# KOTTAYAM & ANR v. STATE OF KERALA & ORS

- **Citation:** [1963] Supp. 1 S.C.R. 823
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Bench:** S. K. Das, ]. L. Kapur, A. K. Sarkar, M. Hidayatullah, Raguubar Dayal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/kottayam-anr-v-state-of-kerala-ors-2749
- **Pages:** 14

## Headnote

Agricultural Inconie 'l'a:r-7
1ea l'lantations-Computatinn
of agricultural income-Dui'uctions-State h'trztute
disoJ{o1"inr1
exptnditure
on
-im.mature
plnnfs-Jlalidity
uf-.·l11ricultural
Income-7'ax (Ammdrncnt) Acl, l!IG/ (Ker./.\ of
1961), s. 2-lndian Income-tax Act, 1922 (11 of
111:'.~.!,
s. 2(1)-lwlian
Incorne-t.n.x
Rulr>~'I,
19:?2.
IT. 2.'J,
24Gonstitution of Ind·ia, L1rt. 3GG, Seventh Schrr{uJe, List If /tern
i\
10. 46.
Entrv 46, List II of the Seventh Schedule to the Constitution e1nPowers the State to ~rgislatc \\·ith respect to taxes on
agricultural inrome. Article 366( l) provides th:1t the cxpressir'n "agricultural income" in the f.!onstilution Uicans ar:rirultural incon1e as defined in the Indian Tncome-tax /\ct.
Under
the Agricultural Income-tax Act, 1950, agricultur,ql income fron1
tea plantations was to be computed in the same m;·,nncr as it
was done under the Indian Income-tax Act,
I 922
read ,vi th
tr. ~3 and 24 of the Indian Income-tax Rules. Section 5 of the
v.
Ha1ad.~gi1i Basa·
vanna G(,wd
G11jendra_!!,adk11r, l
1962
November, L
1962
Karimlharuvi Tea
Estates Ltd.,Kottayam
v.
Stale of Kcrala
Raghubar Dayal, I.
824 SUPREME COURT REPORTS [1963] SUPP.
Agricultural Income-tax Act provided for certain deductions
and cl. (j) pruvided for deductions corresponding to s. 10(2)(xv)
of the Income-tax Act.
The · ;\gricultural
Income-tax
(Amendment) Act, 1961, introduced Explanation 2 to s. 5
which provided that no deduction shall be allowed of any expenditure laid out or expended for the cultivation, upkeep, or
maintenance of immature plants from which no agricultural
income was derived during the previous year. The petitioner,
an owner of certain tea estates, contended that the amendment
was beyond the competency of the State Legislature.
HeUl, that Explanation 2 to s. 5 of the Agricultural
Income-tax Act added by the Amendment Act did not extend
to the computation of agricultural income derived from tea
plantations.
If Explanation 2 was applied to agricultural
income from tea plantations it would make such income different and higher than such income calculated in accordance with
Income-tax Act and r. 24 and would make it void. For the
purpose of agricultural income one had to look not !nerely to
the definition in the Income-tax Act but also to the rules made
thereunder.
The rules v.·ere in existence when the Constitution
incorporated the definition of "agricultural income" from the
Income-tax Act by reference; the definition of the term was
bound up with the ·rules.
0RTGINAL JumsDICTION: Petitions Nos. 234
to 236 of 1961.
Petition under Art. 32 of the Constitution of
India for enforcement of Fundamental Rights.
M. C. Setalvad, Attorney-General for India,
C. K. Daphtary, Solicitor General of India, S. T.
Desai, Vellapaly, .J.B. Dadachanji, 0. C. Mathur
and Ravinder NMain, for petitioners.
V. P. G. Nambiar, Advocate-General for the
State of Kerala,
A. V. Viswanatha Sastri and V. A.
Seyid Muhammed, for respondents.
1962. November 1. The Judgment of the
Court was delivered by
RAGHUBAR DAYAL, J.-These are three petitions
under Art. 32 of the Constitution by the Karimtharuvi
1 s.c.R.
