Travancore Rubber & Tea Co. Ltd. & Anr. v. State of Kerala & Anr.

Judgment

.J(arimtharuvi Tea Estates Ltd., Kottayam State of Kera/a ~aghubar Doyal, J. 196~ Novemb1r, 1. 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. 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 discriminatory- Agricultural 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 I S.C.R. Act. Thereafter, by the Agricultural Income Tax (Amendment) Act, 1961 an Explanation 2 was added to·;.

5 of the 01·i~inal Act 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 petitioners contended that Explanation 2 was ultra vires and discriminatory. Hel,d, that Explanation 2 to s. 5 was validly enacted. The State Legislature had full power to tax "agricultural income" as defined in the Agricultural Income Tax Act, which definition was in conformity with the definition in the Indian Income-tax Act, 1922. It was for the State Legislature to provide for such deductions from such income as it considered fit. The word "income" had a very wide meaning. The word "income" in Entry 46, List lI.

Seventh Schedule of the Constitution which empowers a State Legislature to legislate with respect to taxes on agricultural income could not be confined to gross receipts after deduction of necessary expenses incurred to get those receipts. Travancore Rubber & Tea Co. Ltd. v. Commissioner of Agricultural Income-tax, Kerala, [1961] 3 S. C.R. 279 and Navinchandra Mafatlal v. Commissioner of Income-tax, Bombay, (1955] I S. C. R. 829, referred to. Hel,d, further, that Explanation 2 to s. 5 was not discriminatory and did not contravene Art. 14. Though Explanation 2 was applicable to rubber plantations and not to tea plantations, the distinction was based upon the special ·provisions of the Income-tax Act and the rules made thereunder. The income derive from the sale of tea was partly derived from land by agriculture and partly from business. Such is not the case with income derived from sale of rubber. The Karimtharuvi Tea Estates Ltd., Kottayam v. State of Kerala, [1963] Supp. I S. C.R. 823, referred to.

ORIGINAL juRJSDICTION: Petitions Nos. 237 to 239 of 61. Petition under Art. 32 of the Constitution of India for enforcement of Fundamental Rights. S. T. Desai, J.B. Dadachanji, 0. C. Mathur, p.IJ.d Ravindar Narain, for the petitioners. Travancore Rubber & 1 ea Co. Ltd. Stale 'lj Kerala A. V. Viswanathr1 Sristri and V.A .8. illnhainmed, Trnvancort /lubber for the respondents. (.f T,a Co, Ltd. Stattof Kera/a 1962. November l. The .Judgment of' the Court was delivered by Raghnbar Dayal, J. R.\(11/GBAR D,1 ¥AL, .J.-Thc Travancore Rubber and T"a Cu .. Ltd., hereinafter clkd the company, and one of its dirrctors and members, have filed these petitions praying for a <lecbration that the Agricultural Income Tax (Amendment) Act, 1961 (Act IX of 1961), hereinafter called the Amendment Act, enacted bv the Kcrala State Legislature, is null and void and iiir the issue of appropl·iate orders to the respondents viz .. the State of Kerala and the Assistant Commissioner of Agricultural Income-tax.

Kotta· yam, restraining them, their agent~ and servants from enforcing or acting upon the provisions of the aforesaid Amendment Act agaimt tlw company and for refund of tax i llegallv assessed and collected from the company. The hmincss of the company consists of owning and managing rubber and tea estates situate in Kerala State. The company was assessed to agricultural incometax under the Agricultural Income-tax Act 1950 (original\y the Travancorc-Cochin Agricultural Income-tax Act XXII of l 9ii0, amended as the Agricultural Income-tax Act. I !lliO bY Act VIII of 195i of the Kerala Legislature), hereinafter called the Agricultural Income-tax Act, with respect to its income derived from its rubbrr plantations in the accounting years 1950, 195I and 1952, corresponding to the assessment years 1951-1952, l!li52-53 and 1953-54.

The assessing authority did not deduct the expenses incurred in the upkeep and maintenance of the immature rubber plants fo the assessment of the income for the assessment vear 1953-54, but allowed it in the assessment with· respect to the other two years. At the request of the Income-tax Department and of the company, cases were referred to the High Court. of Kerala in accordance with s. 60 of the Agricultural Income-tax Act. The High court decided against the company holding that such expenditure was not to be deducted in computing the agricultural income. The company came to this Court against the order of the High Court ancl this Court held, by its judgment dated December 15, 1960 The 'Travancore R1ibber and Tea Co. Ltd. v. The Commissioner of Agricnltural Income-t1ix, Keralri (') that such expenses were allowable under s. 5(j) of the Agricultural Income· tax Act in computing the assessable income.

Thereafter, the Governor of Kerala State promLtlgatcd an ordinance which was subsequently repealed by the Amendment Act of 1961. The Amendment Act was deemed to have come into effect from April 1, 1951. By its s. 2, Explanation 2 was added to s. 5 of the Agricultural Income-tax Act. That 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 previons year." By s. 3, assessments previously made on the basis that such expenses were not to be allowed. in computing agricultural income were deemed to be valid. On February 22, l!l61, the company, on the basis of the judgment of this Court, wrote to the Income-tax Commissioner for refunding the excess tax which had been realised.

It got the reply, dated June 20, 1961, that its claim for refund was not maintainable so long as the orders of assessment were not varied or reversed by any competent authority and that the claim was dso not tenable in view of the provisions contained in the Amendment Act. (I) (1961] S S.0.R, 279. Travancore tubb~r & Tea Co. Ltd. State of Kerala Ra:hubar DcJ.J al, J. Travancore Ti'ubbtr Iii 1 ea Co. Ltd. St:1te of Kerala Rc:hubsr Day•l, J. The effect of the impugned Explanation is that expenses incurred on the upkeep and maintenance of immature rubber plants from which no agricultural income is derived during the accounting year are not to be deducted in computing the agricultural income. The State Legislature derives power ·to tax agricultural income by virtue of Entry no. 46, List II, Seventh Schedule, of the Constitution. Article 366(1) defines 'agricultural income' to mean 'agricultural income as defined for the purpose of the enactments relating to Indian income-tax.'

The definition in the Income-tax Act is incorporated by reference in the Constitution and serves to demarcate the bounds of 'agricultural income'. The relevant portion of the definition of 'agricultural income' in the Agricultural Income-tax Act is -also in the same terms as the corresponding definition of 'agricultural income' in the Indian Income-tax Act, 1922. Section 5(j) of the Agricultural Income-tax Act provides that the agricultural income of a person shall be computed after making deductions of any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or ex· pended wholly and exclusively for the purpose of deriving the agricultural income. The State Legislature has full powers to tax such income as income within the expression 'agricultural income' as defined in the Agricultural Incometax Act, the definition being in conformity with the definition of 'agricultural income' in the Income-tax Act.

It is for the State Legislature to provide such deductions from such income as it considers fit. Section 5 of the Agricultural Income-tax Act makes provisions for the deductions considered necessary by the Legislature. Explanation 2 added to s. 5 by the Amendment Act makes it clear that the Legislature was of opinion that no deduction should be allowed for the expenses incurred in the upkeep and 8H of immature plants. Such an intention of the Legislature is manifest as Explanation 2 was enac· tcd after the decision of this Court in the Trrrnuncore Rubber And Tm Co. Ltd., case(') to the effect that such expenses arc to be deducted in view of the provisions of cl. (j) of s. 5 of the Agricultural Incometax Act. We are therefore of the opinion that the State Legislature was competent to enact Explanation 2 to s. 5 and thereby provide for the non-deduction of the expenses incurred in the upkeep or maintenance of immature plants from which no income has bern derived in thr accoimting year.

It is however rnntended that apart from the provisions of cl. (j) of s. r;, the word 'income' does not mean the gross receipts of a prrson but such receipts after deducting the necessary expenses incurred for the purpost> of getting those rrceipts and that such had been the concept of the Constitution makers when they used the word 'income' in Entry No. 82 of List I and Entry >lo. 4fi of List IT, of the Seventh Schedule to the Constitution. In support of this c~mt~ntion referen.ce was ma~e to the legislative pract'.ce m the law of mcomc-tax m England, to the dictionary meaning of the word 'income' and to certain meanings mentioned in Strond's Judicial Dictionary and 'Words & Phrases' by Burrows. vVc do not consider it nec~ssary to deal with this contention ~t length as this Court had occasion to consider thi< aspect thoroughlv in Xm·inchn.ndrn Jfajritlal v. Th~ Commi8sio.ncr of Income-tni·, Bomb((.!J City('). Das J., as he then was, said at p. 833 :

"Our attention has not, however, been drawn to any enactment other than fiscal statutes like the Finance Act and the Income-tax Act where the word 'income· has been used and, therefore-, it is not possible to say that the critical word (I) [1961)3 s.c.a.1' 9, (2J [ 1955] 1 s.CJ.l. 829. l ravanrAt Rubb11 & T1• Co. Ltd. State vf Kerula Raghu/iar J)nyal, J. Travancore Rubber & Tea Co. Ltd. State of Kerala Raghubar Da_y1Jl, J. had acquired any particular meaning by reason of any legislative practice. Reference has been made to several cases where the word 'income' has been construed by the Court. W'hat is, therefore, described as legislative practice is nothing but judicial interpretations of the word 'income' as appearing in the fiscal statutes men· tioned above............ These guarded observa· tions quite clearly indicate that they relate to the term 'income' or 'profit' as used in the Income-tax Act.

There is no warrant for say· ing that these observations cut down the natural meaning of the ordinary English word 'income' in any way." In discussing the natural and grammatical meaning of the word 'income', reference was made to its dictionary meaning and to the interpretation of the word in a wide sense in the United States of America and in Australia and then it was said at p. 837 : "The relevant observ;itions of learned Judges deciding those cases which have been quoted in the judgment of Tendolkar J., quite clearly indicate that such wide meaning was put on the word 'income' not because of any particular legislative practice either in the United States or in the Commonwealth of Australia but because such was the normal concept and con· notation of the ordinary English word 'income'. Its natural meaning embraces any profit or gain which is actually received."

It is therefore clear that the word 'income' in. the relevant provisions of the Constitution has a very wide meaning and is not restricted in its meaning as suggested for the petitioner. The next contention· for the appellant is that Explanation 2 is discriminatory and contravenes the provisions of Art. 14 of the Constitution. There is nothing discriminatory in the provisions of Explanation 2 to s. 5. It is applicable to agricultural income derived from all crops except tea. The question of the applicability of Explanation 2 to s. 5 to the agricultural income derive from tea plantations was before us for determination in The Karimtharuv·i Tea E.qf,afes Ltd., Kottayam v. 7'hr State of Kerala(1). We have held in that case tlwt Explanation 2 to s. 5 does not apply to the agricultural income from tea plantations.

It was argued that if such be the view of this Court, the Explanation would bring about discrimination between agricultural income arising from rubber plantatiom and similar income arising from tea plantations and that therefore the Explanation would contravene the provisions of Art. 14 of the Constitution. It was, however, fairly conceded that in case the decision that this Explanation does not apply to agricultural income from tea plantations is baseJ on the special provisions in the Income-tax Act and the rules made thereuncler in connection with the computation of agricultural income from tea plantations, there would be no such discrimination. Our decision in The Karimtharnr1: Ten /1'states Case(1) is based on such special provisions. The income derived from the sale of tea grown and manufactured by the seller is partly derived from land by agriculture and rartly from business. Such is not the case with the income derived from the sale of rubber.

The provision for the computation of agricultural income from tea plantations has to be different and is to be found in the rules made under s. 59(3) of the Income-tax Act for determining the proportions of agricultural income and income from business in the entire income from the sale of tea. The difference in the provisions for the compu•atic•n (I) [1963] Supp. I S.C.R. 323. Travaucore Rub~,, & Tea Co. ltd. State of Kerala Raghubar Dayal, J T ravancCJre Ruibtr r/ Tt11 C6. Ltd. v ::i·t~te of J(~!nla Raghubar Dt1yal, /. 191;2 .Novtmlcr, 2. of agri.cultural income from tea plantations and from rubber plantations is therefore based on good reasons. Vve hold that the provisions of Explanation 2 are not discriminatory against agricultural income from rubber plantations. W c therefore see no forcr in these petitions and, accordingly, tlismiss the>n with costs, one set. Petition8 dinm:ssed. /\NAN f PRASAD LAKSHMINIV AS GENERIWAL ST A TE OF ANDHRA PRADESH AND OTHERS (With connected Petition)

(B. P. SINHA, C. ]., P. B. GA.!ENJJRAGAJ>KAn, K. N. '"' ANCH(JO, K. c. D.\S GUPTA and]. C. SHAH, .JJ.) Religiow; Public Trust-Regisl<at:on-Notice on tra8tee~ F'ailure of trustee to app~a.r-Orfkr of remfJval, 1f ultra v1res- Constitutional t'alidity of cnactu1,fnt-Trust in one ,') 1taiel)roperty in unother-l'enue of regi8frat/on-H11de1«1hol liJndowmr.nts Regulation, 1.940, ss. 3, 9. 'fhe appellant, who was also the petitioner in the \Vrit petition, clairned to be the sole hereditary trustee and mut\valli of the ancient temple of Shri Sitararn Maharaj i:1 Hyderabad. For the n1aintenance of that temple certain village:; in 13e-rar had beed granted by the N1zam. The appellant's father had g-Ot the temple registered as a public trust nnder s. 7(1) uf the Madhya Pradesh Public Trusts Act, 1951, in June, J9:i:i.