ORDER SHEET IN HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE ITA No. 788 of 2004 GOPALPUR TEA CO. LTD. Versus COMMISSIONER OF INCOME TAX(APPEALS) CENTRAL-I, KOLKATA & ANR. BEFORE: Hon'ble JUSTICE SOUMITRA PAL Hon'ble JUSTICE ARINDAM SINHA Date : 18th November, 2014. Mr. Pranit Bag, Adv. Md. Nizamuddin, Adv. Court : This appeal relating to assessment years 1998-99 and 1999-2000 was admitted on following question : Whether on true and proper interpretation of Section 1(1A) of Income Tax Act, 1961 and Rule 8 of Income Tax Rules, 1962 income from sale of saplings grown by appellant is agriculture income and Tribunal was justified in law in holding that same was part of composite income from business of growing and manufacturing tea ? Mr. Bag, learned Advocate appearing on behalf of appellant has furnished copy of order dated 27.12.2005 passed by CIT (Appeal) in assessee s case for assessment year 2000-01. He has also handed up copy of paper book relating to appeal (ITA No. 33 of 2007 pending adjudication in this Court) preferred by Revenue arising out of order of Tribunal made in appeal from said order of CIT (Appeal) dated 27.12.2005. Mr. Bag has pointed out that ground no.3 before C.I.T. Appeals decided for subsequent assessment year 2000-2001 related to same issue arising 2 from question formulated in this appeal. Revenue in having carried matter before this Court in said pending appeal did not challenge finding of C.I.T. Appeals on issue and thus issue stood decided has accepted by Revenue. According to him, question herein should, therefore, be answered in favour of assessee. In this connection he has relied on decision of Hon ble Supreme Court in C.I.T. Vs.J.K.Charitable Trust; 308 ITR 161 (SC) and submitted that Revenue s case in resisting challenge of assessee in this appeal did not come within exception provided for in that judgment by reason of facts and circumstances aforesaid. He then relied on another judgment of Supreme Court in Union of India Vs. Belgachi Tea Co. Ltd.;304 ITR 1 (SC). It would be useful to quote relevant portions of said judgment. definition of 1944 Act makes it clear that income from sale of green tea leaves is agricultural income. 19. Now question which arises for adjudication is whether agricultural income be taxed under 1961 Act? It is true that both rule 8 of Income-tax Rules, 1962 and section 8 of 1944 Act provide how mixed income from growing tea leaves and tea manufacturing can be taxed. Mixed income means income derived by assessee from combined activities, i.e., growing of tea leaves and manufacturing of tea. Therefore, for purpose of computation of income under 1961 Act, it should be mixed income from 'Tea grown and manufactured by assessee. 20) If income is by sale of green tea leaves by assessee it cannot be called income assessable under 1961 Act for purpose of 40:60 share between Centre and State. In both provisions, i.e., rule 8 of Income-tax Rules, 3 1962 and section 8 of 1944 Act, word used is income derived from sale of tea grown and manufactured . 21) income from sale of green tea leaves is purely income from agricultural product. There is no question of taxing it as incidental income of assessee when there is specific provision and authority to tax that income i.e., State, under 1944 Act. In this view of matter, agricultural income cannot be taxed under 1961 Act. 24) In case assessee directly sells green tea leaves resulting into income from agricultural products, it cannot be taken as incidental income to business and whatever income is derived from sale of green tea leaves can be assessed by Agricultural Income-tax Officer under 1944 Act. We have heard Md.Nizamuddin, learned advocate appearing for revenue. We find question formulated is covered by judgment in Belgachi Tea Co.(Supra). We find sale proceeds of sale of sapling cannot be said to be income derived from sale of tea grown and manufactured by seller in India to be taken as composite income for purpose of application of rule 8 of Income-tax Rules, 1962. We, therefore, answer question in negative and in favour of assessee. appeal is allowed. Urgent certified copy of this order, if applied for, be given to appearing parties on priority basis. (SOUMITRA PAL, J.) (ARINDAM SINHA, J.) km/sb. Gopalpur Tea Co. Ltd. v. Commissioner of Income-tax (Appeals), Central-I