1. The question involved in this writ petition under Article 226 of the Constitution of India is as to whether cess to be paid by the peitioner under Assam Taxation (on specified land) Act 1990 is to be deducted from 60% of the computed income of tea.
2. Heard Dr. Saraf learned counsel appearing on behalf of the petitioner and Mr. A.K Sarma learned counsel appearing on behalf of the respondent. To appreciate the contention canvassed at the bar by the learned counsel for the parlies the facts relevant for the purpose may be stated as under:
3. The petitioner which is a public limited company doing business of tea after cultivation and manufacture of the same paid cess to the tune of Rs. 17,70,096/- for the assessment year 1993–94 on the green leaves under the Assam Taxation (on specified land) Act 1990. It is stated that in view of the provisions laid down under Section 8(2)(e) of the Agricultural Income Tax Act 1939 the cess paid is to be deducted only from 60 per cent of the computed income of tea. Petitioner therefore claimed deduction of sum of Rs. 17,70,096/- from the 60 per cent of the income that is 21,07,843/-. Thus after paying the aforesaid amount as cess the petitioner approached for a tax clearance certificate by submitting an application on 24.1.94 (Annexure-2) but the Respondent No. 1 vide his letter No J-46/3322 dated 25.1.94 (Annexure-III) informed the petitioner that he would not be entitled to get the tax clearance certificate as for deduction of the amount of cess (sic) of 60 percent of the Agricultural Income in place of 100 percent of the composite income was not approved.
4. The petitioner has further contended that in view of the provisions-laid down under Section 8(2)(e) of the Assam Agricultural Income Tax Act 1939 which is very much in force, that the petitioner is entitled to get the tax deduction of cess from 60% of the composite income. In this context it has further been averred that in view of the Rule 8 of the Income Tax Rules 1962, 40 percent of such income shall be deemed to be liable to tax and that sub-rule (2) of Assam Agricultural Income Tax lays down as to how the computing of the Agricultural income has to be made.
5. The petitioner has therefore contended that the Respondent's letter dated 25.1.94 contained Annexure III and letter 27.1.94 contained in Annexure IV are liable to be quashed and accordingly appropriate writ should be issued.
6. The respondents did not file any counter. Howeve'r, Mr. A.K Sarma learned counsel appearing on behalf of the respondents has contended that the letter written by the Commissioner of Taxes, Assam contained in Annexure-V cannot be relied on as the petitioner has already been informed that even though the Commissioner of Taxes, Assam informed the petitioner that he is entitled to deduction the amount from 60% of the composite income that the matter was subsequently disputed by the Stale Government and hence no reliance can be placed upon the aforesaid letter. Dr. Saraf learned counsel appearing on behalf of the petitioner has however drawn my attention to Sections 2(i)(a) of the Income Tax Act 1961 to show what agricultural income means. According to Section 2(i)(a) of the Agricultural Income means any land or revenue derived from land which is situated in India and is used for agricultural purposes; (b) Any income derived from such land by (i) Agriculture or (ii)………… In this context it has also been submitted that the Rule 8 of the Income Tax Rules 1962 will also show that income derived from the sale of tea grown and manufactured shall be computed as if it was an income derived from business and 40 percent of such income shall be deemed to be income liable to tax. In view of the above provisions Dr. Saraf likes to emphasise that since 40 percent of such income shall be deemed to be an income liable to tax the petitioner in view of the definition under Section 2(a) of the Income Tax Act read with provisions as laid down under Section 8(2)(e) of the Agricultural income tax act is entitled to the deduction of the 60 per cent of the composite income. Section 8(2)(e) reads”
“Rules prescribing the manner of determining the net amount of agricultural income for the purpose of this clause shall provide that the following deductions shall be made from the gross amount of such income namely
(a) ……………
(b) ……………
(c) ……………
(d) ……………
(e) any tax or rate paid under any enactment in force in Assam on the cultivation or sale of the crop from which such agricultural income is derived.
7. In view of the above quoted position Dr. Saraf argues that since the petitioner has already been paid cess which is nothing but a tax, he is very much entitled to get the deduction from the 60 percent of the composite income. The term ‘cess’ has not been defined in the Agricultural Income Tax Act 1961. Dr. Saraf has however referred an observation of the Supreme Court in the Orissa Cement Ltd. v. State of Orissa reported in 1991 Supp (1) SCC 430. Under Paragraph 40 of this judgment their lordship made the following observation “In other words the levy cannot be co-related to any services rendered or to be rendered for the State Govt, to the class of persons from whom levy is collected whether royality is a tax or not the cess is only a; tax and cannot be properly described as a fee.
8. The other decision referred to by Dr. Saraf in respect of his contention that cess is also a tax is a decision of the Lahore High Court rendered in the case of Daulat Ram appellate v. Municipal Committee, AIR 1941 Lahore 40. In the aforesaid case it was argued before the court that cess is something which is tax or duty. Consequently the learned Single Judge was inclined to accept this contention and made the following observation that “Cess as defined in Murray's Oxford Dictionary means specially in relation to India” a tax levied for a specific object”. It is no doubt said that some times it meant a rate levied by local authority and for local purposes, but as explained there is now superseded in general English use of the word “rate”. It is also observed by the learned Judge that tax in local parlance also means nothing more than money which individuals are compelled to pay for public purposes. It is impossible, therefore to distinguish tax from cess or duty. In view of the aforesaid decision particularly the observation of the Supreme Court as quoted above I am of the view this cess is also a tax. Therefore, in view of the provisions laid under Section 8(2)(e) the petitioner is entitled to get the deduction of tax from 60 percent of the composite Agricultural income. The impugned letters namely letter dated 25.1.94 contained in Annexure III and letter dated 27.1.94 contained in Annexure IV are quashed. The respondent are directed to issue tax clearance certificate provided the petitioner has paid the tax from 60 percent of the composite income after deduction of the cess amount.
9. With the aforesaid order and direction this writ petition is disposed of. No. costs.