It is too much of a simplification to say that farmers, not only in India but in other countries as well, do not earn sufficient income. The prosperity of farmers involved in large-scale agricultural activities on their own land and on those rented by family members, mainly to circumvent the land ceiling laws, is too well known.

Even if the argument that farmers can at best earn only Rs 2-3 lakh is accepted, the issue is about the moral, ethical or economic justifications for sparing such incomes when there are persons who struggle to earn much less from employment or other activities but are subject to tax.

Regarding the definition of farm income, there should obviously have been no hindrance. Why a definition roping in farmers who own big farmlands/properties and with capacity to pay tax has not been formulated is not because of any technical/legal problem but because of the lack of political will. An attempt could certainly have been made in the Budgets to define such incomes. Failing to do so is no ground for not taxing this group.

In a country where 70 per cent of the population is engaged in agricultural activities and, hence, forming a major vote bank, a consensus on this issue would be hard to come by. The constitutional issue is being bandied without examining the issue in perspective. Under Article 366(l) of the Constitution, `agricultural income' means income as defined for the purposes of the enactments relating to Indian income-tax. This definition indicates that it is open to the Central Government from time-to-time to define agricultural income in any particular manner in the I-T Act and that would then be the meaning of that term not only for the purpose of such enactment but also for the purpose of the Constitution. That evidently is for the purpose of avoiding conflict as to the legislative power of the States in regard to agricultural income.

It is also significant that the words used in Article 366(l) are not "as defined by the enactments relating to Indian Income-tax" but "as defined for the purposes of the enactments relating to `Indian income-tax'". From this definition it is quite clear that rule 8 of the I-T Rules, 1962, as well as rule 24 of the I-T Rules, 1922, pertain to and are bound by the definition of the term `agricultural income' for the purposes of laws or enactments pertaining to Indian income-tax and, hence, the provisions of those rules have to be taken into account in considering the meaning of the term `agricultural income' under Article 366(l) (Tata Tea Ltd vs State of West Bengal — 1988 173 ITR 18, 32, 40 SC).

Thus, one has to understand Entry 46 in List 11 of the Seventh Schedule to the Constitution and Entry 82 in List I of the same schedule in the light of the definition of the term `agricultural income' in the I-T Act as ordained by Article 366(l) of the Constitution.

Article 246(3), read with Entry 46 in List 11 (State List) of the Seventh Schedule to the Constitution, vests the legislature of any State with exclusive powers to make or enact laws, for such State or any part thereof, relating to tax on agricultural income.

The term `agricultural income' in Entry 46 is necessarily to be understood in terms of the definition of that term in the law relating to income-tax by reason of the provision in Article 366(l) (Karimtharuvi Tea Estate Ltd vs State of Kerala — 1963 48 ITR SC 83; and K. C. Thomas vs Agri. ITO — 1973 91 ITR 43 8 Kerala).

Hence, by amending the definition of the phrase `agricultural income' in the I-T Act, power to tax income from sources in which big farmers are engaged can be assumed by the Central Government and no amendment of the Constitution is necessary.

This legal position can be examined by those opposing the tax on constitutional grounds. Why this is not being done is not difficult to understand.

As far as the `time' argument goes, it too has no merit. No grounds have been given as to why the present is not an appropriate time.

As far as wealth tax is concerned, the Supreme Court had, in the Dhillon case, said that such a tax can be imposed on agriculturists.

(The author is a former chairman of CBDT.)

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