TATA TEA LTD. & ANR. ETC. versus STATE OF WEST BENGAL & ORS. ETC.

Citation: [1988] 3 S.C.R. 961 · Decided: 05-05-1988 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Disposed off

Judgment (excerpt)

' 
• 
TATA TEA LTD. & ANR. ETC. 
v. 
STATE OF WEST BENGAL & ORS. ETC. 
MAY 5, 1988 
[R.S. PATHAK, CJI AND M.H. KANIA, J.] 
Bengal Agricultural Income-tax (Amendment) Act, 1980-Chal-
lenging constitutional validity of sections 3 and 5 of. 
Agricultural Income-tax (Amendment) Act, 1980 (Kera/a Act No. 
A 
B 
17 of 1980 )-Challenging amendment made by-Resulting in deletion 
C 
of Explanation after clause (2) of section 2(a) of Agricultural Income-tax 
Act, 1950. 
Whether entire income of assessee from sale of tea grown and 
manufactured by him is subject to levy of agricultural income-tax. 
These Writ Petitions, filed in this Court by Public Limited Com-
panies growing, manufacturing and selling tea in the States of West 
Bengal and Kerala raised common questions of law. 
The Writ Petitions relating to the State of West Bengal challenged 
D 
the constitutional validity of sections 3 and 5 of the Bengal Agricultural 
E 
Income-tax (Amendment) Act, 1980, whereby sub-section (2) and (2A) 
of section 8 of the Bengal Agricultural Income-tax Act, 1944 were omit• 
ted and always deemed to be omitted. The petitioners alleged that as a 
result of the omission of the said Sub-sections (2) and (2A) of section 8, the 
State Legislature had sought to assume the power, competence and 
jurisdiction to impose agricultural income-tax on the entire income .F 
from the sale of tea grown and manufactured by a seller and had 
thereby transgressed the constitutional limitations contained in Article 
246(3) of the Constitution of India. The petitioners contended that the 
income derived from the sale of tea grown and manufactnred by them 
was derived partly from agriculture and partly from mannfacture by 
elaborate processes through valuable machinery. Prior to the said G · 
amendment Act, the position was that the income of an assessee who 
grew, manufactured and sold tea in West Bengal, was computed under 
the Indian Income-tax Act, 1922 (the Act of 1922) read with the Income-
tax Rules, 1922, and agricultural income-tax was levied only in respect 
of 60 per cent of that income. After the coming into force of the Income-
tax Act, 1961 and the Income-tax Rules, 1962 also a State Legislature 
H 
961 
962 
SUPREME COURT REPORTS 
[19881 3 S.C.R. 
"' 
A 
could only legislate in respect of 60 per cent of the income, treated as 
agricultural income. The object of the impugned amendment Act, was 
to subject to the levy of agricultural income-tax, the entire income 
derived by an assessee from the sale of tea grown and manufactured by 
him. 
B 
The writ petition relating to Kerala State challenged the amend-
ment made by the Agricultural Income-tax (Amendment) Act, 1980 
(Kerala Act No. 17 of 1980) deleting the Explanation after clause (2) of 
section 2(a) of the Agricultural Income-tax Act, 1950, with a view to 
making the entire income from sale of tea earned by an assessee who l
grew and manufactured tea in that State subject to the levy of agricul-
c tural income-tax. 
The petitioners urged that these amendments, in so far as they 
purported to confer power on the respective legislatures of the States of 
West Bengal and Kerala to legislate regarding taxes on the income from 
the sale of tea grown and manufactured by the assessees in excess of 60 
D per cent of such income computed in the manner prescribed under the 
law relating to income-tax were void and beyond the legislative compe-
tence of the legislatures of the States of West Bengal and Kerala in view 
of the provisions of Article 246 of the Constitution of India read with the 
entry 82 in List I and Entry 46 in the List II of the Seventh Schedule to 
~ 
the Constitution and the relevant provisions ·or the law relating to 
E 
income-tax. 
The respondents contended that Article 366(1) of the Constitution 
merely stated that the term "agricultural income" had the same mean· 
ing as given to it in the enactments relating to income-tax and the 
definition of the said term in Act of 1922 and the Act of 1961 did not y 
F 
prescribe that only a particular part of the income derived by an asses· 
see from the sale of tea grown and manufactured by him could be 
regarded as agricultural income, and it was open to the State Legisla· 
tores concerned to levy agricultural income-tax on such entire income. 
Disposing of the petitions, the Court, 
G 
HELD: The main question to be considered was whether the im-
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pugned provisions in the Bengal Amendment Act of 1980 were in excess 
of the legislative c

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