The Tax Publishers www.tpcc.in 1971 TaxPub(DT) 0087 (Bom-HC) : (1971) 082 ITR 0071

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