Madras H.C : These revisions are directed by the assessee against the common order passed by the Tamil Nadu Agricultural Tribunal, Madras, in respect of the levy of assessment for the years 1973-74 to 1976-77.

K. M. NATARAJAN, J. :

These revisions are directed by the assessee against the common order passed by the Tamil Nadu Agricultural Tribunal, Madras, in respect of the levy of assessment for the years 1973-74 to 1976-77. The revision-petitioner is the assessee, namely, M/s Sakthi Estates, Pollachi. The abovesaid estate consisted of lands on which coffee, cardamom, etc., were grown. According to the assessee, only on a portion of the lands, there were mature plants from which income was actually derived. There were immature coffee plants and on some lands, new planting work was done which yielded no agricultural income during the years. The assessee claimed deduction of the interest on the loan borrowed in connection with the maintenance of the said estate. The question that arose for consideration before the Tribunal was whether deduction is to be given under s. 5(k) or under s. 5 (e) of the Tamil Nadu Agrl. IT Act, 1955. It was contended by the assessee, revision-petitioner herein, that s. 5(k) of the Act applies only to the amount borrowed and actually spent on the land from which agricultural income is derived, and any interest other than this would be governed by s. 5(e) of the Act, and as such, even in respect of establishment expenses, such portion incurred on land which actually yielded income during the accounting year has to be segregated from expenses incurred in respect of lands on which immature plants existed and the same procedure must be adopted in computing the agricultural income. The Tribunal, after considering the respective contentions of the assessee as well as the Department, remanded ITA No. 144 of 1978 and in respect of the other three appeals, ITA Nos. 201522 of 1978, they are partly allowed and partly remanded.

2. The grievance of the assessee is with respect to the observations in para 5 of the order, where it is stated : “We may, at the outset, state that the interpretation placed by learned counsel, if pressed to its logical end, would mean that the Agrl. ITO had to find out whether each mature plant actually yielded any income during the relevant accounting year or was infested by pests, etc.” According to learned counsel for the petitioner, the said observation of the Tribunal is not correct and it was not the interpretation put forward on behalf of the assessee by learned counsel. On the other hand, the only contention put forward on behalf of the assessee was that only in cases where any interest is paid in the previous year on any amount borrowed and actually spent on the land from which the agricultural income is derived, deduction has to be allowed in accordance with s. 5 (k) of the Act and the remaining portion has to be dealt with under s. 5(e) of the Act. Learned counsel also submitted that the Tribunal has not properly interpreted the distinction between s. 5 (k) and 5(e) of the Act and erred in holding that the interest on monies borrowed for cultivation expenses have to be brought under s. 5(k) of the Act no matter whether there was any mature or immature plant. It was also submitted that the Tribunal is not correct in saying that, in determining the expenditure incurred on the land from which the agricultural income is derived, it is not possible to make this dubious distinction between land which yielded some produce and the rest. Though the assessee is not disputing the order of remand, the said finding of the Tribunal, according to learned counsel, will work great hardship, that it is against the very provisions, that the Tribunal has not properly appreciated the distinction between s. 5(e) and 5(k) of the Act and that it is only for the purpose of clarification that these revision-petitions are filed. In this connection, learned counsel drew our attention to the relevant provisions of s. 5(e) and 5(k) of the Tamil Nadu Agrl. IT Act, 1955, as well as the decision of this Court in Puthutotam Estates (1943) Ltd. vs. State of Tamil Nadu (1984) 42 CTR (Mad) 57 : (1984) 148 ITR 341 (Mad). The scope of s. 5(e) and 5(k) of the Act had been dealt with by three Division Benches of this Court. In State of Madras vs. Thiru Arooran Sugars Ltd. (1965) 55 ITR 307 (Mad), it was observed (at p. 345 of 148 ITR) : “There is a clear difference between ‘moneys borrowed for expenses wholly and exclusively for purposes of the land’ referred to in s. 5(e) and ‘moneys borrowed and actually spent on the land’ referred to in s.5(k), that for s. 5(k) to apply, the money borrowed should have been actually ‘spent on the land’ and it is not enough that the money was spent for the purpose of the land in connection with the business activities of the assessee which resulted in the earning of Agricultural income and that it is for the State to establish that particular items represent money actually spent on the land so as to take out any portion of those items from the scope of s. 5(e). The Court observed that ‘s. 5(k) being a special provision, if s. 5(k) applies to certain interest charges, the application of s. 5(e) would be excluded even if all statutory requirements of s. 5(e) are satisfied.”

3. In Kil Katagiri Tea & Coffee Estates Co. Ltd. vs. Government of Madras (1974) 96 ITR 165 (Mad), another Division Bench of this Court held that s. 5(e) is in the nature of residuary clause and would take in not only the expenditure incurred for the purpose of earning the agricultural income but also very many expenses involved in carrying on the agricultural activity as an occupation, that the expression “for the purpose of the land” is much wider in scope than the expression “for the purpose of deriving the agricultural income from the land”, that s. 5(e) covers a wide range of expenses taking in not only the expenses incurred actually for deriving agricultural income but also expenses which are not directly incurred for deriving agricultural income but have been expended in connection with the lands which do not have any relationship to the agricultural income derived in the previous year and that those expenses will come under the expression “for the purpose of the land” and will have to be dealt with under s. 5(e). In Puthutotam Estates (1943) Ltd. vs. State of Tamil Nadu (supra), a Division Bench of this Court held (headnote) : “The expenditure incurred on immature coffee plants was a revenue expenditure and not a capital expenditure, and interest paid on the borrowings made for maintaining the immature plants would clearly fall under s. 5(e) and not under s. 5(k).” It is further held (headnote) : “Sec. 5(k) would apply only in relation to the interest payments on the amounts borrowed and actually spent on the land from which the income had been derived in the previous year.”

4. On a careful analysis of the ratio laid down in the decisions with regard to the distinction between s. 5(e) and s. 5(k), we are of the view that the very purpose of having a provisions like s. 5(k) is to borrowed for spending on the land which yields income, there should be a limit as, otherwise, it is possible for the assessees to claim a substantial portion of the income as a expenditure incurred for maintaining the crop which yields the income while such limitation is not necessary in respect of the interest payments on other borrowings for the maintenance of immature coffee plants. It is further clear that s. 5(k) applies only to interest paid on the amounts borrowed and actually spent on the existing crop in the land from which income is derived and it will not apply to any interest payments on amounts borrowed for maintaining the other areas or plants from which agricultural income is not derived in the assessment year. In view of the above ratio laid down, the finding of the Tribunal with regard to the distinction between s. 5(e) and s. 5 (k) is liable to be set aside.

5. For all these reasons, while sustaining the remand passed by the Tribunal, we direct the Asst. CIT, Agrl. Income-tax, to apply s. 5(k) only in relation to the interest payments on the amounts borrowed and actually spent on the land from which income had been derived in the previous year and not in respect of the interest paid on clearly fall under s. 5(e) and not under s. 5(k). The assessee will be entitled to costs. Counsel’s fee Rs. 250 (one set).

[Citation :185 ITR 600]