THE DOOARS TEA CO., LTD. versus COMMISSIONER OF AGRICULTURAL INCOME-TAX, WEST BENGAL

'1961

'l'he Sen{or El,ctric Inspector v. Lax mi Narayan Chopra·

Subba Rao J.

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3. S.C.R.

SUPREME· COURT REPORTS

157

of an enlarged meaning the same concept might ~ttract with · the march of time and with the revolutionary·. changes brought ft bout in social, economic, political and scientific ·~ml other fields Indeed, unless a contrary of human activity. intention appears, an interpretation should be given to the words used to take in new fact~ and situations, if the words are capable of comprehend ing them. We cannot, therefore, agree with the learned Judges of the High Court that the maxim contemporanea expositio could be invoked in constrn fag the word "telegraph line" in the Act.

For the' said reasons, we hold that the expres. sion "telegraph line" is sufficiently comprehensive t.o take in the wires used for the purpose of the apparatus of the Post and Telegraph Wireless Station.

In the result, we set aside the order of the High Court and dismiss the petition filed by the first respondent. The appeal is allowed, bnt, in tht• eircumstances of the case, without costs.

Appeal allowed.

•

THE DOOARS TEA CO., LTD.

'V. COMMISSIONER OF AGRICUL'TURAL INCOME-TAX, WEST BENGAL (P. B. GAJENDRAGADKAR, K. SunnA RAo and M. HIDAYATULLAH, JJ.)

1961

Augml 18.

Agricultural Income-Agricultural

for asses~ee's "'!'n business and not sold in the market-If by itself constitutes income-Market value-Mode of computation-Bengal Agricultural Income-tax Act, 1944 (IV of 1944), s. 2(1)(b)(I), Rule 4(2).

produce used

The appellant which carried on business of growing m;tnufacturing and selling tea held a large tract of land o~ which qam!>oos, thatching grass and fuel ti!I!ber were grow!l

1981

·~

Tlil DHa-TlJ Tt-. C'o. 1 LtJ. v. Comm111ioritr of Agrict1l:Ural Inum1~tax, Wt# Bt1'gal

lGS

SUPREME COURT REPORTS

[l962]

it by agricultural operations through its servants ... and by labourers and the same were utilised for the purpooea of ita tt:a business and wrre not sold in the market or otherwise. In the relevant assessment year the _1\gricultural Income-tax Officer increased the appellant's return by a ccnain sum of money as representing the market \•aJuc of it~ agricultura] income from bamboos, thatching grass and fuel timber. The appellant contended inltr alia that the agricultural produce in question did not ronstitute agrirultt:ral income under llengal Agriculrural Income-tax Act becausr. the same had not been sold or converted into money.

the

Hrld,

the Bengal that under cl.(!) of s.2(1)(b) of Agricultural Income-tax Act the agricultural produce utilised by the asscssec for its O\\'fl business itself constituted income; no sale v .. ·us contempiate<l thereunder anti it \\'as not required that the agricultural produce should be sold and profit or gain recei\'ed frotn such sale.

'l'en11ant

Alexander

'" Rol1ert Suir/air Smith, (1892) A.C. 150, In re MiCklethwait, 11 Ex. 456 and Sir Kikabhai Premclmnd '" Commi.Mioner nf lnMme-lax (Ceniral) Bombay, (1954) S.C.R. 219, referred to.

('011uni8.tlone,· of /11con1e·ta:r v. Sltau·

lrallace & Co., ( 1932) L.R. 59 I .A. 206, Captain Maharaj Kumar Gopal .'?aran Flinglt v. Conzmiasio1zer of Inconie-ta.r~ JJiltar and (Jrisaa, ( 1935) L. R. G2 I.A. 207, not applicable.

Rule 4(2) framed under the Act deals with cases where agricultural produce has been sold outside the market as well as cases \vhere it has not heen sold at all an<l the income front the mannrr ~uch agriculruraJ produce may hr computed in prescril~ed tl1rreunder.

Crnr. APPELLATE .Tum~nI<'TTO:> : Civil Appeal

Xo. :l8! of l!luO.

. -

y

1

,

Appc·al from the judgmont and ordor d'ted l!l5i, of the Calcutta High Court

ScptcmbC'r 11, in RcfcrC'nce No. I 02/l!l;i2.

