Rishu Kumar Jalan – 1920423

The appellant, MrsBacha F. Guzdar, was, in the accounting year 1949-50, a shareholder in
two Tea companies received from these companies as dividends aggregating to Rs 2750. The
two companies carried on the business of growing and manufacturing tea. Income derived
from the sale of tea grown and manufactured by the seller in the taxable territories is
categorized as if it were income derived from business and 40% of such income shall be
deemed to be income, profits and gains liable tax so 40% of the income of the Tea companies
was taxed as income from the manufacture and sale of tea and 60% of such income was
exempt from tax as agricultural income. It was appealed that the dividend income received by
her is to the extent of 60% agricultural income in her hands and therefore exempt from tax.
The decision was dismissed because the dividend income is not agricultural income therefore
the whole of the income with is received is liable to tax. The court mentioned that a
shareholder does not receive profit directly from the land, though the company may be
involved in agricultural activities and is not entitled to the exemption. In the very same
judgment, the Supreme Court also considered the other activities in relation to the land or
having a connection with the land including breeding and rearing of live-stock, dairy-
farming, butter and cheese-making, poultry-farming, etc. The Supreme Court then went on to
hold that the mere fact that an activity has some connection with or is in some way dependent
on land is not sufficient to bring it within the scope of the term agriculture. In fact and truth
dividend is derived from the investment made in the shares of the company and the
foundation of it rests on the contractual relations between the company and the shareholder.
The dividend is not derived by a shareholder by his direct relationship with the land.
Therefore whosoever receives profit from the land directly is entitled to the exemption.