SUPREME COURT REPORTS
825
Tea Est~tcs Ltd., Kottayam and one of its directors
and members praying for a declaration that the
Agricultural Income Tax (Amendment) Act, 1961
(Ker. IX of 19til ), hereinafter called the Amendment
Act, enacted by the Kerala State Legislature, is null
and void and that the State's power to tax income
from tea to agricultural income-tax is limited to
taking 60% of the income computed for the purpose
of the Indian Income-tax Act (hereinafter referred to
as the Income-tax Act) as if it were income derived
from business and for the issue of appropriate orders
to the respondents viz,, the State of Kerala, the Assistant Commissioner of
Agricultural
Income-tax,
Kottayam, and the Deputy Commissioner of Agricultural Income-tax, Quilon, restraining them, their
agents and sen·ants from enforcing or acting upon
the provisions of

## Text

1 S.C.R. SUPREME COURT REPORTS
823
1962
the District Co.irt, it should be so tried not in the
District Court of Kurnool but in the District Court of
Bellary.
Official Assignee,
High Co:irt, Bomha
In the result, the appeal is allowed, the order
passed by the High Court is set aside and that of the
District Court restored with the modification iu respect of the amount withdrawn by the respond en ts, as
indicated above. The appellant will be entitled to
his costs from the respondents throughout.
Appenl' allowed .
•
THE KARIMTHARUVI TEA EST ATES LTD.,
KOTTAYAM & ANR.
v.
STATE OF KERALA & ORS.
(S. K. DAS, ]. L. KAPUR, A. K.
SARKAR,
M. HIDAYATULLAH and RAGUUBAR DAYAL, JJ.)
Agricultural Inconie 'l'a:r-7
1ea l'lantations-Computatinn
of agricultural income-Dui'uctions-State h'trztute
disoJ{o1"inr1
exptnditure
on
-im.mature
plnnfs-Jlalidity
uf-.·l11ricultural
Income-7'ax (Ammdrncnt) Acl, l!IG/ (Ker./.\ of
1961), s. 2-lndian Income-tax Act, 1922 (11 of
111:'.~.!,
s. 2(1)-lwlian
Incorne-t.n.x
Rulr>~'I,
19:?2.
IT. 2.'J,
24Gonstitution of Ind·ia, L1rt. 3GG, Seventh Schrr{uJe, List If /tern
i\
10. 46.
Entrv 46, List II of the Seventh Schedule to the Constitution e1nPowers the State to ~rgislatc \\·ith respect to taxes on
agricultural inrome. Article 366( l) provides th:1t the cxpressir'n "agricultural income" in the f.!onstilution Uicans ar:rirultural incon1e as defined in the Indian Tncome-tax /\ct.
Under
the Agricultural Income-tax Act, 1950, agricultur,ql income fron1
tea plantations was to be computed in the same m;·,nncr as it
was done under the Indian Income-tax Act,
I 922
read ,vi th
tr. ~3 and 24 of the Indian Income-tax Rules. Section 5 of the
v.
Ha1ad.~gi1i Basa·
vanna G(,wd
G11jendra_!!,adk11r, l
1962
November, L
1962
Karimlharuvi Tea
Estates Ltd.,Kottayam
v.
Stale of Kcrala
Raghubar Dayal, I.
824 SUPREME COURT REPORTS [1963] SUPP.
Agricultural Income-tax Act provided for certain deductions
and cl. (j) pruvided for deductions corresponding to s. 10(2)(xv)
of the Income-tax Act.
The · ;\gricultural
Income-tax
(Amendment) Act, 1961, introduced Explanation 2 to s. 5
which provided that no deduction shall be allowed of any expenditure laid out or expended for the cultivation, upkeep, or
maintenance of immature plants from which no agricultural
income was derived during the previous year. The petitioner,
an owner of certain tea estates, contended that the amendment
was beyond the competency of the State Legislature.
HeUl, that Explanation 2 to s. 5 of the Agricultural
Income-tax Act added by the Amendment Act did not extend
to the computation of agricultural income derived from tea
plantations.
If Explanation 2 was applied to agricultural
income from tea plantations it would make such income different and higher than such income calculated in accordance with
Income-tax Act and r. 24 and would make it void. For the
purpose of agricultural income one had to look not !nerely to
the definition in the Income-tax Act but also to the rules made
thereunder.
The rules v.·ere in existence when the Constitution
incorporated the definition of "agricultural income" from the
Income-tax Act by reference; the definition of the term was
bound up with the ·rules.
0RTGINAL JumsDICTION: Petitions Nos. 234
to 236 of 1961.