•

S. Jlfitm, S. iV. 11luklierjee and B. N. Gho8h, for

Appellant.

R. B. J'al, Asoke Sen and P. K. Bose,

for

rc•Rponrlent.

1001. August 18. The Judgment of the Court

was delivered by

. -

Gajtn.Jragadkar J.

GAJENDRAGADKAR, J.--This appeal by a.oertifi- cnte arises out of a reference made to the IDgh COurt

iti;J

Tfte·Docar~ Tea Co., Ltd. v. Cqmmiaai.Oner uj AgrieuUuritZ lnconte•t"ax,

iv est Betiial --

.• ,

3 S.C.R. StT.PREME COtJR1' REPORTS

• 159

income showing

under s. 63( l) of th A Bengal at Calcutta Agricultural Income-tax Act IV of I ll44 (hereafter 0alled the Act). The appellant, the Dooars Tett Co., Ltd., is a public limited company and it carries -0n business of growing, manufacturing and selling tea. For the accounting year 1948 which corres· ponds to the aesessment year 1949-50 a return was submitted by the appellant in ·respect of its agri· income at cultural Rs. 3,45, 702. The Agricultural Income-tax Officer, however, did not accept the correctness of the said return and increased the amount to Rs. 4,41,940. This increased amount included a sum of Rs. 39,849 the market value 'of the and _appellant's agricultural from . bamboos, thatching grass and fuel timber. It is this amount thus .added by the Agricultural Income-tax Officer to the agricultural income of the appellant in the relevant year that has given rise to the present reference.

represented

the said

income

it

The facts leading to the reference are not in dispute. The appellant holds a large tract of land under lease from the local Government and it is common-ground that in a part of the said land it grows bamboos, thatching grass and fuel timber. During the relevant year it cut down some bamboos, some thatching grass and fuel timber and used the same for the purpose of its business. The bamboos, the thatchiµg grass and fuel timber were grown by the appellant on its land by agricultural operations which were carried on by the servants and labourers employed by the appellant. After they were grown they were utilised by the appellant for the purpose of its tea business and were not sold either in the market or otherwise. It has been found that the appellant has been utilising the bamboos, thatching grass and fuel timber grown by it on its land in this way every year .

..Before the tax authorities the .appellant -urged th.at the agricultural produce in question, ·did not

1961

'l'lu Jjooor.~ Tea Co., LtJ. v. Com1fti1Jsiont'T ('j Agricultural 1 ncomt-tax, lVut Btn{J<.zl

Gajmdragadkrzr J.

J (j() •

SUPRE~IE COURT REPORTS

(1962j

constitute agr;cultural income within the meaning of the _.\ct because the same had not been sold. The appellant's case was that agricultural produce grown by it on its own land could not in law be treated as its income unless it was converted into its money cquival~nt or into something which ,ms money's worth ; m other words, unless the said produce was sold. The department, on the other hand, has taken the view that the several varieties of agricultural produce grown by the appellant on itR land and utilisPd by it for its business were themselves agricnltural income and the tax on the said income cannot be <woidcd on the pica that the 8aid varieties had not been sold. This dispute went up to the Tribunal ; but the Tribunal agreed with the conelusiou of the t<ix authorities and held that the produce in question constituted agricultural incomt• of the appellant for the relevant year, and so the addition of Rs. 39,849 made by the Agricul tural Income-tax Officer in determining the total for the agricultural relevant year was affirmed.

the appellant

income of

It 'HI.I! also urged by the appellant in the assessment proceedings that even if the produce in t.hc appellant's agriculturiil question constituted income its market value could nut be comput-0d in monPy because no rule had been framed for the computation of the market ,·alue of such income. The appellant urged that r. •.l of the Rules framed under the Act was inapplicable to the present case. This contention has also been rejected by In the tax authoriticB as well as by the Trilmnal. tho rC'sult the agl"icultural income found to have becu earned by the appellant for the relevant year haii been duly taxed.

