N.H. Bhagwati, J. - (1.) This Appeal was filed by the Commissioner of Income-tax, Madras against the Judgment and Order of the High Court of Judicature at Madras delivered on a reference by the Income-tax Appellate Tribunal under S. 66(2), Income-tax Act, 11 of 1922 with a certificate under S. 66-A(2) of the Act read with Arts. 133 and 135 of the Constitution.
(2.) The assessee, a Hindu undivided family, owned about 70 acres of agricultural land at Perur near Coimbatore. It also maintained in the estate 65 cows and 10 pairs of bulls. During the accounting year 1945-46, it received Rs. 28,000 from the Co-operative Milk Supply Union at Coimbatore to which it sold the milk of these cows. For the assessment year 1946-47 it claimed that the profits from the sale of milk, constituted agricultural income and as such were exempt from payment of income-tax. As no material had been placed before the Income-tax Officer in support of this claim, it was granted an adjournment for furnishing complete materials and thereupon a letter dated the 26-2-1947 signed by the auditors was filed the relevant portion whereof reads: "The cows are purely pasture-fed and not stall-fed. It is not being run as a commercial proposition. The cows are maintained purely for manuring and other purposes connected with agriculture and only surplus milk after satisfying assessee's needs is sold to outsiders. In this connection, we would refer to you the decided case of -"Commissioner of Income-tax, Burma vs. Kokine Dairy, Rangoon', 1938 AIR Rang 260". The Income-tax Officer, by his order dated the 28th February 1947, rejected the claim of the assessee and, in the absence of any accounts regarding the matter, estimated the profits from the sale of milk in the year of account at Rs. 4,000 and assessed it to income-tax.
(3.) An appeal was taken by the assessee to the Appellate Assistant Commissioner who confirmed the order of the Income-tax Officer. An appeal to Income-tax Appellate Tribunal also met with the same fate. The assessee thereupon applied to the Tribunal for referring the question of law arising out of its order but the Tribunal refused to state the case. The assessee then applied to the High Court of Madras and the High Court directed the tribunal to refer the following question under S. 66(2) of the Act for its decision: "Whether on the facts and circumstances of the case, the income from the sale of milk received by the assessee during the accounting year is not 'agricultural income' within the meaning of the Income-tax Act".;