IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 14/10/2004
CORAM
THE HONOURABLE Mr. JUSTICE P.D.DINAKARAN
AND
THE HONOURABLE Mr. JUSTICE S.R.SINGHARAVELU
Tax Case (Revision) No.509 of 1999
M/s. Velimalai Rubber Co. Ltd.,
rep. by its Mg. Director
A. Jacob .... Applicant
-Vs-
State of Tamilnadu
rep. by Commissioner of Agricultural
Income tax Chennai - 600 005. .... Respondent
Revision Application filed under Section 54(1) of Tamilnadu
Agricultural Income Tax Act, 1955 to revise the order of the Tamilnadu
Agricultural Income Tax Appellate Tribunal, Chennai in ATA 38 of 1995 dated
27.7.99.
!For Applicant : Mr. K.C.Rajappa
^For Respondent: Mr. T.Ayyasami, Spl.G.P.(T)
:O R D E R
(Order of the Court was made by P.D.DINAKARAN,J)
The above revision is filed against the order of the Tamilnadu
Agricultural Income Tax Appellate Tribunal, Chennai dated 27th July 1999 made
in A.T.A.No.38 of 1995 disallowing the items claimed by the applicant as
allowance of deduction under Section 5(e) of the Tamilnadu Agricultural Income
Tax Act , in short, TNAIT Act.
2.1. In brief, the assessment is relating to the year 1992-93. The
applicant declared the net income of Rs.17,11,140/- for the above said
assessment year. The assessing officer found that certain expenses claimed by
the applicant are not allowable under Section 5(e) of the TNAIT Act, as the
details were not forthcoming by an order dated 25.02.1993.
2.2. Against the said disallowance of certain expenses, the applicant
preferred an appeal before the Assistant Commissioner of Agricultural
Income-Tax, Grade-I, Nagercoil, who confirmed the view of the assessing
officer by an order dated 13.01.1995.
2.3. Hence, further appeal was preferred before the Tamilnadu
Agricultural Income-Tax Appellate Tribunal against the order of the Assistant
Commissioner of Agricultural Income-Tax dated 13.01.1995. Before the
Appellate Tribunal, the applicant claimed following allowances and the same
were either allowed or rejected are as here under:
“Head Office Expenses:
a) Rent paid to Managing Director’s residence to the tune of
Rs.13,800/- and the same was allowed;
b) Postage and Telephone expenses to the tune of Rs.24,378/-, which
was also allowed;
c) Subscriptions and donations to the tune of Rs.16,062/-, as there is
no clear details regarding this expenditure, the Tribunal disallowed this
claim.
d) Advertisement charges to the tune of Rs.7,700/-, as there is no
direct nexus with company’s agricultural activity, this claim was also not
allowed;
e) Travelling expenses to the tune of Rs.18,939.50, the same was
allowed;
f) Contribution to Superannuation fund to the tune of Rs.13,800/- was
also allowed;
g) Disallowance of 3% difference, which works out to Rs.20,044/-, as
the details were not furnished, the same was disallowed;
h) Disallowance of 18% relating to non-plantation crops in Head
Office, which works out to Rs.1,16,658/-, for want of details, the same was
disallowed;
Estate Expenses:
a) Disallowance of 18E relating to non-plantation crops in estate
expenses, as the details are not sufficient to find out whether it is
allowable or not, this claim was disallowed;
b) Property tax to the tune of Rs.11,295/- following the earlier
assessment years, this claim was allowed;
c) Repair and Maintenance of Building to the tune of Rs.17,326/-,
which was disallowed;
d) Repairs to Machinery to the tune of Rs.9,393.80 , which was also
not allowed;
e) Repairs and Maintenance of Roads to the tune of Rs.7,202.69,
finding that certain percentage towards expenditure for repairs and roads is
not allowable and disallowed this expenditure for exemption;
f) Repairs and Maintenance of Vehicles to the tune of Rs.30,714.32, as
this Court held that the expenditure both in plantation and nonplantation area
are comprehensive and inseparable, this claim was disallowed;
g) Repairs and Maintenance of others to the tune of Rs.21,893/- was
also disallowed;
h) Professional Tax to the tune of Rs.250/-, which was allowed;
i) Postage and Telephone Charges to the tune of Rs.3,512.50, finding
that this expenditure was incurred only in connection with the agricultural
operation, this claim was allowed;
j) Sales Tax due to the tune of Rs.4,26,248/-, as the case relating to
this expenditure was pending before the Supreme Court, this claim was remanded
to the Agricultural Income-tax Officer;
k) Depreciation value to the tune of Rs.1,07,078.30 in respect to
Estate, as the details furnished are not sufficient to examine whether this
expenditure is allowable or not, this expense was disallowed; and
l) Depreciation value to the tune of Rs.2,970/- in respect to Head
Office was also disallowed.”
3. Aggrieved by the following disallowed claims, the applicant
preferred this revision.
“Head Office Expenses:
i) Subscriptions and donations to the tune of Rs.16,062/-;
ii) Advertisement charges to the tune of Rs.7,700/-;
iii)Disallowance of 3% difference, which works out to
Rs.20,044/-;and
iv)Disallowance of 18% relating to non-plantation crops in Head
Office, which works out to Rs.1,16,658/-;
Estate Expenses:
i) Disallowance of 18E relating to non-plantation crops in estate
expenses;
ii)Repair and Maintenance of Building to the tune of
Rs.17,3 26/-;
iii)Repairs to Machinery to the tune of Rs.9,393.80;
iv)Repairs and Maintenance of Roads to the tune of
Rs.7,202 .69;
v)Repairs and Maintenance of Vehicles to the tune of Rs.30,714.3 2;
vi)Repairs and Maintenance of others to the tune of
Rs.21,89 3/-;
vii)Depreciation value to the tune of Rs.1,07,078.30 in respect to
Estate; and
viii)Depreciation value to the tune of Rs.2,970/- in respect to
Head Office.”
4. Mr.K.C.Rajappa, learned counsel appearing for the applicant
contends that in view of the amended Act (Act 40 of 1991), which came into
effect from 1.4.1992, there is no liability to pay tax for nonplantation area
and therefore, allowing the deduction proportionate to the plantation and
non-plantation area is not permissible in law, as the question of paying the
tax does not arise in the case of nonplantation area.
5. Per contra, Mr.T.Ayyasamy, learned Special Government Pleader
appearing for the respondent contends that unless and until the applicant
establishes and substantiates his claim that the deduction claimed by him
under Section 5(e) of the TNAIT Act and such expenditure were incurred by him
in the previous year wholly and exclusively for the purpose of the land from
which the agricultural income is derived, he is not entitled for the deduction
as claimed.
6. We have given careful consideration to the submissions on both
sides.
7. It is settled proposition that the expenditure incurred by the
assessee by way of corporation tax, advertisement expenses, subscription to
clubs and legal expenses are not deductible under Section 5( e) of the TNAIT
Act, as the expenditure was not incurred wholly and exclusively for the
purposes of land from which the agricultural income is derived as held in New
Ambadi Estates P. Ltd., V. State of Tamilnadu reported in 1994 (207) ITR 874
and Puthutotam Estates (1943) Ltd. V. State of Tamilnadu reported in 1994
(207) ITR 878. The view taken in the above said decisions is in conformity
with the ratio laid in Kil Kotagiri Tea and Coffee Estates Co. Ltd., V.
Government of Madras reported in 1974 (96) ITR 165 wherein it is held as
follows :
“These decisions show that the expression ‘for the purpose of the
land’ 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 expended in connection
with the lands which do not have any relationship to the agricultural income
derived in the previous year.”
8. In the instant case, the petitioner is cultivating both plantation
and non-plantation crops. Therefore, they are comprehensive and inseparable
expenses incurred by them in the above headings sought to be deducted and the
same are not wholly and exclusively incurred for the purpose of the land, from
which agricultural income is derived, namely, the land which is declared by
the applicant itself, namely, the plantation area alone.
9. That apart, the assessing officer, appellate authority and the
Tribunal have concurrently arrived at a conclusion that there is no sufficient
materials placed before them to substantiate that the said expenses are wholly
and exclusively incurred for the plantation area. In the absence of any such
materials and in view of the law laid down in the decisions referred supra, we
do not find any reason to interfere with the order of the Tribunal.
Accordingly, this revision stands dismissed.
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