K.S. Radhakrishnan, J.

Tata Tea Limited, a public limited Company, along with another are the petitioners in O.P.NO.6075 of 1995 which was filed seeking a declaration that Section 4(2) of the Agricultural Income-tax Act, 1991 in so far as it assess tax on deemed agricultural income is arbitrary, illegal and unreasonable and violative of Article 365 of the Constitution of India. Petitioners submit by sub-clauses (ii) and (iii) of Section 4 (2) of the Agricultural income-tax Act the rule making authority seeks to enlarge the meaning of “agricultural income†by deeming certain receipts which are otherwise not agricultural income within the meaning of Section 2 (1A) of the Income –Tax Act. Petitioners point out that in view of Article 366 of the Constitution of India rule making authority has no legislative competence, to tax as agricultural income receipts which are incapable of being construed as agricultural income within the meaning of Section 2 (1A) of the Income-tax Act, Accordingly sub-clauses (ii) and (iii) of Section 4 (2) of the Agricultural Incometax Act is unconstitutional.

2. Petitioners also submit that in any view Section 4 (2) of the Act, if at all, would apply in respect of computation of income made under the Agricultural Income tax Act in respect of agricultural produces other than tea and cannot apply to computation of income made under the Income-tax Act including in relation to the computation of tea income. Petitioners also point out as far as income from tea grown and manufactured is concerned, authorities are empowered to tax only 60% of such income as computed by the Central incometax Officer under the Income-tax Act and the State and the authorities, by resorting to Section 4 (2) of the Act, cannot vary the computation of income from tea grown and manufactured as computed under the Central Income-tax Act. Petitioners further point out that if Section 4(2) of the Act is applied to assessees who derive income from tea grown and manufactured and in respect of matters dealt with in the computation of such income it would directly amount to variation of tea income computed under the Central Incometax Act. They also point out even if certain expenses or allowances claimed and allowed as a deduction in the computation of tea income under the Central Incometax Act is subsequently recovered or obtained by an assessee in a subsequent year such recovery of expenses or allowances cannot be brought to tax under Section 4(2) of the AIT Act.

3. The apex court in Commissioner of Agricultural Income-tax v. Kerala Estate Mooriad Chalappuram (1986) 161 ITR 155) had occasion to consider the question whether the amount of interest, payment of which was waived by the creditor could be assessed as agricultural income for the assessment year 1964-65. The court held in the absence of a deeming provision similar to Section 10 (2A) of the Indian Income tax Act, 1922 or Section 41(1) of the income-tax Act, 1961, the remission could not be considered as amounting to receipt of agricultural income. While disposing of the case, the court opined as follows:

“We may point out in regard to sub-section (2A) of Section 10 of the Indian Income tax Act, 1922, that it has been replaced by an even wider provision as sub-section (1) of Section 41 of the Incometax Act, 1961. No provision of that nature finds place in the Kerala Agricultural Incometax Act.â€

We notice that the new Agricultural incometax Act, 1991 was enacted by the Legislature presumably on the basis of the above observation of the apex court with regard to the deeming provision. For easy reference we may extract Section 4 of the Agricultural Incometax Act 1991 in its entirety.

4. Total Agricultural income-(1) Subject to the provisions of this Act, the total agricultural income of the previous year of any person comprises of all agricultural income derived from land situated within the State and received by him within or outside the State, but does not include.

(a)