Petition under Art. 32 of the Constitution of
India for enforcement of Fundamental Rights.
M. C. Setalvad, Attorney-General for India,
C. K. Daphtary, Solicitor General of India, S. T.
Desai, Vellapaly, .J.B. Dadachanji, 0. C. Mathur
and Ravinder NMain, for petitioners.
V. P. G. Nambiar, Advocate-General for the
State of Kerala,
A. V. Viswanatha Sastri and V. A.
Seyid Muhammed, for respondents.
1962. November 1. The Judgment of the
Court was delivered by
RAGHUBAR DAYAL, J.-These are three petitions
under Art. 32 of the Constitution by the Karimtharuvi
1 s.c.R.
SUPREME COURT REPORTS
825
Tea Est~tcs Ltd., Kottayam and one of its directors
and members praying for a declaration that the
Agricultural Income Tax (Amendment) Act, 1961
(Ker. IX of 19til ), hereinafter called the Amendment
Act, enacted by the Kerala State Legislature, is null
and void and that the State's power to tax income
from tea to agricultural income-tax is limited to
taking 60% of the income computed for the purpose
of the Indian Income-tax Act (hereinafter referred to
as the Income-tax Act) as if it were income derived
from business and for the issue of appropriate orders
to the respondents viz,, the State of Kerala, the Assistant Commissioner of
Agricultural
Income-tax,
Kottayam, and the Deputy Commissioner of Agricultural Income-tax, Quilon, restraining them, their
agents and sen·ants from enforcing or acting upon
the provisions of the aforesaid Amendment Act against
the petitioner company.
Tlie Karimtharuvi Tea Estates Ltd., Kottayam,
petitioner No. 1, hereinafter called the petitioner, are
the owners and managers of the Karimtharuvi and
the Penshurst Tea Estates situate at Peermade in
Kerala State. The Agricultural Income-tax Art, 1950
(originally
the
Travancore-Cochin
Agricultural
Income-tax Act XXII of 1950, amended as the
Agricultural Income-tax Act, 1950 by Act VIII of
1957 of the Kerala Legislature), hereinafter called the
Agricultural Income-tax Act, has been in force in the
St~te of Kerala during the assessment years l!l58-5!1,
1959-60 and J\JliO-!il for which the accounting years
of the petitioner were I !liil, 1 !J58 and l 950 ending on
December 31 pf each year. The petitioner was
assessed
to
agricultural income-tax under
the
provisions of the
Agric~ltnral . Income-tax Act
during
those
years.
fhc grievance of
the
petitione~ is
that
iJ?
computing
the taxable
income m the acr0•mtmg years for the purpose of
assessment of tax under the Agricnltural Income-tax
Act, the assessing authority did not allow deduction
1962
Karimth4ruvi Tea
Est.Its Ltd.,Kottaya,
v.
Slate of K1rela
Raghuhar Dayal. J.
1962
Karimtharuvi Tea
fofr~ Ltd.,Kott 1y,1m
v.
Stale of Kerala
rtghular Dayal, J.
826 SUPREME COURT REPORTS [1963] SUPP.
of the expenses incurred by it in the upkeep and
maintenance of immature tea plants from which no
agricultural income had been derived during those
years, though such expenses were deducted by the
Income-tax Department in connection with the assessment of income· tax with respect to the non-agricultural portion of the income from the petitioner's tea
estate in those years.
The petitioner filed appeals
against
the
three
assessment
orders
dated
August 12, 1960, for ·assessment years 1958-59 and
1959-60 and dated October 11, 19fi0, for assessment
year 1960-61. before the Deputy Commissioner of
Agricultural Income-tax, Quilon. Those appeals are
still pending.
On March 30, 1961, the Agricultural Incometax (Amendment) Act, Hl61, received the assent of
the Governor of the State of Kerala. Sub-section (2)
of s. 1 provides that this Act would be deemed to have
come into force wirh effect on and from April 1, 1951.
Section 2 provides for the addition of Explanation 2
to s. 5 of the Agricultural Income-tax Act, 1950. This
Explanation reads :
"Nothing contained in this section shall be
deemed to entitle a person deriving agricultural
income to deduction of any expenditure laid out
or expended for the cultivation, upkeep or
maintenance of immature plants from which no
agricultural income has been derived during the
.
