JUDGMENT The assessee, Maharaja Vibhuti Narain Singh of Varanasi, was assessed under section 5 and 6 of the U.P. Agricultural Income-tax Act, 1948 (hereinafter referred to as the Act), on an income of Rs. 34,437-12-9 for 1362 Fasli and of Rs. 37,794-13-4 for 1363 Fasli by the assessing authority. He appealed on the ground that he had been assessed on a wrong basis, that the whole of the rental amount due to him as rent had been realized by him from the cultivators, whereas section 5 of the Act only provided that "the Agricultural income mentioned in clause (a) of sub-section (1) of section 2 shall be deemed to be the sum realized in the previous year on account of agricultural income". The Additional Commissioner, who heard the appeal from the assessment order dated February 29, 1956, relating to the year 1362 Fasli did not consider the question of law raised, but he held that, in view of the practice of assessing agricultural income-tax on the basis of rental demand instead of actual realisation, "it was not advisable at that stage to take the realized rent for the purpose of income-tax". The Additional Commissioner also observed that the assessee, being a Raja, had a big staff and was "expected to collect the whole amount demanded specially when it was realised from the city dwellers". Another ground of appeal by the assessee was that the income of Rs. 1,538 from the nursery had been wrongly added to the agricultural income of 1362 Fasli, although this should have been excluded as it was not agricultural income. The assessee pointed out that he had already been taxed by the income-tax authorities on this income. This ground succeeded before the Additional Commissioner who deleted this amount from the total agricultural income of 1362 Fasli. The assessees appeal from the assessment order dated January 31, 1957, relating to the year 1363 Fasli was heard by the Commissioner before whom the Additional Commissioners judgment relating to the assessment of 1362 Fasli seems to have been placed. The Commissioner agreed with the Additional Commissioner that the total rental demand should be the basis of the assessment under section 5 of the Act, but he disagreed with the Additional Commissioner on the question whether the income of the nursery should be computed as agricultural income under section 6 of the Act, although it is not clear why the Commissioner considered the question of income from the nursery at all as it was not assessed to tax under the Act for 1363 Fasli. Consequently, there were revision applications by both sides. The revising authority agreed with the view taken by the Commissioner, Varanasi, and rejected the revision application filed by the assessee, but it allowed the revision application filed by the State so that the item of Rs. 1,538 was added to the income of the year 1362 Fasli which was the income from the nursery treated as agricultural income by the assessing authority. As the revising authority, known as "the Revision Board", rejected the assessees application for a reference, under section 24(2) of the Act, the assessee came to this court under section 24(4) of the Act. This court then required the Revision Board to state the case of two questions of law which, in the opinion of this court, arose in the case, These questions were :
"(1) Whether there was any material before the Revision Board for holding that the entire amount of the current rental demand should be taken as agricultural income from the rent ?
(2) Whether the income from the nursery constitutes agricultural income ?"
In stating the case to this court the Revision Board has observed that "section 5, read with section 2(a) of the U.P. agricultural Income-tax Act supported the view that agricultural income was to be computed on the basis of the actual realisation of rent and not the total rental demand." The Revision Board noticed the contention of the assessees counsel that the Board had ordered agricultural income to be computed on the actual realisation for the years 1359, 1360 and 1361 Fasli. It, however, did not give a finding whether this was actually done in the case of the assessee or not. The Revision Board then gave a rather dubious finding that the practice in the past had been to compute the assessees agricultural income on the basis of the total rental demand of rent "for the sake of convenience". We are unable to hold that any practice or convenience can alter the law. If, as the Revision Board itself seemed to think, the law required computation on the basis of actual realisation of rent and not on the basis of the total rental demand, the Revision Board ought to have given effect to the requirement of law as against any alleged practice or convenience which could have no bearing on what the law actually authorises or requires.
It was contended on behalf of the State of U.P. that the concession by the Revision Board that the basis of assessment should be the actual realisation and not the total rental amount is erroneous. Reliance was placed upon the definition of "agricultural income" given in section 2 of the Act which may be fully quoted here as it is necessary to consider it in answering both the questions before us. The definition is as follows :
"(a) any rent or revenue derived from land which is used for agricultural purposes and is either assessed to land revenue in Uttar Pradesh or is subject to a local rate or cess assessed and collected by an officer of the State Government;
(b) any income derived from such land by,
(i) agriculture, or
(ii) the performance by a cultivator or receiver of rent-n-kind of any process ordinarily employed by a cultivator or receiver of rent-in-king to render the produce raised or received by him fit to be taken to market, or
(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii)..."
Emphasis was placed on behalf of the State on the word "derived from land" used to indicate taxable income. It was contended that section 5 also uses the words "deemed to be the sum realized" so that realizations meant whatever income was derived from land and that this would be deemed to have been actually realized. This appears to be a very unnatural interpretation. Even if we look at the word "derived", it certainly does not mean "deemed to be derived". Section 5 only deals with the determination of the amount after making certain deductions which will be "deemed to be the sum realized in the previous year" on account of agricultural income. The word "deemed" is used only in view of the deductions to be made from actual realization. These deductions are set out under six categories (a) to (f), in section 5. The word "deemed" is not used here in order to negative the natural meaning of the words which clearly indicate that the assessment must take place on the actual realizations made and not on the demands made. The word "derived" also means actually derived and not nationally derived.