Feeling aggrieYed by the final order passed this matter the appellant the Tribunal by required the Tribunal to refer two questions for the opinion of the High Court, and in due- course the Tribunal made the reference as required. The two

in

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•

1961

The Dooars Tea Co., Ltd. v. Commissio,.er cj Agrt·cuZtttrat In<!om~·tax, West Btrigal

Gafendragcdhr J,

3 S.C.R.

SUPREME COURT REPORTS

161

questions referred Court have been thus framed by the Tribunal :

for the opinion of the High

( 1) Is bamboo, thatch, fuel, etc., grown by assessee company and utilised for its own benefits in its tea business, agricultural income within the meaning of the Bengal Agricultural Income-tax Act? ; and

(2) If the answer to question (1) be in the affirmative, can such income be computed under rule 4 of the rules framed under the Act?

The High Court has amwercd both these questions the affirmative against the appellant. The in appellant then applied for and obtained a certificate from the High Court under s.64(2) of the Act read with Art. 135 of the Constitution. The High Court has certified that the case is a fit case for appe:tl to this Court because it was conceded by both the parties before the High Court that this case had been chosen by the assessec and the department as a test case since all the tea companies are intcresterl It in the questions raised in the present reference. is with this certificate that the appellant has come to this Court with its present appeal.

The answer to the first question would depend

upon the construction of the definition of agricul income contained in s. 2(l)(b) of the Act. tural The charging section is s.3. It provides that subject to its two provisos agricultural income-tax shall be charged for each financial year in accordance with and subject to the provisions of the Act at t11e rate or rates specified in the Schedule in respect of the total agricultural income of the previous year of every individual, Hindu undivided family, company, firm or other association of individuals and every Ruler of a Part B State. Section 7 pr(J)vides for the computation of tax and allowances under the head "agricultural income from agricul ture". Do the relevant and material words usea

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t

•

1911

1"he Dooor11 Tt4 Co., l.td. v. C01nmia1iontr of .-fgri,ulturul lntO'Ml-Ta.r, lfe1t Retigal

f_,'ujniiragadl.:ar J.

162

SbPREME COtJRT REi>oR'i'S

in thli definition of agricultural income by s. 2 reach the subject of tax ition in the present case? That is the short question which falls for our decision.

Section 2(l)(a) deafa with the agricultural income consisting of rent or rcvenno derived from Jami which is used for agricultural purposes and is either assosscd to land rovenue in a State or subject to local rate assesse<I or collected by officers of the Government as such. We are not concerned with this part of the definition. Section 2(1 )(b) reads thus:

"any income derived from

such land

by~

(i) agriculture, or (ii) the performance by a culti,•ator or receiver of rent-in-kind of any process ordinarily employerl by a cultivator or receiver of rent-in-kind to render the produce raised or received hv him fit to be taken to market, or

·

(iii) the sale by a cultivator or rccl\iver of rent-in-kind of the produce raised or received hy him, in respect of which no process has hecn performed other than :1 process of the

· nature described in item (ii)."

-

(

J

that

eont<'uds

The r"spondont, th<' C:ommissiorwr of Agricn ltural Income-tax, West Beugal, the in tlw preHcnt. case falls agricultural producc It is income derived directly under s. 2(1 )(b)(i). It is not from agricultural laud by agric:ulturc. disputed l.>y the appellant that the context income ma v mean either cash or iuc:oml' in kind. It is also· conceded l.>y the appellant that the dictionary meaning of the word "income" includes "produce of a farm"', and so if we were to construe the relevant clause in the light of the dictionary me~ning of the word "income" it would take in agricultural produce with whirh we arc concerned

in

1961

The DotJars Tm Co., Ltd. v. Comm#aiont.r of Agricultural Income-tax, West Be'ngal

Ga;"endragadksr J.

3 S.C.R. SUPREME COURT REPORTS

16ll

in

the State enactments

in the present case. It is, however, urged that the word "income" necessarily denotes, and ;has reference to, profit or gain, and profit or gain cannot be made unless the produce is sold and can trade with realises its value. No person himself and so if the agricultural produce is used by the appellant for its own purposes there is no element of sale involved in the transaction and there can be no profit or gain which would justify the imposition of tax on the said produce. In support of this arg11men t

