LexUNION OF INDIA versus BELGACHI TEA CO. LTD. & ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
52 SUPREME COURT REPORTS [2008] 8 S.C.R. A come assessed by the Assessing Officer under the 1961 Act; and the income derived from sale of green tea leaves is agricultural income and assessable under the 1944 Act. In appeal to this Court, assessee contended that the sale proceeds of green tea leaves should be treated inci- B dental to business and its income should be computed under the provisions of the 1961 Act. Disposing of the appeal, the Court HELD: 1.1. There is no dispute on the fact that from C the income assessed, 60% is taxable by the State under the Bengal Agricultural Income Tax Act, 1944 and 40% is taxable by the Centre under the Income Tax Act, 1961. The object behind taxing the 60% and 40% share of the income assessed appears that there are common ex- D penses on establishment and staff for two different ac- tivities that is tl?a grown and tea manufactured. There -.:an be independent income from sale of green tea leaves and by sale of tea, that is, after processing of green tea leaves when green tea leaves become tea for use. Income from E agriculture is taxable by the State and sale of tea after manufacturing is taxable by the Union of India as busi- ness income. To segregate income and expenses from two combined activities of assessee is not possible, but at the same time there cannot be two assessments of in- F come by two different authorities. Therefore, there can be only one assessment of income from the tea business. [Paras 11, 12] [57-E-H, 58-A] 1.2 For the purpose of tax on agricultural income, the Agricultural Income Tax Officer will go by the assessment G order made under the provisions of the 1961 Act and the contents of the assessment for the year made by the As- sessing Officer under the 1961 Act shall be conclusive evi- dence of the contents of such order and he has to go by the assessment and tax only 60% income made under the as- H sessment for the purpose of the 1944 Act. [Para 15] [59-E,F] )( UNION OF INDIA & ANR. v. 53 BELGACHI TEA CO. LTD. & ORS. 1.3 It is true that both rule 8 of the Income Tax Rules, A 1962 and s.8 of the 1944 Act provide how the mixed in- come from the growing tea leaves and tea manufacturing can be taxed. Mixed income means the income derived by an assessee from the combined activities i.e. growing of tea leaves and manufacturing of tea. Therefore, for the s purpose of computation of income under the 1961 Act, it should be the mixed income from 'tea grown and manu- factured' by the assessee. [Para 19] [61-C,D,E] 1.4. If the income is by sale of green tea leaves by the assessee it cannot be called income assessable under C the 1961 Act for the purpose of 40:60 share between the Centre and the State. In both the provisions i.e. rule 8 of the Income Tax Rules, 1962 and s.8 of the 1944 Act, the word used is income derived from the sale of 'tea grown and manufactured'. The income from sale of green tea D leaves is purely income from the agricultural product. There is no question of taxing it as incidental income of the assessee when there is a specific provision and au- thority to tax that income i.e. the State, under the 1944 Act. In this view of the matter, the agricultural income E cannot be taxed under 1961 Act. [Paras 20, 21) [61-E,F,G] 2. It is also pertinent to mention that the Income Tax Officer has assessed the income of tea manufactured by the assessee from 1977-78 to 1980-81 to the tune of Rs.1,44,250/-, Rs.4,28,040/-, Rs.54,450/- and Rs.92,351 /- F respectively and income of the assessee from the sale of green tea leaves was more than Rs.10 lakhs in each ac- counting year (1977-78 and 1978-79). In this view of the matter, the income of the assessee from the sale of tea leaves can never be incidental to business. In a given G case the assessee can process only 10% of green tea leaves and 90% of green tea leaves can be sold directly in the market. That income from sale of green tea leaves cannot be treated incidental to the business. In case the H 54 SUPREME COURT REPORTS [2008] 8 S.C.R. A assessee directly sells the green tea leaves resulting into an income from agricultural products, it cannot be taken as incidental income to the business and whatever the income is derived from the sale of the green tea leaves can be assessed by the Agricultural Income Tax Officer B under the 1944 Act. [Paras 22,23,24] [62-A,B,C,D,E] *Tata Tea Ltd. & Anr v. State of West Bengal & Ors. (1988) Sup
Excerpt shown. Read the full judgment & AI analysis in Lexace.