"
previous year.
The pc ti ti oner 'Challenged the validity of the Amendment Act stating that it was not within the competence of the State Legislature and that its provisions
contravened the provisions of Arts. 14, l 9(l)(f) and
(g) and 31 of the Constitution.
At the hearing,
however, the contentions about the Act contravening
Arts. H)(l) (f) and (g) and Art. 31 were not raised.
The main contention raised at the hearing is that the
1 S.C.R.
SUPREME COURT REPORTS
827
Legislature of the State of Kerala cannot enact such
a provision which would make agricultural income
under it diffrrfnt from 'agric11ltural income' as defined
in the enactmrnts relating to the Income-tax Act and
that the impugned Explanation 2 to s. 5, if applicable
to the income from tea plantations, would make the
income from such plantations, for the purpose of the
Agricultural Income-tax Act, higher than what it
would be if computed in accordance with the dcfini ·
tion in the Income-tax enactments. The contention
is well-founded.
Entry 46, List TI, of the Seventh Schedule to
the Constitution relate> to taxes on agricultural
income.
In view of cl. (:l) of Art. 24() the Stat!'
Legislature can enact laws about these taxes. Art. 3fHi
provides that unless the context otherwise requires,
the expression 'agricultural· income' in the Constitution means agricultural income as defined for the
purposes of the enactments relating to Indian incometax.
Therefore, the agricultural income about which
a State Legislature may enact under Entry 46 of List
II would be such income as defined in the Indian
Income-tax Act.
The relevant portion of the defini·
tion of 'agricultural income' in the Income-tax Act,
1922, reads :
"( 1)
(a)
(b)
(i)
(ii)
'agricultural income· meansany rent or revenue
derived from land
:vhi~h is used for agricultural purnoses, and
1s either a5scsscd t0 land revenue in the
taxable territories or subject to a local rate
assessed and collected by officers of the
Government as such ;
anv income derived from such land byagricnlture, or
the pcrformanc~ ov a cultivator or receiver
of rent-in-kind of' any process ordinarily
1962
Knrimthnruvi Tea
Eslates Ltd.,
}(vttavam
v.
Sink of Kerala
Raglmbar Dayal, J,
1962
Karimtharuvi Tea
Eslafes Ltd.,
Kottayam
v.
Stale of Kera/a
Rughubar Dayal, J.
828 SUPREME COURT REPORTS [1963] SUPP.
employed by a cultivator or receiver of
rent-in-kind to render the produce raised or
received by
him fit to be
taken to
market, or
iii)
the sale by a cultivator or receiver of rentin-kind of the produce raised or received by
him, in respect of which no process has
been performed other than a process of the
nature described in sub-clause (ii);
x
x
x
..
x"
The income derived from the sale of tea grown
and manufactured by the seller is not solely derived
from
agricu I lure.
l t
is
an income which is
derived partially from agricultural operations and
partially from 1mrnufacturing processes.
The income
is p:irtly derived fr0m land by agriculture and partly
from business.
It becomes nr:cessary to determine the
proportions of the two incomes in the entire income.
Section ii!I of the Income-tax Act provides for the
making of rules for such determination.
The relevant portion of s. 59 of the Income-tax
Act empowering the Central Board of Revenue to
make rules reads:
"
x
x
x
x
x
(2) Without prejudice to the generality of the
foregoing power, such rules may-
(a) prescribe the manner in which, and, the
procedure by which, the income profits and
gains shall be arrived at in the case of.-
(i) incomes derived in part from agriculture
and in part from business;
x
x
x
x
1 S.C.R.
SUPREME COURT REPORTS
821!
(3) In cases coming under clause (a) of subsection (2), where the income, profits and
gains liable tu lax cannot be definitely
ascer1 aincd or can be ascertain rd only with
an amount of trouble and expense to th~
assessee which in the opinion of the Central
Board of Revenue, is
unreasonable, the
rules made under that sub-section may-
(a) prescribe methods by which an estimate
of such income, profits and gains may be
made, and
(b) in cases coming under sub-clause (1) of
clause (a) of sub-section (2), prescribe the
proportion of the income which shall be
deemed to be income, profits and gains
liable to tax;
and an assessment based on such estimate
or proportion shall be deemed to be duly
made in accordance with the provisions of·
this Act.
x
x
x
x
x
(5) Rules made under this section shall be
published in the official Gazette, and shall
thereupon have effect as if enacted in this
Act."