it has been urged before us that the definition of agricultural income prescribed by s. 2 of the Act is common to all respect of agricultural income and is the same as the defini tion of agricultural income prescribed by s. 2(1) of the Income-tax Act. The same definition has been adopted by the Constitution under Art. 366( 1 ). That being so, it is contended that in interpreting the word "income" it would be relevant to rely In on the decisions under the Income-tax Act. Alexander Tennant v. Robert Sinclair Smith (1 ) Lord Halsbury has cited with approval Lord Wensleydale's observation in In re Micklethu:ait (') that "it is a well-established rule, that the subject is not to be taxed without clear words for that purpose ; and also that every Act of Parliament must be read according to the natural construction In that case it was held that the of its words". benefit which the appellant assessee derived from having rent-free house provided for him by the Bank brought in nothing which can be reckoned up as receipt or properly be described as income. Mr. Mitra, for the appellant, contends that income obviously and necessarily denotes the coming in of profit or gain, and what is true about thehousc which the assessee Alexander Tennant was allowed to use is equally true about the agricultural land owned by the appellant. The appellant has received

(1) [1892] A.C. 150, 154.

( 2) II Ex. 456.

0

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lB6J .,.....-- The Pooor. Tea Co., Ltd. y. Oomntisliontr of .-4gri~ltural lft'Ot»e ~lax, IVtat Btnglll

Cajtndragadk(l1" J.

• •

'

164

SUPRE:ME COURT REPORTS

[1962)

no profit or gain from the agricultural produce derived from its land, and so the said produoe cannot be saicl to constitut<' its income under s. 2(I)(b)(i).

'"

In

The Mme argument is put in another form on the authority of the decision of this Court in Commi8.~ioner of Sir !{ ikabhai · l'remclum4 that case lncmne-ff1x (Oentml), Bombay('). Bose .J., wllo spoke for the majority of the Court, sta({)cl that it was well recognised that in revenue cases regard must ho had to tfo, substanc<' of the transaction ratht11· than its mere form, and ho proceeded to observc that in tho ease before the Court, clisregarcling tochnicalit.ics, it wa.s impossible to get away from the fact tliat the business was owned and run bv the assessec himself; and if liablc for th<' tax "you reach he was to be held the poHition that a man is supposed to· be soiling to himself ancl thereby making a profit out of himself which on the face of it is not onlv absurd but against nil canons of mercantile and income tnx law.,_ Mr. ;\fitra suggests in taxing the agricultural produce utilised by th<' appellant for its own purpose the respondent is really taxing the appe llnnt on the basis that it has traded with itself and mad1• profita on the agricultural pro clucr· in q11estion.

tliat

0

0

Thi~ argument is hased on

the assumption that income a,.q definecl bys. 2(l)(h)(i) must always be in the nature of profit or gain, and that incvitabl.\• postulat<os a Hale transaction mado at n, profit 01· gain. to derive a.ssi,tanc(' for this argument from the provisions of ss. •1 and 6 of the Income-tax Act where income, profits and gains arc grouped together. What is true about the denotation of the word "income" und"r the Income-tax Act, savs !\fr. Mitra, must be equally true about the denotation of the word "income" under s. 2( I )(b J(i) of the Act.

;\Tr. Mitra seeks

( 11 [1954~ s.c.R. 219.

1961

Tlu-Dooara Tea Co., Ltd. v. Commiarioner of AgrfruUural lncome·tax lt' est Bengal

Gajendragadkar J.

·3 s:c.R.

SUPREME COURT REPORTS

165

)

.

by

judicial

In dealing with this argument it is necessary to· bear in mind that the word "income" even as it is used in the Income-tax Act has oftm been characterised decisions as formidably wide and vague in its scope. It is a word of elastic import and its extent and sweep are not controlled or limited by tho use of the words "profits and gains" in ss. 4 and 6. As has been observed by Sir George Lowndes in Com missioner of Income-tax v. Shaw Wallace & Co., ( 1 tax income the object of Indian Income-tax is to a term which it does not define. It is expanded, no doubt, into incomt>, profits and gains, but the expansion is more a mattl'r of words than of substance. Similar is the observation of Lord Rus~ell in Captain Maharaj Kumar Gopal Saran Narain Singh v. Commissioner of Income-tax, Bihar and Orissa (2) where it has been observed that "the word "income" is not limit-Od bv the words "profits" and "gains". Anything ~vhioh taxable can be properly describ'.'d as income is under the Act unless expressly exempted". The diverse forms which income may 11ssume cannot exhaustively be enumerated, and so in each ease the decision of the question as to whether any particular income or not must depend upon the nature of the receipt and the taxing true scope and effect of the income for the provision. The receipt may he a11 purpose of taxation though it may not amount to profit. The case of Gopal S(iran Narain Singh (2) itself is an illustration in point. fn that rase the assessee aged 47 had transferred an cstak worth two crores of rupees for a relatively small annuity of Rs. 2,40,000 for life. The said annuity could not constitute or provide a profit or gain to the assessee but all the same it was taxable as income. Tbus the argument based on the emphasis on the use of the words "profits and gains" in ss.4 and 6 of the Income-tq.x Act cannot really assist the appellant

