Law:

Section:

Section 2(1) [Now section 2(1A)] of the Income-tax Act, 1961 [Corresponding to section 2(1) the Indian Income-tax Act, 1922], read with rule 23(2)(a) of the Indian Income-tax, Rules 1922 - Agricultural income - Assessment years 1951-52 and 1953-54 to 1956-57 - Market value of sugarcane produce was liable to ascertained in accordance with scheme contained in rule 23(2)(a) - Assessee-company valued produce as per rates fixed by sugar factory association - No other reliable evidence of average price of sugar-cane in area was produced by assessee - Assessee failed to explain as to how rates relied on was worked out and on what basis particular rates were fixed by association - Quantity of sugarcane purchased in relevant assessment years from outsiders were extremely small to find out average price - It was not possible from facts disclosed to find out cost of freight and such other incidental expenses from purchase price - There was no clear evidence on record to show that quality of sugarcane grown was superior and entitled to any weightage - Tax authorities referred to rates adopted and accepted by other comparable sugarcane cultivating companies and arrived at reasonable rate of market value of produce - Whether on facts, it could be said that assessee was insufficient to make finding that rates relied on by assessee was in fact average price within meaning of rule 23(2)(a) for calculation of market value of sugarcane produce - Held, yes - Whether, therefore, tax authorities ascertained value in best manner possible and value ascertained correct - Held, yes FACTS The primary business of the assessee-company was to manufacture sugar from sugarcane grown on its own farms. The assessee occasionally purchased small quantities of sugar cane grown from outsiders for the purpose of manufactures of sugar. The purchase from the outsiders was very small in the relevant assessment years. As regards the income that the company derived by agricultural operations, as defined in section 2(1), the company was totally exempt from income-tax under section 4(3)(viii) of the 1922 Act. The company was not liable to pay any tax on its agricultural income under the heading 'business…

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