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2014 Supreme(Kar) 721
High Court of Karnataka
DILIP B. BKOSALE, EJMANOHAR, JJ.
The State of Karnataka Represented by the Secretary & Others
Versus
M/s. Waterfall Estate & Others
CRP. No. 164 of 2012 c/w CRP. Nos. 406, 117 & 118 of 2011, CRP. Nos. 202, 38 & 34 of 2012 & CRP. No. 296 of 2009
Decided On: 25-03-2014
For the Appearing Parties:S. Sujatha, AGA, S.P. Bhat, C. Basavaiah, Advocate.
Headnote:KARNATAKA AGRICULTURAL INCOME TAX ACT, 1957 - Sections 5(1)(g) to (j) & 7: [Dilip B. Bhosale & B. Manohar, JJ] Deduction under - Deduction in respect of total cultivation expenditure which includes depreciation allowance and also interest paid on loan availed for cultivation - Assessment years 2000-01 to 2008-09 - Assessee partnership firms engaged in cultivation of Coffee - Assessing Authority disallowed some of the claims of expenditure including expenditure including expenditure towards payment of interest - The First Appellate Authority after considering the matter in detail had given partial relief, however disallowed the claim of deduction towards interest on the ground that the certificate issued by the Bank Authorities is not in accordance with law since the said amount was not actually paid but debited to the account of assessees - Tribunal held that the respondents are entitled to avail the benefit under Section 5(1)(g) to (j) of the Act and issued directions to the Assessing Authority to issue revised demand notice after giving deduction - Held, Section 5(1)(g) is very clear on this point that interest should have been paid so as to claim the benefit of deduction under the above Section. The contention of the assesses cannot be sustainable thereto makes it clear reading of Section 5(1)(g) to 5(1)(j) and provisions thereto makes it clear that the interest allowable under the above Section shall be the actual interest paid on such loan. Hence, there is not scope for further interpretation of the word ’paid’ used in Section 5(1)(j) of the Act as demand to have been paid in the system of accounting followed by the assessee. The assesses are not entitled for deduction of expenditure in the form of interest unless the actual interest is paid on such loans. The communication received from the banks clearly discloses that no actual interest was paid by the assesses. Hence, the assesses are not entitled for any deduction. Accordingly, the assesses are not entitled for any relief.
1. The State Government as well as the assessees have filed these revision petitions under Section 55(1) of the Karnataka Agriculture Income-Tax Act, 1957 (for short 'the Act’) challenging the order passed by the Karnataka Appellate Tribunal.
2. Though these revision petitions are coming on for admission, with the consent of the learned counsel for the parties, these revision petitions are taken up for final disposal.
3. In these revision petitions, common question of law and facts are involved with regard to claiming deduction towards interest on the loan availed by the assessees in the agricultural income and also denial of deduction of interest, for different assessment years and different orders have been passed by the Assessing Authority, First Appellate Authority and the Karnataka Appellate Tribunal. Hence, all the revision petitions are clubbed together and disposed of by this common order.
4. The assessee/respondents in CRP No. 164/2011, CRP No.64/2011, CRP No.38/2012, CRP No.202/2012 and CRP No.34/2012 are the Partnership Firms engaged in cultivation of Coffee. They filed returns of total agricultural income in Form No. 3 for the assessment years 2000-01, 2001-02, 2003-04, 2005-06, 2006-07, 2008-09 declaring the net loss for the said assessment years. The Firms claimed deduction in respect of total cultivation expenditure which includes depreciation allowance and also interest paid on the loan availed for cultivation. The Assessing Authority (Deputy Commissioner of Agricultural Income-Tax, Chikkainagalur) issued notice to the respondents calling upon them to produce the books of account and other relevant records for verification. The authorized representatives of the respondents appeared before the Assessing Authority and produced the relevant records with regard to Yield Register, Sales Statement, Ledger, Bills and Vouchers etc. The Assessing Authority after verification of the records produced by the respondents disallowed some of the claims of expenditure including the expenditure towards payment of interest for the aforesaid assessment ears and also issued demand notice calling upon them to pay the difference of agricultural tax The respondents being aggrieved by the assessment order passed by the Assessing Authority preferred appeals under Section 32(5) of the Act before the Joint Commissioner of Commercial Taxes (Appeals) Shimoga (hereinafter referred to as 'the First Appellate Authority' for short). The First Appellate Authority after considering the matter in detail had given partial relief, however disallowed the claim of deduction towards interest on the ground that the certificate issued by the Bank Authorities is not in accordance with law since the said amount was not actually paid but debited to the account of assessees. Being aggrieved by the order passed by the First Appellate Authority the respondents preferred appeals before the Karnataka Appellate Tribunal on various grounds. The Appellate Tribunal relying upon the earlier judgment of this Court made in CRP No.8.12/1992 disposed of on 18th September 1996 in M/S. SIDDESWARA ESTATE V/S STATE OF KARNATAKA held that the respondents are entitled to avail the benefit under Section 5(1) (g) to (j) of the Act and issued directions to the Assessing Authority to issue revised demand notice after giving deduction. Being aggrieved by the order passed by the Karnataka Appellate Tribunal, the State Government preferred these appeals.
5. The assessees filed CRP No. 117/2011, CRP No.I18/2011& 296/2009, being aggrieved by the order passed by the Karnataka Appellate Tribunal dismissing their appeals confirming the order passed by the Assessing Authority as well as the First Appellate Authority wherein the Tribunal has disallowed the claim of deduction of interest while assessing the agricultural income.
6. Smt.S.Sujatha, learned Additional Government Advocate appearing for the State Government contended that the order passed by the Karnataka Appellate Tribuna
