Dalmia Cement (Bharat) Ltd. vs Government of Madras

Ramanujam, J.—The matter arises under the Agricultural Income Tax Act, 1955 (hereinafter called ""the Act""). The assessee is a company

manufacturing cement. A portion of the lands owned by the company was used for raising elephant grass by utilising the sewage surplus water. The

grass so grown was used to feed the cattle of the dairy firm maintained by the company. For the assessment year 1966-67 its agricultural income

from the land used for raising elephant grass was estimated at Rs. 4,047. The assessment for that year along with the assessment for the earlier

years was challenged before the Appellate Assistant Commissioner, but without success. On a further appeal, the Agricultural Income Tax

Appellate Tribunal has upheld the order of assessment in relation to the assessment year in question.

Before us, the learned counsel for the assessee contends that the assessment to agricultural Income Tax for the assessment year cannot be

sustained. He raises substantially three contentions : (1) that the assessee cultivated the elephant grass only in 8.04 acres of land and as this extent

falls far below the minimum extent of 121/2 standard acres referred to in Section 10 of the Act, the assessee is exempt from the provisions of the

Act; (2) that the entire 8.04 acres of land used for raising elephant grass has to be treated as pasture land and as such by virtue of the definition of

land"" in Section 2(nnn) the same has to be excluded in calculating the extent of the holding of the assessee under agricultural operations; and (3)

that the estimate of the crop by the authorities for the assessment year in any event cannot be sustained and that the value of the crop can in no

circumstance exceed the amount of expenditure incurred in raising the crop.

As regards the first contention, it has been found by the Appellate Assistant Commissioner that, apart from the land retained by the assessee for

the purpose of mining operations, it had considerable extent of cultivable lands which were much more than 121/2 standard acres, and that as a

matter of fact for the assessment years 1958-59 to 1961-62 it has been assessed on an income from more than 55 acres of land. Therefore, it is

clear that the assessee had in fact more than 121/2 standard acres of cultivable land. It is true that during the year of assessment, the cultivation of

elephant grass was restricted to 8.04 acres but, for the application of Section 10 of the Act as it stood during the assessment year, the extent

actually cultivated may not be material but the extent of the agricultural lands held by the assessee will be material. It is not in dispute that in the

earlier years the assessee has cultivated elephant grass in more than 121/2 standard acres. Therefore, the assessee has held lands more than the

exempted limit referred to in Section 10 of the Act during the assessment year. The fact that the assessee chose to cultivate only in a portion of the

agricultural lands held by it will not make it any the less assessable under the provisions of the Act.

The learned counsel refers to the definition of ""land"" in Section 2(nnn) of the Act and points out that it is only the land which is used for

agricultural purposes in the assessment year that can be taken into account for the purpose of Section 10. But it is not possible for us to accept this

contention, for the definition of ""land"" as an agricultural land which is used for agricultural purposes or purposes subservient thereto has to be taken

only for the purpose of ascertaining the nature of the land and not for the purpose of finding out whether the land has been used for agriculture in

the assessment year. As a matter of fact, the definition of ""land"" does not say that the agricultural land should have been used for agriculture during

the assessment year and that it is only such land that can be taken to be within the holding of an assessee. We are, therefore, of the view that the

fact that the assessee has cultivated only 8.04 acres of land during the assessment year will not bring it within the exempted limit provided u/s 10 of

the Act as it then stood.

The next contention advanced by the learned counsel is that 8.04 acres of land having been used for raising grass as fodder for cattle it should

be taken that the land has been used only for the purpose of pasture and that, therefore, the said extent has to be excluded from the category of

agricultural land"". According to the learned counsel, if the land ceased to be agricultural land as per the definition in Section 2(nnn), the assessee''s

income from that land cannot be brought to charge as agricultural income. Section 2(nnn) excludes house sites and lands used exclusively for

pasture from the definition of ""agricultural land"". As per the definition in Section 2(nnn) land exclusively used for pasture and the income therefrom

cannot be taken to be governed by the provisions of the Act. But the question here is whether the 8-04 acres of land wherein elephant grass have

been cultivated by the assessee can be taken to be land used exclusively for pasture. According to the learned counsel for the assessee, if lands in

which fodder crops are raised for feeding cattle, then such lands should be deemed to be lands used for pasture. We are not inclined to accept the

submission made by the learned counsel. Normally, pasture land is a land in which grass or other herbage has spontaneously grown and where

sheep or cattle are allowed to graze. By any stretch of imagination, we cannot treat the land, in which agricultural operations have been carried on

to raise elephant grass as a regular crop, as a pasture land. It is not possible to treat all lands in which fodder crops are raised as pasture lands.

The intention of the legislature appears to be to exclude the land in which no agricultural operations are done but some herbage grows

spontaneously which is eaten down by sheep and cattle. We have to, therefore, disagree with the contention put forward by the learned counsel

that the land in question should be treated as pasture land.

The third and the last contention urged by the learned counsel is that the value of the crop raised by the assessee during the assessment year has

been over-estimated. It is seen that the authorities have valued a bundle of 5 pounds of elephant grass at 6 paise as against the market rate of 9

paise per bundle of 5 pounds prevailing in places like Srirangam, Tiruchirapalli and Pattukottai. It is urged by the learned counsel for the assessee

that there is no market for elephant grass at Dalmiapuram and, therefore, the actual expenditure incurred for raising the crop should be taken to be

the value of the crop. It is also pointed out that the elephant grass grown has been used only for the cattle maintained in the assessee''s dairy firm

and, therefore, no income has been actually received by the assessee. But the fact that the assessee has derived income from the land by raising the

elephant grass is sufficient to make it liable under the Act and liability to tax does not depend on the marketability of the goods. Therefore, crops

have to be valued in any method known to law. The mere fact that there is no specific market at Dalmiapuram where the elephant grass has been

grown does not mean that the crop has no value at all. It is difficult for us to accept the contention of the learned counsel that the value of the grass

can only be taken to be actual expenditure incurred by the assessee in raising the crop. If this is the principle to be adopted in all cases where the

crop is not actually sold or offered for sale, then there will be very little scope for the application of the charging provision of the Act, for there will

be no income if the value of the crop is taken to be the same as the expenditure incurred in raising the crop. Therefore, the authorities below were

justified in valuing the crop and estimating the agricultural income after giving deduction for the actual expenses incurred. The estimate has been

made on the basis that a bundle of 5 pounds of grass can be sold for 6 paise. We are not in a position to say that this rate is in any way excessive

especially when the assessments made in the previous years on an estimated basis applying the same rates have not been questioned by the

assessee in those years. In the result, the tax case fails and it is dismissed with costs. Counsel fee Rs. 150.