HIDAYATULLAH, J. : - (1.)THE following Judgment of the court was delivered by
(2.)THIS appeal which has been filed with a certificate under s. 66(A)(2) granted by the High court of Assam against its judgment and order dated 29/03/1955, concerns the assessment of the appellants, a Hindu undivided family, for the assessment years, 1945-1946 and 1946-1947.
The appellants owned a tea garden called the Sewpur Tea Estate in Assam. They had on the Estate, factories, labour quarters, staff quarters etc. On 27/02/1942, the Military authorities requisitioned all the factory buildings, etc., under R. 79 of the Defence of India Rules. Possession was taken sometime between March land March 8, 1942. The tea garden was, however, left in the possession of the appellants. The possession of the military continued till the year 1945, and though the appellants looked after their tea garden the manufacture of tea was completely stopped. Under the Defence of India Rules, the Military authorities paid compensation. For the year 1944, corresponding to the assessment year, 1945-1946, they paid a total sum of Rs. 2,22,080.00 as compensation including a sum of Rs. 10,000.00 for repairs to quarters for labourers and Rs. 144.00 which represented the assessor's fee. For the year 1945, corresponding to the assessment year, 1946-1947, the Military authorities paid a sum of Rs. 2,46,794.00 which included a sum of Rs. 15,231.00 for other repairs. The sums paid for repairs appear to have been admitted as paid on capital account, and rightly so. The question was whether the two Sums paid in the two years minus these admitted sums, or any portion thereof, were received on revenue or capital account.

The assessments for the two years were made by different Income-tax Officers. For the assessment year, 1945-1946, the Income-tax Officer deducted from Rs. 2,22,080.00, a sum of Rs. 1,05,000.00 on account of admissible expenses. He then applied to the balance Rs. 1,17,080.00, R. 24 of the Indian Income-tax Rules, 1922, and brought to tax 40 per cent of that sum amounting to Rs. 46,832.00. The assessment was made under s. 23(4). For the assessment year, 1946-1947, the assessment was made under s. 23(3) of the Incometax Act. The Income-tax Officer excluded the sum paid on account of repairs and treated the whole of the amount as income taxable under the provisions of the Income-tax Act, after deduction of admissible expenditure. The appeals filed by the appellants to the Appellate Assistant Commissioner against both the assessments were unsuccessful. On further appeal, the Income-tax Appellate tribunal (Calcutta bench) was divided in its opinion. The Judicial Member held that the receipts represented revenue but on account of 'use and occupation' of the premises requisitioned. He, therefore, computed the not compensation attributable to such use and occupation at 20 per cent of the total receipts in both the years. He however, observed that if the receipts included income from the tea estate he would have been inclined to apply R. 24 in the same way as the first Income-tax Officer. The Accountant Member was of the opinion that the appellants were liable to pay tax on 40 per cent of their receipts in both the years after deduction of the sums paid for repairs of buildings and the admissible expenditure. He accepted the estimate of expenditure for the account year, 1944,. at RE;. 1,05,000, and directed that the admissible expenditure for the succeeding year be determined and deducted before the application of R. 24.

It appears that through some inadvertence these two orders which were not unanimous, were sent to the appellants and the Department. The Commissioner of Income-tax filed an application under s. 66(1) for a reference, while the appellants filed an application under s. 35 for rectification of the orders, since many other matters in appeal were not considered at all. When these two applications came before the tribunal, it was realised that the matter had to go to a third Member for settling the difference. The President then heard the appeal, and agreed with the Accountant Member. Though he expressed a doubt whether the appellants were entitled to the benefit of rr. 23 and 24, he did not give an opinion, because this point was not referred to him.

The tribunal then referred the case to the High court of Assam on the following two questions: '(1). Whether the sums of Rs. 2,12,080.00 and RE;. 2 31,563 paid by the government to the assessee in 1945 and 1946 respectively (exclusive of the sums paid specifically for building repairs) were revenue receipts in the hands of the assessee comprising any element of income? (2). If so, whether the whole of the said sums less the expenses incurred by the assessee in tending the tea bushes constituted agricultural income in his hands exempt from tax under the Indian Income-tax Act, 1922?' The reference was heard by Sarjoo Prasad, C.J., and Ram Labhaya, J., along with two writ petitions, which had also been filed. They delivered separate judgments, but concurred in their answers. The High court answered both the questions against the appellants. The writ petitions were also dismissed.

(3.)BEFORE we deal with this appeal, we consider it necessary to state at this stage the method of calculation of compensation adopted by the Military authorities. It is not necessary to refer to both the years, because what was done in the first year was also done in the following year except for the change in the amounts. This method of calculation is taken from the order of the Judicial Member, and is as follows: JUDGEMENT_1579_AIR(SC)_1961Html1.htm
From the admitted facts which have been summarised above, it is clear that the business of the appellants as tea-growers and tea-manufacturers had come to a stop. The word 'business' is not defined exhaustively in the Income-tax Act, but it has been held both by this court and the Judicial Committee to denote an activity with the object of earning profit. To say that a business is being carried on, means no more than that profit is to be earned by a process of production. The business of a tea-grower and manufacturer is not merely to grow tea plants but to collect tea leaves and render them fit for sale. During the years in question, the appellants were tending their tea garden to preserve the plants, but this activity cannot be described as a continuation of the business, which had come to an end for the time being. It would have hardly made any difference to the carrying on of business, if, instead of the factories and buildings, the tea garden was requisitioned and occupied, because in that event also, the business Would have come to a standstill.

The compensation which was paid in the two years was no doubt paid as an equivalent of the likely profits in those years; but, as pointed out by Lord Buckmaster in The Glenboig Union Fireclay Co. Ltd. v. The Commissioners of Inland Revenue (1) and affirmed by Lord Macmillan in Van Den Berghs Ltd. v. Clark (2), 'there is no relation between the measure that is used for the purpose of calculating a particular result and the quality of the figure that is arrived at by means of the application of that test'.