Ajit K. Sengupta, J.
1. In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1081-82, the following question of law has been referred to this court :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the hail damage insurance claim receivable by the assessee-company in the amount of Rs. 3,13,410 was a mixed receipt to which Rule 8 of the Income-tax Rules, 1962, is applicable ?'
2. Shortly stated, the facts are that from the director's report dated December 2, 1980, the Income-tax Officer found that, in this year, insurance claim receivable under hail damage insurance policy on account of severe hailstorm amounted to Rs. 3,13,410. There was a severe hailstorm in Darjeeling area on April 17, 1980, as a result of which the tea crop in the assessee's gardens was damaged. The assessee, on April 18, 1980, intimated the damage caused to the crop by the hailstorm to the insurance company, namely, Messrs. National Insurance (P.) Ltd. The insurance company admitted the claim of the assessee to the tune of Rs. 3,13,410. Before the Income-tax Officer, this amount was claimed by the assessee-company as an agricultural income. It was contended that this amount was not liable to income-tax. In support of this contention, reliance was placed on behalf of the assessee-company on the decision of the Calcutta High Court in the case of CIT v. B. Gupta (Tea) Pvt. Ltd. : [1969]74ITR337(Cal) . The Income-tax Officer rejected the assessee's contention and found on a perusal of the three damage reports that the valuers in all cases evaluated the hail damage finally in terms of 'made-tea'. The Income-tax Officer was of the view that the claims admitted by the insurance company also covered a portion of an overall loss in each of the three gardens from the stage of growing of green leaves to that of manufacturing of tea and marketing of made-tea. The Income-tax Officer thus held that the receipt is liable to be assessed under Sub-rule (1) of Rule 8 of the Income-tax Rules, 1962. The matter was carried in appeal before the Commissioner of Income-tax (Appeals) before whom the assessee-company placed reliance on the decision of the High Court in the case of B. Gupta (Tea) Pvt. Ltd. : [1969]74ITR337(Cal) . The Commissioner of Income-tax (Appeals), following the said decision of the Calcutta High Court, treated the amount of Rs. 3,13,410 as 100 per cent. agricultural income. Against the aforesaid order of the Commissioner of Income-tax (Appeals), the Department appealed to the Tribunal. It was submitted by the learned Departmental representative that the money receivable by the assessee-company from the insurance company covered agricultural as well as manufacturing operations as the amount in question was payable in respect of manufactured tea. So, the amount represented agricultural as well as business income arising out of manufacture of tea by the assessee-company. It was thus submitted that the receipt was not 100 per cent. agricultural in nature and that a part of it was income arising out of manufacture of tea and that the Income-tax Officer was right in applying Rule 8(1) of the Income-tax Rules to this receipt. It was further contended that the decision of the Calcutta High Court in the aforesaid case was distinguishable on facts. The learned authorised representative for the assessee-company, on the other hand, fully supported the order of the Commissioner of Income-tax (Appeals). Reliance was placed on the decision of the Calcutta High Court in the case of B. Gupta (Tea) Pvt. Ltd. : [1969]74ITR337(Cal) . It was pointed out that the evaluation of damage caused by hailstorm was made in terms of 'made-tea' simply to determine the damage caused. The Tribunal, after considering the rival contentions of the parties and the terms of the insurance policy, expressed the view that the amount receivable from the assessee-company under the insurance policy not only covered damage to the growing crop but also covered the loss sustained by the assessee in respect of tea which could have been manufactured if the damage to the green leaves had not been caused. So the claim under the insurance policy was also receivable in respect of growing tea. The Tribunal held that the assessee's claim that the entire receipt should be regarded as 100 per cent. agricultural income is untenable. The Tribunal held that it was a mixed receipt to which Rule 8 of the Income-tax Rules is applicable. The Tribunal found that the decision of the Calcutta High Court relied on by the assessee-company was distinguishable on facts. The Tribunal also repelled the submissions made on behalf of the assessee that evaluation of damage caused by hailstorm was made in terms of 'made-tea' to determine the extent of damage caused. The Tribunal set aside the order of the Commissioner of Income-tax (Appeals) on the point and restored that of the Income-tax Officer.
3. At the time of hearing, learned counsel for the assessee contended that the decision in the case of B. Gupta (Tea) Pvt. Ltd. : [1969]74ITR337(Cal) will clearly apply to the facts of this case. He has drawn our attention to the relevant clause of the insurance policy which provides as follows:
'damage to growing tea crop of the current season on the assured's tea estate(s) as under directly attributable to hail to the extent of 50% of the agreed insured value of the crop so damaged calculated on the basis of 4 kgs. of green leaf equivalent to 1 kg. of made-tea.'
4. This court in the aforesaid decision in the case of B. Gupta (Tea) Pvt. Ltd. : [1969]74ITR337(Cal) , considered an identical clause which provided, inter alia, as follows (at page 338) :
'In the event of any crop being damaged by hail the assured's garden manager shall forthwith summon two neighbouring planters who shall certify to the area so damaged (in acres) and furnish an estimate in (green leaf) of the season's loss consequent thereon, detailing fully their reasons for the conclusions arrived at ...'
5. There the court observed (at pages 338, 339) :
'Under the policy the insurance company undertook the liability to pay 50 per cent. of such loss suffered. In fact in the instant case the amount actually received by the company roughly represents 50 per cent. of the total loss assessed in respect of the damaged green leaf by hailstorm...
In our opinion, Rule 24 of the Income-tax Rules, 1922, is not applicable to a receipt of this nature. The same rule is only applicable when the income is derived from the sale of tea grown and manufactured by the seller.'
6. Thereafter, the court proceeded to hold as follows :
'It appears from the clause of the insurance policy that this amount was paid in respect of the damage done by hailstorm to the growing crop only and that crop represented agricultural operations. Therefore, any sum which represents profits of agricultural operations must be considered to be income from agricultural operations. In that view of the matter we are of the opinion that the sum received from the insurance company represented nothing but agricultural income and as such exempt under Section 4(3)(viii) of the Indian Income-tax Act, 1922.'
7. In our opinion, the principles laid down in the aforesaid decision will apply to the facts of this case. The entire receipt under the insurance policy for damage caused by the hailstorm to the growing tea leaves will be assessable as agricultural income and no part of the said income can be apportioned under Rule 8 of the Income-tax Rules, 1962.
8. For the reasons aforesaid, we answer this question in the reference in the negative and in favour of the assessee.
9. There will be no order as to costs.
Bhagabati Prasad Banerjee, J.
10. I agree.