1956 Supreme(SC) 17

SUPREME COURT OF INDIA
17th February, 1956
S.R. DAS, C.J.I., BHAGWATI AND VENKATARAMA AYYAR, JJ.
Commissioner of Income-tax, Madras, Appellant
Versus
R. Venkataswamy Naidu,. Respondent.
Civil Appeal No. 46 of 1954.
Advocates Appeared
Mr. C. K. Daphtary, Solicitor-General of India, (Mr. G. N. Joshi and Mr. R. H. Dhebar, Advocates, with him), for Appellant; Mr. S. Ramaswamy Iyer, Senior Advocate, Mr. R. Ganapathy Iyer, Advocate, with him), for Respondent.

Headnote:Section 2 (1) (b) (i) and (iii)-"Agricultural income"-Assessee maintaining cows on part of agricultural land and deriving income from sale of milk-Whether exempt from income-tax as "agricultural income" -Burden of proof.

       Section 66 (A)-Assessee not furnishing propel: materials before Income tax Officer inspite of opportunity given-Effect.

       The assessee, a Hindu undivided family, owned about 70 acres of agricultural land. It also maintained in the estate 65 cows and 10 pairs of bulls. During the accounting year 1945-46, it received Rs. 28,000 from the Co-operative Milk Supply Union to which it sold the milk of these cows. Some part of the land was used for agriculture and produce of the value of Rs. 32,220 was raised on it and some part of the land was used as pasture. The assessee claimed for the assessment year 1946-47 that the profits from the sale of milk constituted agricultural income and as such (were exempt from payment of income-tax. No material, however, was placed before the Income-tax Officer in support of his claim. The Income-tax Officer rejected the claim of the assessee and in the absence of any accounts regarding the matter, estimated the profits from the sale of milk in the year of account at Rs. 4000 and assessed it to income- tax. On appeals, the order of the Income-tax Officer was confirmed both by the Appellate Commissioner and by the Income-tax Appellate Tribunal. The assessee thereupon applied to the Tribunal for referring the question of law arising out of its order but the Tribunal refused to state the case. The assessee then applied to the High Court of Madras and the High Court directed the Tribunal to refer the following question under S. 66 (2) of the Act for its decision:

       "Whether on the facts and circumstances of the case, the income from the sale of milk received by the assessee during the accounting year is not agricultural income within the meaning of the Income- tax Act. "

       The Madras High Court decided the reference in favour of the assessee and allowed the appeal. There was appeal by the Commissioner of Income tax Madras to the Supreme Court after obtaining the necessary certificate.

       Held (allowing the appeal1): (1) In order to claim an exemption from payment of income-tax in respect of what the assessee considered agricultural income, assessee had to put before the Income-tax authorities proper materials which would enable them to come to a conclusion that the income which was sought to be assessed was agricultural income. It was not for the Income-tax authorities to prove that it was not agricultural income. It was this wrong approach to the question which vitiated the judgment of the High Court and led it to an erroneous conclusion the assessee failed to put before the Income-tax authorities the proper materials which it was incumbent upon it to do to enable them to decide whether the income from the sale of milk during the accounting year was agricultural income ~s claimed by the assessee.

       (2) The bare allegations unsupported as they were by any evidence of the nature specified above or by any books-of account in connection with the maintenance of the 65 cows and marketing of what according to the assessee was the surplus milk after satisfying its needs were not

       1. From A. I. R. 1953 Mad. 223.

       sufficient to discharge the budren which lay upon the assessee of proving that the income derived by it from these sales was agricultural income.

       On the contrary, the regularity with which the sales of milk were effected by it to the Co-operative Milk Supply Union at Combatore, the quantity of milk sold by it which was of the average value of Rs. 2,500 per month and the payment of the sales- tax of Rs. 235 for the year ended the 31st March 1946 showed that what the assessee carried on was a regular business of producing milk and selling it as a commercial proposition and was, therefore, a business and not agricultural operation.

       (3) The assessee was solely responsible for the paucity of these materials inasmuch as it did not furnish any materials to the Income-tax Officer in spite of the latter having given it an adjournment for the purpose. On the facts and circumstances of the case it must be held that the income from the sale of the milk received by the assessee during the accounting year was not/an agricultural income within the meaning of the Income-tax Act.

       (4) In the circumstances the Supreme Court will not send back the case to High Court for calling a future statement of case from Income tax Appellate Tribunal at such late stage.