receipt is

relevant

(I) (1932) L. R. 59 l·A· 206, 212.

(2) (1935) L.R. 62 I.A. 207.

•

1961

Thi Dooara Tea· Co~~ Ltd~~ v •. Commisa,i.onrr of Agricultural Income-tax, West I!_engal

Gajendragadkar J.

166

· SUPREME COURT REPORTS

[1962)

, '

in construing s. 2(l)(b)(i) of the Act with which we 'Vhat the word "income" denotes are concerned. . has to be determined in the context of the. said section itself ..

Going back to s.2(l)(b) it refers to income • derived fr.om land which means arising from land and denotes income the immediate and effective - source of which is land. Section 2( 1 )(b) consists of -three clauses. Let-us first construe els. (iil and (iii). Clause (ii) includes cases of income derived from the performance of any process therein specified. The process must be one which is usw11ly employed by the cultivator or receiver of rent-in-kind ; it may be_ simple manual process or- it may involve the use and assistance of machinery. That is the first requirement of this proviso. The second require ment is that the said process must have been employed with the object of making the produce marketable. It is, however, clear that the t;mploy ment of the process contemplated by the second clause must not alter the character of the producr. The produce must retain its original character and the ouly change that may have been brought about in the produce is to make it marketable. The said change in the condition -of the· produce -is only intended to make the produce a saleable commodity in - the market. Thus cl. (ii) includes within the categories of income, income· derived from the employment of the process falling under that clause. As we have just observed the object of employing the requisite process is to make the produce market able but in terms the clause docs not refer to sale - and does not require that the income should 'be obtained from sale as such though in a sense -it contemplates the sale of the produce.

That takes us to cl. (iii). This clause in' income terms · and expressly refers derived from sale. It refers the sale price realised either by the cultivator or the receiver. of rent-in·kind by the sale of the produce in respect

the

to

to

1961

The Dooors Tea'G(}., lAtl. v. Commi.1sWner of Agricultural Income-tax, West Bt.ngal

dajendragadka1 LI.

3 S.C.R. SUPREME COURT REPORTS

161

the process

contemplated by of which as cl. (ii) has been performed. It is significant that the sale to which cl. (iii) refers must be the sale of produce which has not been subject to any process other than that contemplated by cl. (ii). Thus it may be stated that reading els. (ii) and (iii) together they contemplate the sale of the produce cl.(ii) indirectly inasmuch as it refers to the process employed for making the produce marketable and cl. (iii) directly inasmuch as it refers to the price realised by sale of produce which has been subjected to the process contemplated by cl. (ii). Therefore, it is clear that income derived from sale of agricultural produce has been provided for by els. (ii) and (iii) and prima f acie that would show that cl. (i) which does not refer to salfl even in directly cannot be intended to cover cases of income derived from the sale of agricultural produce.

Considered in the light of els. (ii) and (iii) of s.2( 1 )(b) what is the true scope and effect of the income contemplated by cl. (i) ? In terms tho clause takes m income derived from agricultural land by agriculture ; and as we ha Ye already pointed out giving the material words their plan grammati cal meaning there is no doubt that agricultural Is produce constitutes income under this clause. there anything in the context which requires the introduction of the concept of sale in interpreting this clause as suggested by the appellant ? In our opinion this question must be answered in the negative. Not only is there no indication in tho context which would justify the importing of tho concept of sale in the relevant clause, but as we have just indicated the indication provided by els. (ii) and (iii) is all to the contrary. What thiR elause seems clearly to have in view is agricultural produce itself which has been used by the assessec In the present case it is common-ground that thf, appellant has utilii!Od for its business the agricultu ral produce in question and we feel no difficulty in agreeing with the High Court when it held that

t

1961

Tht Do(}{tra 7'ea Co., l11t v. Co1n111i811ioiur of Aqf'ioullurrtl l110011u..fux. 11' ul Bniqal

