Manchanda, J.:— This is a case stated under section 66(1) of the Indian Income-tax Act 1921 hereinafter referred to as the Act. The question referred is:

“Whether on a true interpretation of Rule 24 of the Income-tax Rules made under, section 59 of the Indian Income-tax Act and the 2 lease deeds executed on 8-1-1954 and 30-1-54, the assessee was entitled to claim the exemption of 60 per cent of the net income from sale of tea leaves from the Banjarwala Tea Gardens which he had taken on lease?”

2. The material facts are these. The assessee is an individual. He had taken on sublease for a period of 15 years a tea garden known as Banjarwala Tea Garden from Shri Kaushalendra Pratap Singh and Sri Devendra Singh who had a perpetual lease, under an agreement dated the 8th January 1954. The material covenants of this lease deed are:

“Whereas the first party (lessees) are the perpetual lessees of Banjarwala Tea Estate and as such have become Bhumidhars in the area of about 200 acres grown with tea bushes and whereas the first party has agreed with the second party to sell the tea crop of the entire Banjarwala Tea garden to the second party (assessee) for a period of five years extending from 1st January 1964 to December 1958 …… the parties hereto have agreed to abide by the following terms and conditions.”

1. That the 1st party will sell and the 2nd party will buy all the crop of tea bushes in the aforesaid Banjarwala Tea Estate.

2. That the annual price of the tea crop of the entire garden together with grass…… will be Rs. 10,000.

5. That at present the sale of tea crop will be made for a period of five years till the end of 1958 but the second party will have the option to collect and gather tea for another two years……

7. That the possession of the tea garden will remain with the first party but the second party (assessee)…… will be entitled at all times to enter and reside in the garden to pluck, pick up, gather and collect tea crop in all seasons.

9. That the hoeing (gudai) and pruning (Kalam) will be done by the first party (lessor) at his own costs but the first party will not spend more than Rs. 4000 (four thousand) annually in the said operation. If the second party will require more hoeing and pruning costing more than Rs. 4000 (four thousand) it shall be done at the cost of the 2nd party.

13. That the agricultural income on the cultivation of tea and other similar taxes will be payable by the first party but the tax on the manufacture of tea will be payable by the second party (assessee).

14. That the tea crop will be plucked-picked up, gathered and collected from the tea bushes by the second party at his own cost.”

3. This agreement was varied by the agreement dated the 30th day of January 1954 only in one respect

“Whereas the second party lessor has agreed to sell the entire crop of tea bushes………tea estate to the first party (assessee)…. and whereas it was agreed between the parties that hoeing and pruning in the said tea garden will be done by the second party (lessor) at the maximum cost of Rs. 4000/- only and whereas the upkeep of the tea garden and the tea crop depends on the proper hoeing and pruning and whereas on the matter of the extent of hoeing and cutting dispute may arise between the parties in future the parties hereto have agreed to observe and abide by the following conditions—

(1) That the second party (lessor) has given a contract of hoeing and pruning of the tea cultivation in the said Banjarwala tea garden to the first party (assessee) in consideration of the sum of Rs. 40,000/- per annun from January first to the 30th December each year.

(2) That the first party (assessee) will henceforward get the hoeing and pruning done at his own cost receiving from the second party (lessor) the sum of Rs. 4000 annually”

4. The assessee therefore, in respect of hoeing became a contractor of the lessor whose obligation it was to have it hoed at his own expense. It may be noticed that what was agreed to be sold under the aforesaid two agreements was the “tea Crop” of the entire Banjarwala tea garden to the assessee and nothing else. The tea garden had already been planted and had been in existence since some time. The assessee had the right to pluck the tea leaves and to sell them after processing. The assessee under the provisions of this “second” agreement tended the tea plants and did all the other operations which under the “first” contract the lessor was under an obligation to perform.

