Skip to content


Commissioner of Agricultural Income-tax Vs. Bombay Burmah Trading Corporation Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberI.T.R.C. Nos. 40 to 43 of 1979 (Agrl.)
Judge
Reported in[1981]131ITR154(Ker)
ActsKerala Agricultural Income Tax Act, 1950 - Sections 5
AppellantCommissioner of Agricultural Income-tax
RespondentBombay Burmah Trading Corporation Ltd.
Appellant AdvocateGovernment Pleader
Respondent Advocate T.L. Viswanatha Iyer,; P.S. Narayanan,; K.S. Menon a
Cases ReferredCommr. of Agrl. I.T. v. Malayalam Plantations Ltd
Excerpt:
.....section 5(j) of the..........purpose of deriving the assessee's agricultural income and hence the assessee is not entitled to claim a deduction in respect thereof under section 5(j) of the act. the view taken by the tribunal that because the expenditure was incurred for projecting the company's title to its landed property the claim for deduction would fall within the scope of s, 5(j), cannot be accepted as correct.7. the position is, however, different in regard to the claim for deduction made by the assessee for the assessment year 1968-69. the expenditure, in respect of which deduction was claimed by the assessee for the said assessment year, had been incurred for the eviction of a tenant from a shop building situated within the estate premises and for filing a writ petition challenging the legality of the levy.....
Judgment:

Balakrishna Eradi, C.J.

1. In these four reference cases, the following common question of law has been referred to this court by the Kerala Agricultural Income-tax Appellate Tribunal (hereinafter called ' the Tribunal '), Additional Bench, Kozhikode, under Section 60 of the Kerala Agrl. I.T. Act (for short, ' the Act') as arising out of the consolidated order passed by the Tribunal in four appeals filed before it by the same assessee (respondent herein):

' Whether, on the facts and in the circumstances of the case, the legal expenses incurred for defending the title to the properties of the appellant-company are allowable deductions in computing the agricultural income under the Agricultural Income-tax Act '

2. The assessment years concerned are 1968-69, 1969-70, 1970-71 and 1971-72. The respondent, M/s. Bombay Burmah Trading Corporation Ltd., is an assessee on the file of the IAC of Agrl. I.T. (Special), Calicut. While computing the income of the assessee for the aforementioned four assessment years, the assessing authority refused to allow the assessee's claim for deduction of certain charges incurred by way of legal expenses, etc., for the protection of a part of the property of the assessee from encroachment by strangers. The appellate authority before whom the matter was carried in appeal by the assessee confirmed the disallowance of those expenses. The assessee thereafter took up the matter in appeal before the Tribunal.

3. The Tribunal found that the amount of Rs. 5,312.35 claimed by way of deduction for the year 1968-69 represented expenses incurred by the assessee under two heads, namely, for the eviction of a tenant from a shop building in the estate premises, and, secondly, for filing a writ petition challenging the legality of the levy of some toll. The Tribunal took the view that the first item aforementioned was an expenditure incurred to protect the appellant's title to the property and the second item constituted expenditure incurred by the assessee for augmenting its agricultural income by avoiding payment of the toll ' which used to be debited to the revenue '. The Tribunal, accordingly, held that both those items were eligible for exclusion and the assessee's claim for deduction of those amounts was allowed. In respect of the claim for deduction relating to the years 1969-70, 1970-71 and 1971-72, the Tribunal found that the expenditure in respect of which the deduction was claimed had been incurred by the assessee for the prevention of encroachment into certain uncultivated forest area belonging to the assessee. Relying on a decision in Liberty Cinema v. CIT : [1964]52ITR153(Cal) , the Tribunal took the view that the said expenditure having been incurred for protecting the company's title to its landed property the assessee was entitled to be granted a deduction in respect of the said amounts notwithstanding the fact that the property which was sought to be protected was uncultivated forest land. The Tribunal accordingly upheld the claim of the assessee for the deduction of the legal charges and other expenses incurred under the aforementioned heads for all the four years.

4. Thereafter, the Tribunal has made these references to this court at the instance of the revenue.

5. It is common ground before us that the claim for deduction in respect of all the four years is made by the assessee only under Clause (j) of Section 5 of the Act. Under the said clause in computing the agricultural income of a person ' 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 ' is liable to be deducted. The short question to be decided is whether the disputed items of expenditure incurred by the assessee during the four assessment years in question can be said to have been laid out or expended wholly and exclusively for the purpose of deriving the agricultural income. As pointed out by the Supreme Court in Travancore Rubber and Tea Co. Ltd. v. Commr. of Agrl. I.T. : [1961]41ITR751(SC) , it is not necessary under the said provision (s. 5(j)) that the expenditure should have been laid oat for the purpose of deriving the agricultural income during the particular accounting period itself; in other words, it is unnecessary for the assessee to establish a direct relationship between the incurring of the expenditure and the earning of the agricultural income during the particular accounting period. But, as pointed out by the Division Bench of this court in Commr. of Agrl. I.T. v. Malayalam Plantations Ltd: : [1978]115ITR624(Ker) , it is clearly necessary under Section 5(j) that there should be a connection between the item of expenditure and the earning of income and such connection should not be remote, indefinite or fanciful.

6. From the statement of the case, it is seen that the expenditure in respect of which the deduction has been claimed by the assessee for the three assessment years 1969-70 to 1971-72 was incurred for the protection of certain uncultivated forest lands belonging to the assessee from being encroached upon by strangers. Those lands being uncultivated lands yielding no agricultural income whatever, we are unable to find any proximate connection between the incurring of the said expenditure and the deriving of any agricultural income by the assessee. It is not, therefore, possible to say that the said expenditure was laid out or expended wholly and exclusively for the purpose of deriving the assessee's agricultural income and hence the assessee is not entitled to claim a deduction in respect thereof under Section 5(j) of the Act. The view taken by the Tribunal that because the expenditure was incurred for projecting the company's title to its landed property the claim for deduction would fall within the scope of s, 5(j), cannot be accepted as correct.

7. The position is, however, different in regard to the claim for deduction made by the assessee for the assessment year 1968-69. The expenditure, in respect of which deduction was claimed by the assessee for the said assessment year, had been incurred for the eviction of a tenant from a shop building situated within the estate premises and for filing a writ petition challenging the legality of the levy of some toll. The eviction of a quondam tenant who was in occupation of a shop situated within the coffee estate of the assessee was a step necessary for the protection of the said estate from which income was being derived by the assessee and for the preservation of the undisturbed rights of the assessee to peacefully collect the income from the said estate and as such it had a direct nexus' with the earning of the agricultural income. Similarly, the charges incurred by the assessee for prosecuting the writ proceedings challenging the levy of the toll were also expenses incurred for augmenting the assessee's income by averting payment of a toll which was allegedly being illegally collected. This item had also, therefore, a proximate connection with the earning of the agricultural income by the assessee. Hence, the Tribunal was clearly right in holding that the claim put forward by the assessee for the deduction of the expenditure incurred by it under the aforementioned two heads during the accounting period relevant to the assessment year 1968-69 was admissible under Section 5(j) of the Act.

8. In the result, we answer the question raised in I.T.R. No. 40 of 1979 in the affirmative, that is, in favour of the assessee and against the department and in I.T.R. Nos. 41 to 43 of 1979, the question will stand answered in the negative, that is, against the assessee and in favour of the department. The parties will bear their respective costs.

9. A copy of this judgment, under the seal of the court and the signature of the Registrar, will be forwarded to the Tribunal, as required by law.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //