Grover, J. - (1.) These appeals from a common order of the High Court of Madras are by certificate. The assessee, who is the respondent is a limited company carrying on business of tea planting. It owns several tea estates in the States of Tamil Nadu, Kerala and Assam. Its head office is in Munnar in the State of Kerala. One of the tea estates owned by the assessee is called Chittavurai Tea Estate and comprises 1043 acres of tea plantations. Out of this an area of 1006.60 acres is situate in Kerala and the remaining 36.40 acres, in Tamil Nadu. According to the assessee Chittavurai Estate is working as one unit. There is only one factory manufacturing tea grown in the Madras and Kerala portion of the estate. The expenses are incurred for the maintenance of the whole estate as one unit and common accounts are maintained for it, there being no separate account for the Madras portion.
(2.) Section 2(1) of the Indian Income Tax Act, 1922 hereinafter called the 'Income-tax Act' defines 'agricultural income'. The same definition is to be found in Section 2 of the Madras Agricultural Income Tax Act, Madras Agricultural Income Tax Act, 1955, hereinafter referred to as "Agricultural Income-tax Act." Under Section 59 of the Income-tax Act the Central Government can make rules to prescribe the manner and the procedure by which the income, profits and gains shall be arrived at in the case of such concerns as carry on business in part as also agriculture in part. Under Section 59 of the Income-tax Act Rule 54 was framed by the Central Government. That rule provides that 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% of such income shall be deemed to be income profits and gains liable to tax. It is thus clear that the remaining 60% of the income will be deemed to be agricultural income.
(3.) For the three assessment years 1956-57, 1957-58 and 1958-59 the Agricultural Income-tax Officer computed the agricultural income in accordance with the assessment made by the Central Income-tax Officer. He took 60% of the income computed by the latter for the purpose of computation of the agricultural income. For the assessment year 1960-61 the Agricultural Income-tax Officer felt that so far as Chittavurai Estate was concerned the computation had to be made differently because the area of 36.40 acres was situated in the State of Madras. He made a different computation for the purpose of calculating the income under the Income-tax Act and then assessed 60% of that income as agricultural income accruing in Madras. The Assistant Commissioner of Agricultural Income-tax upheld his order. The Tribunal, however, set aside the assessment. It remanded the case to the Assistant Commissioner for certain matters. The department further sought to reassess the assessee for the earlier three years also and issued a notice under Section 35 of the Agricultural Income-tax Act. Thereupon the assessee filed writ petitions in the High Court challenging the order for reopening the assessment for the assessment years 1956-57 to 1958-59. A tax Revision was also filed against the order of the Agricultural Income-tax Appellate Tribunal in respect of the assessment for the year 1960-61. The writ petition and the Revision were allowed by the High Court. The order reopening the assessments was quashed and as regards assessment for the year 1960-61 the Agricultural Income-tax Officer was directed to make a revised assessment on the basis of the Central Income-tax Officer's computation which in the circumstances of the case was considered to be the proper basis for assessment of the agricultural income-tax. Now Agricultural Income-tax Officer had taken the view that the Kerala area of the Chittavurai Estate yielded only 656 lbs. of tea per acre while the yield of the Madras portion was 799 lbs. per acre. According to him apportionment of expenditure by treating the whole of Chittavurai Estate as one unit had resulted in a loss for the Madras portion and a profit for the Kerala portion. As pointed out by the High Court the computation by the Central Income-tax Officer showed a loss for the entire Chittavurai Estate. It is not necessary to go into details of how the computation was made by the Agricultural Income-tax Officer. The net result, however, was that whereas the Central Income-tax Officer had worked out the loss for the purpose of the Income-tax Act treating the Chittavurai Estate as one unit, the Agricultural Income-tax Officer took the valuation of the produce from the Madras portion as the gross receipt. He deducted from it the expenditure allowed by the Central Income-tax Officer and recalculated it from the Madras portion on the basis of acreage. That led to a profit from the Madras portion.;