Kerala H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenses incurred for the professional fee for taxation work is an allowable deduction under s. 5 of the Agrl. IT Act ?

Counsel Appeared

Governmnt Pleader for the Petitioner : A.K. Jose, for the Respondent

K. S. PARIPOORNAN, J.:

The Revenue is the petitioner in both these original petitions. The respondent in both the cases is the same assessee. The matter arises in connection with the assessment of the respondent to agricultural income-tax for the years 1975-76 and 1976-77. The assessee/respondent claimed the legal expenses incurred by it (classified under professional fee for taxation work) as an admissible expenditure in computing the agricultural income. The claim was negatived by the assessing authority. In the appeal preferred by the assessee, the Dy. CIT(A) allowed the claim. In second appeal, the Agricultural Tribunal sustained the allowance ordered by the first appellate authority. Aggrieved by the decision of the Tribunal, the Revenue filed two reference applications under s. 60 (1) of the Agrl. IT Act praying that the following two questions may be referred to this Court for a decision :

” (i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenses incurred for the professional fee for taxation work is an allowable deduction under s. 5 of the Agrl. IT Act ?

(ii) Was not the decision of the High Court of Kerala reported in CIT Agrl. vs. Malayalam Plantations Ltd.(1979) 8 CTR (Ker) 348:(1978) 115 ITR 624(Ker) distinguishable on facts and in law ? “

The Tribunal held that no referable question of law arose as suggested by the Revenue. The applications were dismissed. In pursuance thereof, the Revenue has filed the above two original petitions under s. 60(3) of the Agrl. IT Act praying that this Court may be pleased to direct the Tribunal to refer the said two questions for the decision of this Court.

We heard counsel for the Revenue as also counsel for the assessee respondent. Counsel for the Revenue contended that the matter is covered by the decision of this Court in CIT (Agrl.) vs. Nilambur Rubber Co. Ltd. (1969) 71 ITR 686(Ker) and so in view of the said decision, the expenses incurred for preparation of the agricultural income-tax returns are not allowable in determining the assessable income under the Agrl. IT Act. It was contended that reliance placed by the Tribunal on the decision in CIT (Agrl.) vs. Malayalam Plantations Ltd. (supra) and the decision of the Supreme Court in CIT vs. Birla Cotton Spg. & Wvg. Mills Ltd. (1971) 82 ITR 166(SC), is misplaced. The legal expenses incurred and classified as professional fee for taxation work is not an admissible deduction under s. 5(j) of the Agrl. IT Act. It was contended that this is not an expenditure laid out or expended wholly and exclusively for the purpose of deriving agricultural income. On the other hand, counsel for the assessee contended that the crucial words in s. 5(j) of the Agrl. IT Act are similar to s. 10(2)(xv) of the Indian IT Act, 1922, and the legal expenses incurred for taxation work are an admissible expenditure. It was argued that the legal expenses incurred for representation before the Investigation Commission were held to be a permissible expenditure under s. 10(2)(xv) of the Indian IT Act, 1922, by the Supreme Court in Birla Cotton Spinning & Weaving Mills Ltd.’s case (supra) and so in view of the said decision, the legal expenses incurred even for taxation work is an admissible expenditure under s. 5(j) of the Agrl. IT Act.

On hearing the rival contentions of the parties, we are of the view that the plea of the Revenue should fail. In Malayalam Plantations’ case (supra) , this Court held that s. 5(j) of the Agrl. IT Act and s. 10(2)(xv) of the Indian IT Act, 1922, represent conceptions which are kindred though distinct. It was also held that to confine s. 5(j) to cover only those expenses which are directly and immediately relatable to the derivation of income will be to import limitations which are not there, either in the language or in the context, and to hold that what is contemplated is only ” agricultural expenses ” considered as an antithesis to ” agricultural income “. Once it is accepted that the language of s. 5(j) of the Kerala Agrl. IT Act and that of s. 10(2)(xv) of the Indian IT Act, 1922, are only kindred expressions, it cannot admit of any doubt that any expenditure laid out or expended for the purpose of agricultural income will be a deductible expenditure. Indeed, in Birla Cotton Spinning & Weaving Mills Ltd.’s case (supra) the Supreme Court held that if the assessee takes any steps for reducing its liability to tax which result in more funds being left for the purpose of carrying on the business, there is always a possibility of higher profits and this will be a permissible expenditure.

In the light of the decision in Malayalam Plantations’ case (supra) and the decision in Birla Cotton Spinning & Weaving Mills’ case (supra), we have to hold that any expenditure incurred in connection with the receipt of agricultural income is a deductible expenditure. The decision in Malayalam Plantations’ case (supra) was followed in IT Ref.Nos. 63, 64 and 65 of 1978 CIT (Agrl) vs. Emerald Valley Estates Ltd (1988) 169 ITR 392(Ker) and also in IT Ref.Nos. 109 and 125 of 1977 CIT (Agrl.) vs. S. Bhaskaran (1988) 169 ITR 395(Ker) and in IT Ref. No. 107 of 1977 CIT (Agrl.) vs. Malabar Industries Company Ltd. (1988) 169 ITR 390 and in ITR No. 50 of 1977 CIT (Agrl.) vs. Kartikolam and Alathur Estates Ltd. (1988) 169 IT Ref. 393(Ker). The question that arose for consideration in ITRs Nos. 63, 64 and 65 of 1978 CIT (Agrl.) vs. Emerald Valley Estates Ltd (supra) was whether, on the facts and in the circumstances of the case, the expenses incurred in filing appeal, revision, reference application, etc. (claimed as legal charges) are allowable deductions in computing the agricultural income under s. 5(j) of the Kerala Agrl. IT Act. This Court held that the matter is covered by the decision in Malayalam Plantations’ case (supra). So also, in IT Ref. Nos. 109 and 125 of 1977 CIT (Agrl.) vs. S. Bhaskaran (supra) the question that arose for consideration was whether the legal expenses and travelling expenses incurred in connection with taxation matters were allowable deductions. Following the decision in Malayalam Plantations’ case (supra), this Court held that they are permissible deductions. The decisions in IT Ref. Nos. 107 CIT (Agrl.) vs. Malabar Industries Co. Ltd. (supra) and 50 of 1977 CIT (Agrl.) vs. Kartikolam and Alathur Estates Ltd (supra) are also to the same effect.

6. In the light of the decisions of this Court in IT Ref. Nos. 63, 64 and 65 of 1978 CIT (Agrl.) vs. Emerald Valley Estates Ltd (supra) and also in IT Ref. Nos. 109 and 125 of 1977 CIT (Agrl.) vs. S. Bhaskaran (supra) and in IT Ref. No. 107 of 1977 CIT (Agrl.) vs. Malabar Industries Co. Ltd. (supra) and in IT Ref. No. 50 of 1977 CIT (Agrl.) vs. Kartikolam and Alathur Estates Ltd (supra) it is too late in the day to contend that the legal expenses incurred and classified as professional fee for taxation work is not an admissible expenditure in computing the agricultural income under s. 5 (j) of the Kerala Agrl. IT Act. We are of the view that the Tribunal was justified in holding that the legal expenses incurred for taxation work is an admissible expenditure. The Division Bench decision of this Court in Malayalam Plantations’ case (supra) was followed in the later unreported decisions (since reported infra) mentioned above.

In the light of the above reasoning, we hold that no referable question of law arises for consideration from the order of the Tribunal.

There is no merit in these two original petitions. They are dismissed.

[Citation : 169 ITR 386]