Kerala H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the sums of Rs. 11,756,05 and Rs. 37,629.32 disallowed by the assessing authority as amounts spent for the maintenance and upkeep of immature plants under the two heads ” weeding charges ” and ” fertiliser charges “, respectively, are allowable deductions under the provisions of s. 5 of the Kerala Agrl. IT Act, 1950 ?

Counsel Appeared

Government Pleader, for the Revenue : Arikkat Vijayan Menon, for the Assessee

T. KOCHU THOMMEN, J.:

The following question has been, at the instance of the Revenue, referred to us by the Agricultural Tribunal, Addl. Bench, Ernakulam: ” Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the sums of Rs. 11,756,05 and Rs. 37,629.32 disallowed by the assessing authority as amounts spent for the maintenance and upkeep of immature plants under the two heads ” weeding charges ” and ” fertiliser charges “, respectively, are allowable deductions under the provisions of s. 5 of the Kerala Agrl. IT Act, 1950 ? “

In respect of the asst. yr. 1970-71, the Agrl. ITO disallowed the sums of Rs. 37,629,32 and Rs. 11,756,05 being expenditure claimed for fertilisers and weeding charges, respectively, on the ground that the said expenditure had been incurred on immature plants from which no agricultural income had been derived. This decision was, on appeal by the assessee, affirmed by the AAC of Agricultural Income-tax and Sales Tax, PaIghat. On further appeal by the assessee, the Tribunal reversed the finding of the authorities below and held that the decision of the Supreme Court in Travancore Rubber & Tea Co. Ltd. vs. Commr. of Agrl. IT (1961) 141 ITR 751 was applicable to the claim of the assessee and it was, therefore, allowable.

Counsel for the Revenue rightly contended that the Tribunal had lost sight of the fact that, subsequent to the decision of the Supreme Court relied on by the Tribunal, s. 5 of the Agrl. IT Act, 1950, was amended by Act No. 9 of 1961, w.e.f. April 1, 1951, by the insertion of Explanation 2. He refers to the decision of this Court in Commr. of Agrl. IT vs. Johnsons Estates & Agencies (P.) Ltd. (1964) 52 ITR 629 in which the scope of Explanation 2 was considered. Sec. 5 reads: “5. Computation of agricultural income.—The agricultural income of a person shall be computed after making the following deductions, namely :. …… (j) any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of deriving the agricultural income ; …… Explanation 2.—Nothing contained in this section shall be deemed to entitle a person deriving agricultural income to deduction of any expenditure laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income has been derived during the previous year.” The Agrl. ITO had found, as a matter of fact, that the amounts disallowed by him represented expenditure in relation to immature plants. That finding of fact has not been challenged by the assessee. The challenge is in regard to the construction of s. 5, which, according to the assessee, would bring under cl. (j) thereof even expenditure laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income has been derived during the previous year. That contention was accepted by the Tribunal on the basis of the principle adopted by the Supreme Court in the aforesaid decision without realising that that principle no longer held good in relation to the immature plants by reason of the Explanation. See Commr. of Agrl. LT. vs. Johnsons Estates & Agencies (P.) Ltd. (1964) 52 ITR 629 (Ker).

In the circumstances, we answer the question referred to us in the negative, that is, in favour of the Revenue and against the assessee.

We direct the parties to bear their respective costs in this tax referred case.

[Citation : 173 ITR 390]