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Thirumbadi Rubber Co. Ltd. Vs. Commissioner of Agricultural Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 93 of 1979
Judge
Reported in[1982]135ITR540(Ker)
ActsKerala Agricultural Income Tax Act, 1950 - Sections 4; Kerala Agricultural Income Tax Rules, 1951 - Rule 8D
AppellantThirumbadi Rubber Co. Ltd.
RespondentCommissioner of Agricultural Income-tax
Appellant Advocate T.L. Viswanatha Iyer and; P.S. Narayanan, Advs.
Respondent AdvocateGovt. Pleader
Excerpt:
- - 1. was the tribunal justified in rejecting the claim for deduction of the expenses for stock exchange listing fee in the assessment years 1965-66 to 1969-70, loss on sale of assets in the assessment years 1966-67 and 1967-68, provision for bad debts in the year 1969-70 and value of tools rejected and written off in the assessment year 1965-66. were not these items incidental or ancillary to the agricultural activity carried on by the appellant-company and derivation of income ? 2. whether the finding of the tribunal that the bridge was a capital asset and that the contribution made for its construction was for the acquisition of a capital asset justified in law and on the facts of this case ? inany event, was not the contribution for local development purpose an allowable item of..........in question is not shown to have been undertaken by any authority in charge of community development work, national extension service work or local development programme work. hence, the assessee cannot invoke for its aid the provision contained in rule 8d for the purpose of claiming deduction of the amount contributed by it towards the expenditure for the construction of the bridge. the second question is answered as above, that is, against the assessee and in favour of the department. the parties will bear their respective costs.
Judgment:

Balakrishna Eradi, C.J.

1. The Kerala Agricultural Income-tax Appellate Tribunal, Additional Bench, Kozhikode, hereinafter called 'the Tribunal', has referred to this court the following two questions of law as arising out of its order dated June 29, 1978, in A.I.T.A. Nos. 189 to 194. and 270 of 1974. The questions of law are:

'1. Was the Tribunal justified in rejecting the claim for deduction of the expenses for stock exchange listing fee in the assessment years 1965-66 to 1969-70, loss on sale of assets in the assessment years 1966-67 and 1967-68, provision for bad debts in the year 1969-70 and value of tools rejected and written off in the assessment year 1965-66. Were not these items incidental or ancillary to the agricultural activity carried on by the appellant-company and derivation of income

2. Whether the finding of the Tribunal that the bridge was a capital asset and that the contribution made for its construction was for the acquisition of a capital asset justified in law and on the facts of this case Inany event, was not the contribution for local development purpose an allowable item of expenditure under Rule 8D of the Agrl. Income-tax Rules, 1951 ?'

2. The assessee is a company owning a rubber plantation. For the assessment years 1965-66 to 1971-72, the assessee had claimed before the assessing authority deductions in respect of, (a) expenses incurred by it for stock exchange listing fee; (b) loss suffered on the sale of assets including tools; (c) provision made by the assessee-company for bad debts for the year 1969-70; and (d) the amount paid by the assessee-company by way of contribution towards the cost of construction of a bridge on a public road. The assessing authority disallowed the claim in respect of all the items. The Dy. Commissioner, before whom appeals were filed by the assessee, confirmed the view so taken by the assessing authority. On second appeals taken up before the Tribunal by the assessee reiterating the aforesaid claims for deduction, the Tribunal also rejected the contentions of the assessee and confirmed the disallowance of all the items aforementioned claimed by way of deduction.

3. In our judgment in I.T.R. Nos. 87 and 88 of 1979 (see p. 536 supra), we had occasion to consider the identical question relating to the admissibility of the claim for deduction put forward by a plantation company in respect of stock exchange listing fee and loss suffered by way of sale of assets inclusive of machinery, tools, etc. We have expressed the view that these items will not constitute expenditure wholly and exclusively for the purpose of deriving the agricultural income. Applying the said dictum to the present case, it has to be held that the Tribunal was perfectly right in taking the view that the claim for deduction put forward by the assessee under the aforementioned heads could not be allowed. Though the first question as framed by the Tribunal covers also the question of admissibility of the claim for deduction put forward by the assessee in respect of a provision for bad debts made for the year 1969-70, counsel for the assessee submitted before us that the assessee does not wish to pursue that matter before this court and hence that part of the first question need not be answered by this court. Accordingly, we restrict the scope of the first question as to the deductibility of the expenses for stock exchange listing fee, loss on sale of assets such as old machinery, tools, inclusive of those rejected and written off. We answer the question so modified against the assessee and in favour of the department.

4. The second question concerns the claim put forward by the assessee for a deduction of the amount paid by it by way of contribution towards expenses for the construction of a bridge. Admittedly, the road on which the bridge was constructed was outside the estate of the assessee and was a public road and the construction of the bridge was undertaken by somewelfare committee with which the assessee had no direct connection. We are unable to see how the expenditure incurred by payment of contribution for the construction of a bridge on public road can be regarded as money expended wholly and exclusively for deriving agricultural income. We uphold the finding entered by the Tribunal that no deduction can be allowed to the assessee in respect of such expenditure.

5. The second part of the question concerns the applicability of Rule 8D of the Agrl. I.T. Rules to the facts of the present case. Under that rule, all cash donations made towards the works under the community development, national extension service and local development programme shall be deducted in computing the agricultural income of a person. The construction of the bridge in question is not shown to have been undertaken by any authority in charge of community development work, national extension service work or local development programme work. Hence, the assessee cannot invoke for its aid the provision contained in Rule 8D for the purpose of claiming deduction of the amount contributed by it towards the expenditure for the construction of the bridge. The second question is answered as above, that is, against the assessee and in favour of the department. The parties will bear their respective costs.


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