[As the first and second questions are not relevant they are omitted.]
LAHIRI C.J. - The third question referred to us relates to the Auditorss fee Rs. 146 which was allowed by the Assistant Commissioner as well as by the Tribunal. Upon the materials before us and also upon the admission made by learned counsel on both sides, this audit fee was paid for the purpose of auditing the balance-sheet and the revenue account of the assessee. The assessee claimed a sum of Rs. 150 the whole of which was disallowed by the Agricultural Income-tax Officer, but since the income of the assessee was partly agricultural and partly non-agricultural, the Appellate Assistant Commissioner allowed a proportionate amount of Rs. 146 out of the total of Rs. 150 claimed by the assessee. The question before us is whether it is an allowable deduction under section 7 (9) of the Bengal Agricultural Income-tax Act. That section provides that one of the items which may be allowed as a deduction in the computation of the agricultural income of the assessee is 'any other expenditure of the assessee not being in the nature of capital expenditure or personal expenditure laid out wholly and exclusively for the purpose of deriving such agricultural income from such land.' The point in controversy before us is whether the auditors fee in the present case is an expenditure laid out wholly and exclusively for the purpose of deriving the agricultural income. On behalf of the Commissioner of Agricultural Income-tax, Mr. Sen emphasised the word 'deriving' which appears in sub-section (9) of section 7 and he argues that in order to be an allowable deduction under sub-section (9) of section 7 the expenditure must have a direct connection with the deriving of agricultural income. The question, therefore, is whether the auditors fee has a direct connection with the deriving of agricultural income. It is to be noted that section 7 lays down the method of computation of agricultural income from agriculture, referred to in clause (b) of sub-section (1) for section 2 of the Bengal Agricultural Income-tax Act. Clause (b) of sub-section (1) of section 2 contemplates three kinds of agricultural income : (i) from agriculture (ii) income by the performance of any process ordinarily employed by a cultivator to render the produce raised fit to be taken to the market and (iii) income from land by sale of the agricultural produce. Clause (b) of sub-section (1) of section 2, therefore, is not confined to income derived from agriculture alone, but includes income derived by rendering the agricultural produce fit to be taken to the market and by sale of the agricultural produce in the market. It is, therefore, necessary to ascertain what expenses were incurred by the assessee for the purpose of rendering the produce fit to be taken to the market and what expenses were incurred by it for the purpose of selling the agricultural produce in the market. The employment of an accountant or auditor for the purpose of ascertaining what sums were spent by the assessee for the two purposes mentioned in section 2 (1) (b) (ii) and (iii) is, in my opinion, an expenditure which is laid out wholly and exclusively for the purpose of deriving the agricultural income. I have already said that in this case the auditor was employed only for the purpose of auditing the balance-sheet and the revenue account. Expenses incurred for having the accounts investigated for the purpose of preparation of profit and loss account or of the balance-sheet are, in my opinion, incidental to the deriving of income and they are an admissible deduction under section 7 (9) of the Bengal Agricultural Income-tax Act.
For the reasons given above, I would also answer question No. (III) in the affirmative.
The assessee will have the costs of this reference.
BACHAWAT J. - I agree.
I wish to add a few words on the third question referred to us. The assessee claims deduction of the audit fee for the preparation of the revenue account and the balance sheet under clause (9) of section 7 of the Bengal Agricultural Income-tax Act in respect of agricultural income from agriculture referred to in sub-clause (b) of clause (1) of section 2. Income under the head is derived not only from till age and the performance of processes employed to render the produce fit to be taken to market, but also from sale of the produce. In order to facilitate the carrying on of these operations and of the incidental operation of finding out the true income and the financial position of the assessee it is necessary to keep books of account and to prepare a revenue account and a balance-sheet and for that purpose to employ accountants and auditors. In my opinion the fees paid to the auditor for preparing the revenue account and the balance-sheet are an expenditure laid out wholly and exclusively for the purpose of deriving the agricultural income in question.
Question No. 3 answered in the affirmative.