Judgment

HEGDE, J.:- This is an appeal by special leave. It relates to the assessment of the assessee for the assessment year 1961-62, for which the relevant previous Year was the calendar year 1960.

2. The assessee is a Tea Company. Upto the assessment year 195051 the Agricultural Income-tax Officer was accepting the computation of the total income from the growth, manufacture and sale of tea made by the Income Tax Officer and taking 60 per cent of the income determined as the agricultural income under R. 24 of the Income-tax Rules. On and from the assessment year 1951-52 the agricultural income-tax authorities started taking the market value of thatch, bamboo and fuel etc. grown in the tea estate and used in the tea business as 100 per cent agricultural income and after deducting the cost of cultivation thereof, taxed the whole of the resulting income on the basis of the market value of those articles. So from that assessment year the computation of the total income from tea by the Income-tax authorities was varied by the Agricultural Income-tax Officer and the assessee had to pay tax on a total income which was more than the income disclosed in the Profit and Loss Account.

3. For the assessment yea: 1961-62, the assessee company was assessed to Income-tax under Rule 24 of the Income-tax Rules, on its Profit as per its Profit and Loss Account with certain modifications by the Incometax Officer. In the expenses debited in its accounts, only the expenses for raising of thatch, bamboo, fuel etc. grown in the tea estate and used in the tea business were included.

4. Before the Appellate Assistant Commissioner, the assessee raised the contention that the market value of agricultural produce grown in the tea estate and utilised by the assessee in the tea business, which had been assessed at 100 per cent to agricultural income-tax, must be taken into consideration in the computation of allowable expenditure. In support of that contention reliance was placed on the decision of this Court in the case of Dooars Tea Co. Ltd. v. Commr. of Agrl. Income-tax, West Bengal, (1962) 44 ITR 6. The Appellate Assistant Commissioner accepted that contention and directed the Income-tax Officer to modify the assessment accordingly. In appeal by the Revenue the finding of the Appellate Assistant Commissioner was accepted by the Tribunal. Thereafter at the instance of the Revenue the following question was referred to the High Court for its opinion:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the decision of the SC in Dooars Tea Co. Ltd. (1962) 44 ITR 6, was applicable to the computation of the assessee s total income under the provisions of the Indian Income-tax Act, 1922 and in directing the Income-tax Officer to make a fresh assessment according to law in the light of the aforesaid decision of the SC." The High Court answered that question in the affirmative and in favour of the assessee. Hence this appeal by the Revenue.

5. It is true that, the question formulated by the Tribunal does not accurately bring out the real contention between the parties. The real contention between the parties is whether the assessee is entitled to the market value of the agricultural produce grown by it but utilised for the purpose of tea business. Dooars Tea Co. s case 44 ITR 6 related to the levy of agricultural income-tax. The facts of that case are as follows:

6. The assessee, who is a tea grower, grew in its estate bamboo, thatched grass, fuel timber etc. and utilised the same for tea business. At the time of the assessee s assessment under the Bengal Agricultural Income-tax Act the assessee contended that only the cost of growing the produce in question should be taken into consideration and not its market value as the same was used for the purpose of assessee s tea business. This contention was rejected by the Revenue and this court upheld the decision of the Revenue. This court came to the conclusion that the ag