Commissioner of Income-Tax, Poona v. H.G. Date.
Income-tax Reference No. 69 of 1963,
Decided on February 25, 26, 1970.
K.K. Desai J.
In this reference under section
66(2) of the Indian Income-tax Act, 1922, made at the instance of the revenue,
the following two questions of law arise for decision :
"(1) Whether, on the facts and
in the circumstances of the case, there was any evidence before the Tribunal to
justify the finding that there was no market for sugarcane produced by the
assessee ? and
(2) Whether, on the facts and in
the circumstances of the case, the income received by the assessee was
agricultural income within the meaning of the Indian Income-tax Act ?"
The short facts leading to the
above reference may be summarised as follows :
For a number of years prior to the
assessment year 1952-53, the respondent-assessee, being the owner of about 93
acres of land situated at Phaltan on th southern and/or right bank of river Nira,
cultivated sugarcane on his lands. He owned three heavy horse power engines for
crushing sugarcane and converted sugarcane into jaggery
for sale in the market. He was assessed to income-tax in respect of the income
from the sales of jaggery under the Income-tax Act,
and had not claimed exemption in respect of this income on the footing that it
was agricultural income. In respect of the income from sales of jaggery for the assessment years 1952-53 and 1954-55, being
the accounting years section Y. 2007 and section Y. 2009, he claimed that the
income was agricultural income; and that he was entitled to exemption from
income-tax in respect thereof having regard to the provisions in section 2(1)
(b) (iii) read with section 4(3) (viii). This exemption was refused to him and
in Appeals Nos. 1591 and 1592 of 1956, the Income-tax Appellate Tribunal by its
order dated August 10, 1956, had that proper attempt had not been made to
ascertain the truth whether there was in fact a market for the sale of
sugarcane grown by the assessee. The Tribunal remanded the case to the
Income-tax Officer for further investigations and report with particular
reference to the above assessment years on 11 points formulated by the Tribunal
in its order. The assessee was given opportunity to tender further evidence in
support of his case that his income was agricultural income and that he was
entitled to exemption having regard to the above provisions in the Act. The
case of the assessee was in great particulars mentioned in the affidavit dated
August 9, 1956, which was made the part of the record before the Tribunals
order of remand. Before the Income-tax Officer further evidence was taken on
the record in a large way. The Income-tax Officer issued a questionnaire on the
Phaltan Sugar Works being a factory which carried on
business of manufacturing sugar and was situated approximately at a distance of
7 miles from the fields of the assessee. A questionnaire was also served on the
Walchandnagar Factory and Brihan
Maharashtra Sugar Factory which were situated at a
long distance from the fields of the assessee and the transactions were not
relevant to the question which had arisen to be decided by the Appellate
Tribunal. The Income-tax Officer received correspondence and/or certificates in
respect of the inquiries forwarded by him from the above three factories as
also from the Registrar of Co-operative Societies, Poona, the Mamlatdar and Prant Officer, Phaltan Taluka, the Executive
Engineer, Nira Right Bank Canal Division, Phaltan Taluka, the Executive
Engineer, Nira Right Bank Canal Division, Phaltan, and the Marketing Inspector, Satara
District, Sangli. On behalf of the assessee, oral
evidence of about 33 witnesses was tendered and recorded. The assessee filed
his own further affidavit dated April 1, 1957. Having gathered information from
the above sources, the Income-tax Officer made his remand report dated January
28, 1957. The remand report is annexure "B" to the statement of the
case and includes the whole of the evidence recorded by the Income-tax Officer
as mentioned above including the correspondence and certificates. Apart from
his above report, he filed his own affidavit dated April 1, 1957, before the
Tribunal in connection with the evidence that he had recorded and the
conclusions he had mentioned in his report. Now, what appe
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