIL NADU versus KANNAN DEVAN HILLS PRODUCE CO. LTD.

Citation: [1972] 1 S.C.R. 1016 · Decided: 07-10-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed
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Judgment (excerpt)

1016 
STATE OF TAMIL NADU 
v. 
KANNAN DEV AN IDLLS PRODUCE CO. LTD. 
October 7, 1971 
[K. s. HEGDE AND A. N. GROVER, JJ.] 
Madras Agricultural Income-tax Act, 1955-Rules 7 and 8 made under 
s. 6--Whether tea grown in Madras but manufactured in Kera/a corns 
within the scope of the said Rules. 
The respondent-assessee is a limited company carrying on the business 
A 
B 
of tea planting, 
A part of its tea estates was situated in Kerala and the 
other part was in Tamil Nadu. According to the assessee, the estate in 
question was working as one unit with one factory and common accounts 
C 
were maintained for. the whole estate. 
For the assessment years 1956-57, 1957-58 and 1958-59, the Agricul-
tural Income-tax Officer, Tamil Naclu, computed the Agricultural Income 
in accordance with the assessment made by the Central Income-tax Officer 
and took 60% of the income computed by the Central Income-tax Officer 
for the purpose of computation of Agricultural Income. For the assess-
ment year 19'60-61, however, the ~gricultural Income-tax Officer felt that 
D 
since the i(erala area of the estate yielcled only 656 lbs, of tea per acre 
whereas the yield of Madras portion was 799 lbs. per-acre, he took the 
valuation of the produce from the Madras portion as the gross receipt 
wherefrom he deducted the expenditure allowed by the Central Income-tax 
Officer and recalculated it from the Madras portion on the basis of acreage 
thereby showing a profit from the Madras portion and made his assessment 
accordingly. 
The computation of the Central Income-tax Officer, how-
E 
ever, showed a loss for the entire estate. 
The Assistapt Commissioner of Agricultural Income-tax upheld the 
order of Agricultural Income-tax Officer but the Tribunal set aside 
the 
assessment, and remanded the case to Assistant Commissioner ior certain 
matters. The . departments further sought to reassess the assessee for the 
earlier 3 years also and issued notices. 
The assessee, 
thereupon, 
filed 
writ petitions challenging the on!er of reopening the assessment. 
A tax 
F 
revision was also filed , against the 
order 
of Agricultural Income-tax 
Appellate Tribunal in respect of the assessment for the year 1960-61. 
The writ petitions and the revision were allowed by the High Court and 
the order of re9oening the assessment was quashed. 
As 
regards the 
aisessment for the year 1960-61, the Agricultural Income-tax Officer was 
directed to make a revised assessment on the basis of the Central Income-
tu Officer's computation which was considered by the High Court to be 
the proper basi§, for assessment of Agricultural Income-tax for the year 
G 
1960-61. 
On appeal, the Revenue strongly relied on s. 6 of the Madras , 
Agricultural Income-tax Act and rules 7 and 8 framed under that Act. 
Disll'!-issing the appeals, 
HELD : (I) Rules 7 and 8 made under s, 6 of the Madras,Agricul-
tural Income-tax Act have no application in the present case because r. 7 
deals with Agricultural Income from tea grown and manufactured in the 
State of Madras. In the present case, though tea is grown in Madras it 
H 
is manufactured in Kerala which is outside that State. Therefore, r'. 7 
does not apply. Similarly r. 8 does not. cover the case of tea which is 
manufactured in another State and not in the State of Madras Tea leaves 
,, 
' 
•
A 
B 
c 
TAMIL NADU v. KANNAN DEVAN HILLS (Grover, J.) 
1017 
alone can be the produce of a particular State but as such they have no 
value. They become valuable only after they are subjected to a special 
proce8s, which takes place in Kerala. Therefore r. 8 has no applicability 
to manufactured tea. [I 020 F] 
(ii) A very small area of the estate is in the State of Madras and even 
though that area is more fertile and gives much more yield than the area 
in Kerala, the entire estate has to be assessed as a whole and the High 
Court has rightly thought that Agricultural Income-tax Officer should 
accept the computation of the Central Income-tax Officer which is the only 
satisfactory basis for computation of agricultural Income-tax in respect of 
the estate, especially when, the Agricultural Income-tax Officer has 
not 
given satisfactory reasons for not accepting the Central Income~tax Officer's 
computation. [1020 HJ 
Anglo American Direct Tea Trading Co. Ltd. v. Commissioner of Agri-
cultural Income-tax, Kera/a, 64 l.T.R. 667, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1175-
1178 of 1970. 
Appeals from the judgment a
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