Ghulam Hasan, J. - (1.) This appeal raises an interesting point of law under the Indian Income-Tax Act.
(2.) The question referred by the Tribunal to the High Court of Judicature at Bombay was stated thus: "Whether 60 per cent. of the dividend amounting to Rs. 2,750/- received by the assessee from the two Tea companies is agricultural income and as such exempt under section 4 (3) (viii) of the Act." Chagla, C. J. and Tendolkar, J. who heard the reference, answered the question in the negative by two separate but concurring Judgments dated March 28, 1952.
(3.) The facts lie within a narrow compass. The appellant, Mrs. Bacha F. Guzdar, was, in the accounting year 1949-50, a shareholder in two Tea companies, Patrakola Tea Company Ltd., and Bishnauth Tea Company Ltd., and received from the aforesaid companies dividends aggregating to Rs. 2,750/- The two companies carried on business of growing and manufacturing tea. By Rule 24 of the Indian Income-Tax Rules, 1922, made in exercise of the powers conferred by Section 59 of the Indian Income-Tax Act, it is provided 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 per cent. of such income shall be deemed to be income, profits and gains, liable to tax". It is common ground that 40 per cent. of the income of the Tea Companies was taxed as income from the manufacture and sale of tea and 60 per cent. of such income was exempt from tax as agricultural income. According to the appellant, the dividend income received by her in respect of the shares held by her in the said Tea companies is to the extent of 60 per cent. agricultural income in her hands and therefore 'pro tanto' exempt from tax while the Revenue contends that dividend income is not agricultural income and therefore the whole of the income is liable to tax. The Income-tax Officer and, on appeal, the Appellate Assistant Commissioner both concurred in holding the whole of the said income to be liable to tax. The Income-tax Appellate Tribunal confirmed the view that the dividend income could not be treated as agricultural income in the hands of the shareholder and decided in favour of the Revenue but agreed that its order gave rise to a question of law and formulated the same as set to out above and referred it to the High Court. The High Court upheld the order of the Tribunal but granted leave to Appeal to this Court.;