5. The assessee returned his net income from the tea business and claimed before the Income-tax Officer that under Rule 24 of the Income-tax Rules made under Section 59(2)(a) that only 40% of the net income was liable to tax and 60% of it was exempt. Under S. 59, powers are given to make Rules, inter alia, for “Incomes derived in part from agriculture and in part from business.” Pursuant thereto R. 24 of the Indian Income-tax Rules, 1922 was framed. This reads “Income derived from the sale of tea grown and manufactured by the seller in the taxable territories shall be computed as if it were income derived from business and 40% of such income shall be deemed to be income profits and gains liable to tax. To obtain the benefit of this rule an assessee must fulfil both the conditions.

(1) That the tea should have been grown by the seller and.

(2) It should have been manufactured by the seller.

6. The dispute only is in respect of the first condition and that is whether the tea was grown by the seller i.e the assessee. The Income-tax Officer refused to give him the benefit of Section 24 and assessed the entire income from the sale of tea as income from business. The Appellate Assistant Commissioner allowed the appeal. The tribunal on appeal by the Commissioner of Income-tax restored the finding of the Income-tax Officer. Hence this reference under Section 66(1) of the Act.

7. Mr. Jagdish Swarup, learned counsel for the assessee, has contended that the assessee who was the seller of the tea had also grown” the tea for the reason that under the first agreement he had been given the option to carry out hoeing operations if the hoeing undertaken to be carried out by the lessor was found to be inadequate and in any event under the second agreement hoeing “became” the obligation of the assessee albeit, under a contract from the lessor it was further contended that the word “grown” has to be given a wider meaning than that given to “cultivation” or “agriculture.” There is no force in these contentions. The question that arises is integra as there is no authority a to what constitutes growing of tea. A consideration of the scheme of the Act and the rules framed, however, leaves no doubt that the intention was to give the words “tea grown” In the manufacturer and seller of tea the same meaning as the growing of any other agricultural crop (and to distinguish it from spontaneous growth) by the expenditure upon the land itself of human labour and skill. Income from agriculture is not to be included in the total income of the person receiving it by virtue of Section 4(3) of the Act. Therefore, where the same person performed agricultural operations as well as subjected the growth to a manufacturing process and sold the manufactured product it was only reasonable that he should not be deprived of that part of the exemption of Section 4(3) which could be related to agricultural operations. It was precisely for this purpose that R. 24 was enacted specifically for growers and manufacturers of tea. The rule provides for an apportionment of the income realised from the sale of tea on a rough and ready basis between the agricultural income which is exempt and the business operations which are subject to tax. 60 per cent is treated as relating to agricultural income and 40 percent is deemed to be income liable to tax.

8. Rule 23 gives an indication for this rough and ready apportionment. This rule provides (1) in the case of income which is partially agricultural income as defined in Section 2 and partially income chargeable to income-tax under the head “business” in determining that part which is chargeable to income-tax the market value of any agricultural produce which has been raised by the assessee and which has been utilised as raw material in such business ….shall be deducted.” from the scheme of the Act it is difficult if not impossible to escape from the conclusion that the words “tea grown” by the seller has the same meaning as grown by the process of agriculture. At one time there was a considerable conflict between the various High Courts as to what constituted “agriculture” but this was set at rest by a decision of the Supreme Court in Commissioner of Income-tax, West Bengal v. Benoy Kumar (1957) 32 ITR 466 : (AIR 1957 SC 768) where it was laid down (at p. 508 of ITR): (at p. 788 of AIR).