. <Jajtnt:Wagadkur J,

168

Sl'PHE:\IE COl.R'l' HEPOR'T'S

,

trn82J

in

intended

terms hy cl. (iii) of s. 2( I)( b ). Where

t.ho agricultural prricluce utilised by the appellant for its lmsillC'8;; cu11stitut1·s inecimc 1111der "· 2(1 )(b)(i). If the agricultural producc usc<l by the appellant was not intended to be included within tho definition of income umler s. 2( l)(b) we apprehend that tho whole clause would have been verv differently worded. Where income derived fr~m sale was internlcd to l)(' prescribed the Legislature has done the so marketable condition of the produce r<'sulting from the •·mployment of the Rpecified processes and income <leriYed from the adoption of sueh procosse.s was to be included in the income t.he Legislature has <lone so by cl. (ii) ; and so those two cnses having Leen specifically provided for by the two respecti,•e clauses there would bn no justi· fication for introducing the concept of sa.Jc in cons- truing cl. (i) ofs. 2(1)(b). 'rhr words ins. 2(l)(b)(i) are, iu our opinio11, wide, plain and mu1m biguous and lie construed to C'Xcludc agri- cultural produce used by the appellant for its busi- ness. In this co11ncdio11 we mav inciclcntallv refer to th(' prm•isio11s of su L-cls. ( i ), {ii) a11<l (iii) of s. 7( I) of the Act which pro\·idc for the computation of tax am! :11lowa11ccs under the h<>ad "agricultural incum<· from agriculture"'. These three sub-clauses in terms corrcspuncl to the three suL-clauscs of s. 2(1)(b) ancl lend some support to the conclusion i11 s.2(1 )(b) doc' 11ot require tlrntthc that <'I. (i) agricultural prorluce should be solrl and profit or gain received from such sale before it is included in tho said clause. Therefore, we do not tl1ink that .\[r. Mitra is justified i11 contending that the answer made by the High Court in referC'nee to question I is \Vrong.

they ca11not

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Tlw second question relates tu

the compu

tation of agricultural income for the purposes of the Act. l~ulc 4 with the constructio11 of which the second quc8tion is concerned reads thus :

_,,..

3 s.c.:R. 8UPREM&COURT·REPORTS

i6!l

"4. For the purposes . of the. Act the market value · of any agricultural produce shall, except in the case referred to in clause (a) of the proviso to sub· section (I) of section 8, be determined the following manner, namel;y : - ( 1) if

the agricultural · produce was sold in the market, the market value. shall be deemed to 'be the price for whicli such produce was sold ;

in

(2) if

the agricultural produce has not been sold in the market, the market value shall be deemed to be-

( a) where such. produce is otdinarily sold · in the market in its raw state, or after the '• ·c:c·.performance of any piiocess ordinariiy em- .'· ployed by a cµltivator or receiver of rent-in kind to render it fit to be taken to market, the value calculated according. to the average :price at which such produce has been so sold m the locality during the previous year in res'pec~ of which the assessment is made ;

The.-UOOQfa Tea Co,, Ltd. v. "' G'ommi~•.i_ontr.of Agrtctlftilriit I tic-Otlf<;ftu . Jl'ii!fi~I

Gajen(lra,dad,kar J.

•

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(b) where such produce is not ordinarily sold in the market in the manner referred to in sub-clause (a), the aggregate of-.. (i) the expense~ of cultivation ; (ii) the land revenue 01· rent, paid for the

area in which it wasgrowh ; and

_ ... -,

. (iii) such amount as

the Agricultural Income-tax Officer finds, having regard to all to represent the circumstances in each case, a reasonable rate of profit on the sale of produce in guestion as agricultural produce." it is clear that r. 4(1) cannot apply to tho appel I1u1t's cas.e for the agricultural produce ill question Jui;s not been sold in the market but has been used Tho ap~llant contends t!i;.t l'• '4(2) cannot 'also be in ,yo~l)d" ·against it, and SG>e. the.i:o is no rule under

its o,vn

bµsiµe13s.