Rules 23 and 24 of the Indian Income-tax
Rules, 1922, made under the above-quoted section,
provide for the determination of income for the purposes of income-tax when the entire income is partially agricultural income and partially income chargeable to income-tax under the head 'business'.
Rule
23 deals with such cases in general. Rule 24 deals
with the case of tea grown and manufactured by the
seller, and reads :
1962
KarimtlVJruvi Ti
Ej/alts Ltd.,
Kotta_yam
v.
State of Kerala
Roghubar Da_ya/,
1962
Karimtharuvi Tea
Estates Ltd.,
Kottay:.m
v.
State of Kera/a
~aghuhar Dayal, J.
830 SUPREME COURT REPORTS [1963) SUPP.
"24. Income derived from the sale of tea
grown and manufactured by the seller in the
taxable territories shall be computed as if it
were income derived from business, and 40 per
cent of such income shall be deemed to be
income, profits and gains liable to tax :
Provided that in computing such income an
allowance shall be made in respect of the cost
of planting bushes in replacement of bushes
that have died or become permanently useless
in an area already planted, unless such area
has previously been abandoned."
The result of rule 24 is that the income derived from
the sale of tea grown and manufactured by the seller
is to be computed in the first instance as if it was
income derived from business.
Consequently, the
income would be computed in accordance with the
provisions of s. ~O of the Income· tax Act. Clause
(xv) of sub-s. (2) of s. IO provides that in computing the income any expcndi tu re by an assessee not
being an allowance of the na lure described in any qf
the clauses (i) to (xiv) inclusive and not being in the
nature of capital expenditure or personal expenses of
the assessee laid out or expended wholly and exclusively for the purpose of such business, would be
deducted. Of the income so computed, 40 per cent
is, under rule 24, . to be treated as income liable to
income-tax and it would follow that the other 60 per
cent only will be deemed to be 'agricultural income'
within the meaning of that expression in the Incometax Act. It follows, therefore, that the power of the
State Legislature to make a law in respect of taxes
on agricultural income arising from tea plantations
will be limited to legislating
with
respect to
the agricultural income so determined. The State
Legislature is free in the exercise of its plenary
legislative power to allow further deductions from
such computed agricultural income as it considers
1 S.C.R.
SUPREME COURT REPORTS
831
fit, but it cannot add. to the amount of the agricultural income so
computed by providing that certain items of expenditure deducted in the computation of the income from a business under the provisions of the Income-tax Act be not deducted and be
~onsidered to be a part of the taxable agricultural
mcome.
The relevant portion of the definition of 'agricultural income' in the Agricultural Income-tax Act
reads:
"2. In this Act, unless there is anything repugnant in the subject or context--
(a)
'Agricultural' income' means-
( 1)
any rent or revenue derived from land
which is used for agricultural purposes ;
(2)
any income derived from such land in the
State by-
(i}
agriculture, or
(ii) the performance by a cultivator or receivo::r
of rent-in-kind (of any process ordinarily employed by a cultivator or receiver of rent-inkind) to render the produce raised or received
by him fit to be taken to market, or
(iii) the sale by a cultivator or receiver of rentin-kind of the produce raised or received by
him, in respect of which ro process has been
performed other _ than a process of the nature
described in sub-clause (iil;
Exi-::tlnation.-Agrku1tura1
income derived
from -such land by the cultivation of tea means
that portion of the !ncome derived from the
cultivation, manufacture and sale of tea as is
defined to be agricultural income for the pur1962
Karimtbarm'i Teo.
EJtales [.rd.
Kotta}'am
v,
State of Ker ila
Raghuhar D·iJ''f. ,!,
1962
Karimtharuui Tea
Estalts Ltd.,
Kottayam
v.
State of Kera/a
Razhubar Dayal, J.
832 SUPREME COURT REPORTS (1963] SUPP.
poses of the enactments relating to
Indian
Income-tax;
x
x
x
x
x"
This definition practically conforms to the
definition of 'agricultural income' in
sub-els. (a)
and (b) of cl. ( 1) of s. 2 of the Income-tax Act.