“As we have noted above, the primary sense in which the term agriculture is understood is agar field and cultra-cultivation i.e, the cultivation of the field, and if the term is understood only in that sense agriculture would be restricted only to cultivation of the land in the strict sense of the term meaning thereby, tilling of the land, sowing of the seeds, planting and similar operations on the land. They would be the basic operations and would require the expenditure of human skill and labour upon the land itself. There are however other operations which have got to be resorted to by the agriculturist and which are absolutely necessary for the purpose of effectively raising the produce from the land. They are operations to be performed after the produce sprouts from the land e.g weeding, digging the soil around the growth, removal of undesirable under growths and all operations which foster the growth and preserve the same not only from insects and pests but also from depradation from outside, tending, pruning, cutting, harvesting, and rendering the produce fit for the market. The latter would all be agricultural operations when taken in conjunction with the basic operations above described, and it would be futile to urge that they are not agricultural operations at all. But even though these subsequent operations may be assimilated to agricultural operations, when they are in conjunction with these basic operations could it be said that even though they are divorced from these basic operations they would nevertheless enjoy the characteristic of agricultural operations? Can one eliminate these basic operations altogether and say that even if these basic operations are not performed in a Riven case the mere performance of these subsequent operations would be tantamount to the performance of agricultural operations on the land so as to constitute the income derived by the assessee therefrom agricultural income within the definition of that term?

9. We are of opinion that the mere performance of these subsequent operations on the products of the land, where such products have not been raised on the land by the performance of the basic operations which we have described above would not be enough to characterise them as agricultural operations. In order to invest them with the character of agricultural operations, these subsequent operations must necessarily be in conjunction with and a continuation of the basic operations which are the effective cause of the products being raised from the land. It is only if the products are raised from the land by performance of these basic operations that the subsequent operations attach themselves to the product of the land and acquire the characteristic of agricultural operations.”

10. It is manifest that in the instant case no primary or basic operation upon the land itself in the actual growing of the tea bushes was performed by the assessee. The best that could be said for the assessee was that some hoeing could have been done by him under the first agreement and under the second agreement he was to carry out the hoeing operations on behalf of the lessor as a contractor. The hoeing operations in the present case would not be in the actual planting or growing of the tea bushes as they were already in existence and would at best constitute caring or tending of the grown bushes. That would only be a subsequent and secondary operation on the land and not the basic operations which are the ploughing of the land and putting or planting the tea seeds or bushes into the ground to grow. There is no evidence that any hoeing at all was done but even assuming that some hoeing was carried out it would still not constitute agricultural operations to exempt that income from tax.

11. Mere coppicing, lending, pruning etc. can never in themselves be “agriculture “and what is required is the actual growing of the tea seeds and planting in the soil after preparing it. According to the Encyclopedia Britanica

“the tea plant is an ever green shrub, which in its natural state grows to a height of 15-30 feet but the tea planter keeps it pruned down to height of 3-5 feet. It usually is grown from seed in nursary beds. On large tea estates the young plants are transplanted to the prepared tea field when they are 6 to 8 inches high, usually in six months' time….By the end of third year they are ready for plucking … Weeding, cultivation between the rows and pruning goes on regularly at different periods for 25 to 50 years, the average life of a tea bush.”

12. Thus the life of a tea bush is 25 to 50 years and therefore when the tea bushes were already in existence and no fresh tea bushes were planted the assessee who was Sub-lessee and to whom only the tea leaves had been sold for Rs. 10,000 cannot possibly claim the benefit under Rule 24 of the Rules as no human labour or skill was expended on the land itself in the planting, or growing of the bush. The assessee if he had not been a manufacturer and seller of tea could never have succeeded in claiming, that income from growing of tea was exempt from taxation under the Income tax as being agricultural income and there is no good reason why he should claim the benefit of R. 24 furthermore the very agreement under which the assessee took a sublease had made it abundantly clear that the agricultural income-tax would be paid by the lessor for the obvious reason that all basic operations in the growing of tea had been performed by him and the assessee had only carried out the secondary operations. There was thus no manner of doubt in the mind of the assessee when he entered into the agreement that he could never claim any part of his income from the planting of leaves and manufacture of tea to be exempt as income derived from agriculture. The assessee has therefore rightly been held not to qualify for the exemption under Rule 24. For the reasons given above we would answer the question referred in the negative and against the assessee. The assessee will pay the costs of this reference which we assess at Rs. 200 Counsel's fee is also assessed at Rs. 200.

FJ/RSK/D.V.C

13. Question answered in negative.