.._... by ·the appellant for

i70

SuPREME OOuRT REPORTS

[1962j

1961

T!.. Doo.,.• 0 ;:· Ltd. T"" aommiaaioner of .A..grieultural / ----. Income-tax,· We8'B"'ilfLI

which the agricultural income in question can be computed, Incidentally the appellant suggested that if its construction of r. 4(2) is right it in- directly supports its case as to the tnie scope and effect of s. 2(l)(b)(i). The Legislature knew that agricultural produce is not taxable unless it is sold, Gojmd,.gaakar-.J.--. and so· it -has not made any rule for the compu tation of agricultural income alleged to have been received by the assessee from agricultural produce used by the assessee for its own purpose. On the other hand, the respondent contends that r. 4(2) . covers the present case, and if that is so, according to the respondent, that would "incidentally support his construction of s. 2(1 )(b )(i).

_The argument urged by the appellaJlt assumes that the two rules are based on a .kiild of baeic _dichotomy. Rule 1 deals with agricultural produce sold in the market, andr. 2 with the agricultural produce which -has been· sold but not in the market. In other words, according to the appellant, · both the rules assume that the agricultural produce has in fact been sold, r. (1) deals with cases where it has been sold in the market and r. (2) with cases where it has been sold but not in the market. If this argument is right then of course cases where agricultural produce has not been sold would remain outside the purview of both the rules ; but is this · argument right ? We have no hesitation in hold· In our opinion, r. (2) deals with ing that it is not. _ cases where agricultural produce has been sold outside the market as well as cases where agri cultural produce has not been sold at all. The effect of reading the two sub-rules together is that the cases of market sales arc covered by r. (1) and all - other . cases are covered by r. (2). Rule (2) is a residuary rule which applies to all cases not -falling m1der r. (I). Therefo1·e, we must hold that the answer given by the High Comt to question 2 ·is also right. It is obvious that the rules framed in exercise of the power conferred by s. 57 of the

38.C.R.

SUPREME COURT REPORTS

171

~

~

~~, i. • Act cannot legitimately be pressed into service for the purpose of construing the relevant provisions of the Act ; even so, incidentally it may be permis~ sible to observe that the construction of r. 4(2) which we are inclined to adopt is consistent with the respondent's case includes agricultural produce utilised by the appellant for its own business.

that s.2 (1 )(b)(i)

':!

1981

ThtiD-i TeaC<u, Ltd. •• Crmihiia':i.~lrM ~'. Aur~ral' Jniiome .. tax, Wes!B<ngal

Gajerzitloagadkar J.

In the result the appeal fails and is dismissed

with costs.

Appeal dismissed.

1

SHRI AMBALAL M. SHAH AND ANOTHER v. HATRISINGH MANUFACTURING CO., LTD. (K. N. WANCHOO, K. c. DAS GUPTA, J.C. SHAH and RAGHUBAR DAYAL, JJ.)

Industrial Untkrtaking-lnvestigation into its affairs by Central Government-Takinq over of manoqement by officer appoin· ted by Government on the basis of report--Legality-lndust1·ies (Development and Regulation) Act. 1961 (66 of 1961), ss. 16, 18 A(I)(b).

1961

A"!11Jat 21.

for

Being of the opinion that 1lhere had been a• substantial fall in the volume of production in respect of cotton textiles manufactured in the respondent company, an industrial under taking, for which having regard to the economic CQnditions • prevailing there was no justification; the Central Government ,\ made an order under s.15 of the Industries (Development and Regulation) Act, 195 l, appointing a committee of full and three persons the purpose of making a complete investigation into the circumstances of the case. After the committee madeits report, the Central Government being of the opinion the company was being managed in a manner highly detrimental to public 18 A of the Act authorising interest, made an order under s. the first appellant to take over the management of the whole· of challenged the - legality of the order on the ground, inter alia, that on the proper construction of s,18 A the Central Government hac' the right to make the order under that section on the ground

undertaking. The

respondents

thereupon

that

~-~he·· said

-