The Explanation added in the definition of 'agricultural income' in the Agricultural Income-tax Act
in substance adopts what has been provided in rule 24
of the Income-tax Rules about the proportio£1 of
agricultural income from tea plantations. It follows
therefore that agricultural income from tea plantations is to be computed in the same manner as it is
computed under the provisions of the Income-tax
Act.
Section 5 of the Agricultural Income-tax Act
provides for certain deductions tu be made in the
computation of the 'agricultural income' of a person
and its clause (j) provides for the deduction of any
expenditure not being in the nature of capital expenditure or personal expenses of the assessee laid
out or expended wholly or exclusively for the purpose of deriving the agricultural income. This clause
corresponds to cl. (xv) of sub-s. (2) of s. 10 of the
Income-tax Act.
The proviso at the end of the
various clauses of s. 5 states that no deduction shall
be made under that section if it has already been
made in the assessment under the Income-tax Act.
This avoids a double deduction.
Now, explanation 2 added to s. 5 by the
Amendment Act takes away the advantage of the
provisions of cl. (j) of s. 5 with respect to the expenses incurred in the upkeep and maintenance of
immature plants from which no agricultural income
has been derived during the accounting year. We
are not concerned in this case with the validity of
this provision so far as agricultural income from land
1 S.C.R. SUPREME COURT REPORTS
833
in which crops other than tea arc raised. Here we
are concerned with its validity with respect to its
application to the income from tea plantations.
Explanation 2 in s. 5 of the Agricultural Income-tax
Act is obviously not consistent with the Explanation
to sub-cl. (2) of cl. (a) of s. 2 of the Agricultural
Income-tax Act and also the rule for computing
agricultural income made under the Income-tax Act
and results in making the agricultural income from
tea plantations, for the purpose of the Agricultural
Income-tax Act, to be different and higher than
such agricultural income when calculated in accordance with the provisions of the Income-tax Act and
rule 24. The different provisions of an Act arc to be
construed in such manner as to make them harmonious. Explanation 2 to s. 5 should be so construed
as makes it harmonious with Explanation to subcl. (2) of cl. (a) of s. 2 of the Agricultural Income- -
tax Act which provides a special definition for agricultural income for tea plantations, such income
being that portion of the income derived from land
by the cultivation, manufacture and sale of tea as is
defined to be agricultural income for the purposes
of the enactments relating to Indian Income-tax.
Explanation 2, if applied to income from tea, would
create an agricultural income which is not contemplated by the Income-tax Act and the Constitution
and would then be void.
Though wide in terms,
Explanation 2 to s. 5 should therefore be construed
not to apply to the computation of
agricultural
income derived from land by the cultivation of tea.
Such a construction would make it harmonious with
the Explanation to sub-cl. (2) of cl. (a) of s. 2 of
the Agricultural Income-tax Act.
It is true, as urged for the respondents, that the
State Legislature has full freedom to enact ,such
provisions as it considers fit in respect of tax on
agricultural income aud that such power includes the
power to enact for matters subsidiary and incidental
1962
Karimtharuvi Tea
Estates Ltd.,
Kottayam
v.
Stale of Kerala
Raghub?r Dayal, J.
1962
Karimtharuvi Tea
&tates Ltd.,
Kottayam
v.
State of Kerala
Raghubar Da,aJ, J.
834 SUPREME COURT REPORTS [1963] SUPP.
to the taxation of agricultural income. We
also
agree that the State Legislature is free to provide the
method of computation of the taxable agricultural
income and is free to allow any particular deductions
from the gross income as it considers fit.
It is not
disputed for the respondent that the power of the
State Degislature to enact a law in respect of agricultural income relates only to such agricultural
income as is defined in Art. 366 of the Constitution.
It is however urged th at for the purpose of this
definition, one has to look to the definition of 'agricultural income' in the Income-tax Act and not to
the rules made thereunder.
V\Te do not agree. 'Agricuitural income' as defined in the Constitution means
'agricultural income for the purpose of the enactments
relating to income-tax'.
One such enactment is the
Income-tax Act. Rule 24 of the Income-tax Rules
has been made under the powers conferred by s. 59 of
the Income-tax Act and has effect as if enacted in
that Act. When s. 59 of the Income-tax Act provides
for the rules made under that Act to prescribe the
proportions of income from business and income from
agriculture in the entire income derived in part from
agriculture and in part from business, the proportion
so prescribed must be taken to be prescribed by the
Act.
