The Tax Publishers www.tpcc.in 1946 TaxPub(DT) 0076 (Bom-HC) : (1946) 014 ITR 0611

Brihan Maharashtra Sugar Syndicate Ltd. v. Commissioner of Income-Tax Bombay

Reference under section 66(1) of the Indian Income-tax Act (XI of 1922) by the Income-tax Appellate Tribunal : (Income-tax Reference No. 13 of 1943

Decided on April 8, 1946


Kania, J.

This is a reference under section 66(1) of the Indian income-tax Act made by the Appellate Income-tax Tribunal. the question submitted for the courts opinion is in these terms :-

"Whether in the circumstances of this case income derived by the assessee from sale of gul manufactured from sugar-cane is agricultural income within the meaning of section 2(1)(b) of the Income-tax Amendment Act, 1939, so as to be exempt from taxation under section 4(3)(viii) of the Act ?"

The question arises in respect of the manufacture of gul by the assessee company, which is a joint stock company and has erected a sugar factory. It owns large areas of land on which sugar-cane is grown. Section 2(1) of the Income-tax act defines agricultural income (omitting immaterial parts) as follows :-

"Agricultural income means -

(b) any income derived from.....land by

(ii) the performance by a cultivator....of any process ordinarily employed by a cultivator........to render the produces raised...by him fit to be taken to market; or

(iii) the sale by a cultivator....of the produce raised.....in respect of which no process has been performed other that a process of the nature described in sub-clause (ii)."

The rest of the section is immaterial. Although in the reference the tribunal has referred to sub-clause (ii) it appears that the correct reference should be to section 2(1)(b)(iii) of the Act. The income in question is the result of sale of gul by the assessee company. It is not income derived by the performance of the process by the assessee as mentioned in sub-clause (ii). The material question still remains and is to be considered in two parts : (1) Whether the process in ordinarily employed by a cultivator and (2) Whether it is employed to render the produce raised by him fit to be taken to market.

When the matter was first submitted by the tribunal for the Courts opinion the necessary facts from which the Court could say whether the two factors necessary to bring it in the definition were not found in the reference. We had therefore the to refer the matter back to the Tribunal. The Tribunal has now made a further report in para. 3 of which they have set out the letter received by them from the Deputy director of Agriculture. In para. 4 they have stated the extent of the area under sugar-cane cultivation is the Nira Canals Division. In para. 5 they have set to the report of the Inspector in respect of the process employed by the assessee in the manufacture of gul. Paragraph 6 contains a further report of the Inspector on the same point. In paragraphs 7 and 8 they have stated their conclusion on the materials before them. The relevant statements in paragraphs 7 and 8 are the following : (1) Use of machine power would not make any difference as regards the process employed. It may even be that machine power is more economical than bullocks if the production is on a larger scale. (2) The Inspectors report shows that the assessee company was not growing any soft quality of sugar-cane which could be sold for the purpose of chewing. (3) The sugar-cane grown by the assessee can either be sold to other sugar factory owners or utilised in the production of gul and sugar by the assessee company. (4) Some factory owners may require sugar-cane for the production of sugar and purchase it from the small bagaitdars. (5) It may be possible for the small bagaitdars to sell the sugar-cane to the factory owners. (6) In the present case we do not think that the particular quality of sugar-cane which has was used for the manufacture of gul could be sold by the assessee company. (7) We do not therefore think that the inspector was right in assuming that the surplus of sugar-cane with the assessee company was marketable without being turned into gul, i.e., saleable in its raw form. They conclude by stating that the they were of the opinion that the requirements of the definition were made out. It may be noticed that throughout their statement of facts they have nowhere disbelieved any portion of the Inspectors report. The Inspectors report inter alia contains two statements which are material. The first is that the process employed by the assessee however differs from that of the agriculturists inasmuch as t