Shah, J. - (1.) S. S. Rajalinga Raja-hereinafter called 'the appellant'-owns a cardamom plantation on a fifty-acre estate. For the assessment year 1957-58 he submitted a return under the Madras Plantations Agricultural Income Tax Act 5 of 1955 disclosing a net income of Rs. 5,250 from the plantation. On enquiry the Agricultural Income-tax Officer learnt that the appellant had sold stocks of cardamom of the value of Rs. 58,375-9-9 between April 1, 1956 and March 31, 1957. The appellant explained that those sales represented not the produce of the year of account, but accumulated stocks of the past 3 to 4 years. That explanation was rejected by the Agricultural Income-tax Officer and after allowing expenditure estimated at the rate of Rs. 120 per acre, the balance was brought to tax, and a penalty of Rs. 3,000 was levied under S. 20 (1) (c) of the Act. The order was confirmed in appeal to the Appellate Assistant Commissioner, both as to the levy of tax and penalty. But the Appellate Tribunal was of the view that the average production of cardamom per acre was 40 lbs. and that if the stocks of cardamom sold in the year of assessment be attributed to production of the year, the yield would approximately be 134 lbs. per acre. Holding that an estimate of 40 lbs. per acre would be a "fair estimate" and that an average expenditure of Rs. 145 per acre should be allowed, the Tribunal directed that the assessment be modified, and the order imposing penalty be set aside.
(2.) The State of Madras then applied to the High Court of Madras in revision. The High Court was of the view that a part of the stock of cardamom sold in the year, though not the whole, was probably accumulated stock out of previous years' production, but since the appellant did not lay before the taxing authorities reliable evidence, his explanation was rightly rejected. The High Court also rejected the contention of the appellant that the income from sales of cardamom stock of previous years was not taxable in the year of account because it had been subjected to tax in those previous years under orders compounding the tax under S. 65 of the Act. The High Court accordingly allowed the petition and restored the assessment made by the Department. With special leave, the appellant has appealed to this Court.
(3.) It is claimed by the appellant in the first instance that under the Act, agricultural produce itself is income and becomes charged to tax under the Madras Plantations Agricultural Income Tax Act, 1955, when it is received, and not when it is sold, used or consumed. Relying upon this premise it was urged that even on the view expressed by them the learned Judges of the High Court ought to have directed determination of the produce which was actually derived from agriculture in the year of account, and ought to have brought to tax only that quantity and excluded the value of the rest from taxation under the Act. Section 3 of the Act imposes the charge of tax upon the total agricultural income of the previous year of every person, and by S. 4 the total agricultural income of any previous year of any person comprises all agricultural income derived from a plantation within the State and received within or without the State. 'Agricultural income' is defined (insofar as the definition is relevant in these appeals) as meaning: "(1) any rent or revenue derived from a plantation: (2) any income derived from such plantation in the State by (i) agriculture, or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which "no process has been performed other than a process of the nature described in paragraph (ii): Explanation 1.- * * * Explanation 2.- * * * (3) * * * *" Prima facie, S. 3 of the Act read with the definition of 'agricultural income' charges to tax the monetary return either as rent or revenue or agricultural produce from the plantation. The expression "income" in its normal connotation does not mean mere production or receipt of a commodity which may be converted into money. Income arises when the commodity is disposed of by sale, consumption or use in the manufacture or other processes carried on by the assessee qua that commodity. There is no reason to think that the expression "income" in the Act has any other connotation. A tax on income whether agricultural or non-agricultural is unless the Act provides otherwise, a tax on monetary return-actual or notional. Section 4 of the Act supports that view, for in the total agricultural income is comprised all agricultural income derived from a plantation in the State. It is not necessary, however for income to accrue that there must be a sale of a commodity; consumption or use of a commodity in the business of the assessee from which the assessee obtains benefit of the commodity may be deemed to give rise to income. Therefore, merely because the produce of his plantation was received in the earlier years. assuming that the appellant's case is true, income derived from sale of that produce in the year of account is not exempt from tax under the Act, in that year.;