These rules were in existence in 1950 when the
Constitution incorporated the definition of 'agricultural income' from the Income-tax Act by reference.
The definition of the term was bound up with the
Rules.
It has been further submitted for the respondents that cl. (xv) of sub-s. (2) of s. 10 of the Incometax Act is a general provision and should give way to
the special provision of the Agricultural Income-tax
Act with respect to the deductions from the gross
income for the purpose of computing the agricultural
income. This cannot be, as we have to take the definition of 'agricultural income' from what it is in
1 S.C.R.
·SUPREME COURT REPORTS
835
the Income-tax Act. The provisions of the Incometax Act and the rules made tht'reundcr will control
the provisions of the Agricultural Income tax Act
enacted by a State Legislature.
The contention that the amount spent for the
upkeep and maintenance of the immature plants till
they become mature is in the nature of a capital ex·
penditure is also not sound. It is a running expenditure and not of the nature of capital expenditure.
It is further contended that if such expenditure
be held to be deductible expenditure, the proviso to
rule 24 would be redundant.
Again, we do not
agree.
The proviso allows the deductions of the cost
of planting bushes in replacement of bushes which
died or became permanently useless in an area already planted. It deals with the cost of planting
bushes and not with the expenses incurred in the up·
keep and maintenance of bushes already planted.
These petitions are not with respect to the expenses
incurred in the planting of immature tea bushes but are
with respect to expenses incurred in the upkeep and
maintenance of immature plants.
We therefore comlrue Explanation :! to s. 5 of
the Agricultural Income-lax Act not to extend to the
computation of agricultural i11come derived from tea
plantations and hold that in computin~ such agricul·
tural income for the purpose of taxation under the
Agricultural Income-tax Act, the Explanation tu s. :!
of that Act must be kept in mind and the income
must be taken to be as defined for the purposes of the
enactments relating to Indian income-tax.
In view of our opinion it is uot necessary to
consider the other contention for the petitioner that
Explanation 2 to s. 5 is discriminatory and contravenes the provisions of Art. 1± of the Constitution.
We therefore allow these petitinns to this extent
that we declare that Explanation 2 to s. 5 of the
1962
/( arimtharurii Tis
Estates Ltd.,
Kottay11m
v.
State of K1rala
Raghubar Dayal, ~
1962
.J(arimtharuvi Tea
Estates Ltd.,
Kottayam
v.
State of Kera/a
~aghubar Doyal, J.
196~
Novemb1r, 1.
836 SUPREME COURT REPORTS [19fi3]SUPP.
Agricultural Income-tax Act added by the Amendment Act does not cover the expenses incurred in the
upkeep or maintenance of immature tea plants from
which no income has been derived during an account·
ing year and that the agricultural inrnme derived
from tea plantations will be computed in accordance
with the provisious of the Income· tax Act and the
Income-tax Rules. We order that a writ be issued to
the respondents restraining them, their agents and
servants from enforcing or acting upon the provisions
of Explantation 2 to s. 5 of the Agricultural Incometax Act against the Karimtharuvi Tea Estate Ltd.,
Kottayam, viz., petitioner No. J.
We direct the respondents to pay the costs of petitioner No. 1, on eset.
Pet·i#o11s allowed in part.
TRAV ANCORE RUBBER & TEA
CO. LTD. & ANR.
v.
STATE OF KERALA & ANR.
(S. K. DAS, J. L. KAPUR, A. K. SARKAR, M.
HIDAYATULLAH and RAGHUBAB- DAYAL, JJ.)
Agricultural Income Tax-Rubber Plantation-Computation of agricultural income-Deductions-Statute disallowing
expenditure on immature plants-Validity of-If discriminatoryAgricultural Income Tax (Amendment) Act, 1961 (Ker. IX of
1961), s. 2-Constitution of India, Art. 14.
Under the Agricultural Income Tax Act, J 950, agricultural income from rubber plantations was to be computed in
the same manner as ·under the Indian Income-tax Act, 1922.
In December 1960, the Supreme Court held that the petitioners
were entitled to deduct the expenses incurred in the upkeep
and maintenance of itnn1ature rubber plants in the assessment
of their agricultural income under the Agricultural Income Tax
I
t