The second question to which we may now turn is more difficult, Analysis of the above-mentioned definition of agricultural income given in the Act will show that this income must be derived from the actual user of land. Section 2(1)(a) is confined to rent or revenue received, but section 2(1)(b) covers wider classes of agricultural income. The first of these classes covers income of those engaged in the profession of agriculture carried on upon land by themselves or through others who cultivate for them. The next class is of those who engage in the actual process of cultivation which may result in agricultural income. This process is indicated as "any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market." It appears to us that the process which is employed by a person carrying on agriculture, either as a direct cultivator or as a person employing others to cultivate, must be carried on upon land and not on earth contained in earthern pots as in the case with a large number of processes in a nursery. It also appears to us that the process involved must result in some produce which is raised directly for being taken to the market. Further, we find that in section 2(1)(b)(ii) the process contemplated is one "ordinarily employed" by cultivator such as cultivation of fields with ploughs. The definition of "agricultural income" given here is, therefore, a rather technical and restricted one. It does not include all kinds of income which may result from carrying on an activity embraced by the broad sense of the term "agriculture".
It is true that the dictionary meaning of the term agriculture is wide enough to cover all that may lie within the province of the science or art of cultivating the soil and may include even allied activities such as rearing of livestock. The Supreme Court, in Commissioner of Income-tax v. Raja Benoy Kumar Sahas Roy [[1958] 32 I.T.R. 466, 508, 509, 511; [1958] S.C.R. 101.], while interpreting the above-mentioned definition, which is taken from the Indian Income-tax Act, 1922, made an exhaustive survey of the various decisions on the meaning of the term, agriculture, and came to the following conclusion :
"As we have noted above, the primary sense in which the term agriculture is understood is agar - filed, 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 undergrowths 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 given case, the mere performance of these subsequent operations could 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 ?
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 the performance of these basic operations that the subsequent operations attach themselves to the products of the land and acquire the characteristic of agricultural operations."
Their Lordships held that subsidiary operations such as digging, the soil must be subordinate and incidental to the primary operations of cultivation of fields in order to be embraced within the term "agriculture". It is only then that the subsidiary operations will be comprised within the definition of agriculture is defined above. They went on to hold that "all activities in relation to the land or having connection with the land, including breeding and rearing of live-stock, diary-farming, butter and cheese making, poultry farming, etc." could not be covered in this technical definition of "agriculture", although the wider dictionary meaning may embrace it. They went on to point out that there has to be "present throughout the basic idea that there must be at the bottom of it cultivation of land in the sense of tilling the land, sowing of seeds, planting and similar work done on the land itself." They said : "This basic conception is the essential sine qua non of any operation performed on the land constituting agricultural operations."
In view of the exhaustive discussion by the Supreme Court of the criteria to be adopted in deciding whether an activity can be described as an agricultural operation or not, there is no need for use to go into this matter at length. It is true that there is no decision so far brought to our notice on the question whether the maintenance of a nursery is included within the scope of agriculture technically defined. It may be that applying the above-mentioned tests laid down by their Lordships of the Supreme Court, cases my arise in which a nursery may be maintained by a farmer as an aid or necessary adjunct to the primary process of agriculture carried on by him. But, usually nurseries are maintained and run as businesses quite independently of agriculture, and there may be no process carried on upon the land at all in running a nursery. There are, inter alia, two meanings of the term "nursery" given in the Oxford Dictionary which are relevant here. One of these is : "A piece of ground in which young plants or trees are reared until fit for transplantation". Another meaning given, which is not so common, is : "a collection of such plants". Any place where young plants are "reared" and kept is spoken of as a "nursery". The keeping and running of a nursery as a business does not generally involve the ordinary processes of cultivation in fields at all.
In the present case, we do not find any discussion of the type of nursery involved. Even if the keeping of a nursery necessarily means the use of some land and earth for the purposes of rearing plants, that would not by itself amount to carrying on a primary agricultural operation in the sense of cultivating fields. Moreover, plants or seeds are not considered "produce ready for the market" in the ordinary sense. We do not also know the facts upon which the income-tax authorities have treated the income from the nursery as income from a business. It is only clear that the materials before the agricultural income-tax authorities in the case before us were wholly insufficient to justify the conclusion that the income from the nursery was agricultural income. No facts which would give rise to an inference that there was a nursery were discussed. Perhaps the income-tax authorities went into the matter in more satisfactory manner before they determined the income from the nursery to be income from a business. However, we have not even got any order or judgment of the income-tax authorities before us. All we can say with certainty is that the materials before the agricultural income-tax authorities could not justify the conclusion that the income from the nursery in this case constituted agricultural income.
The result is that our answers to both the questions are in the negative and in favour of the assessee. Accordingly, we allow costs of this reference to the assessee and fix it at Rs. 100. We also allow and assessee counsels fee at Rs. 100.
Questions answered in favour of the assessee.