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2000 Supreme(Ker) 523
Judges : S.P.BHARUCHA,DORAISWAMY RAJU,RUMA PAL
CAIT - Appellant
Versus
Plantation Corporation - Respondent
Case No : C. A. No. 2243, 2244, 2245, 2246, 2247, 2248, 2249 of 1993
Decided On : 11/29/2000
Advocates Appeared :
T.L. Viswanatha Iyer; G. Prakash; Jyothish; For Appellants S. Ganesh; For Respondent
Explanation.2 to S.5 of the Agricultural Income Tax Act applies to the entirety of S.5 and explains generally what are not deductible as expenditure for computing agricultural income.
Headnote:
The appeals concern the correctness of the Kerala High Court's decision construing Explanation.2 to S.5 of the Agricultural Income Tax Act, 1950, to be confined in its application only to Clause 0) of S.5 and not to S.5 as a whole. The High Court's conclusion was based on internal and external aids of construction. The Supreme Court held that the Explanation.2 applies to the entirety of S.5 and explains generally what are not deductible as expenditure for computing agricultural income. The claims for deduction of rent and interest paid by the assessee on loans utilized for cultivation were found ineligible for deduction in relation to the immature oil palm plantation. The appeals were allowed.
Fact of the Case:
The appeals relate to three Assessment Years, 1975-76, 1976-77, and 1977-78. The respondent-assessee claimed deductions for rent paid to the landlord for the entire estate, including the area covered by immature oil palm plants, and interest paid on loans utilized for cultivation. The High Court held that Explanation.2 is limited to Clause 0) of S.5 and not applicable to the other sub-clauses of S.5.
Finding of the Court:
The Supreme Court held that the Explanation.2 applies to the entirety of S.5 and explains generally what are not deductible as expenditure for computing agricultural income. The claims for deduction of rent and interest paid by the assessee on loans utilized for cultivation were found ineligible for deduction in relation to the immature oil palm plantation.
Issues: The correctness of the Kerala High Court's decision construing Explanation.2 to S.5 of the Agricultural Income Tax Act, 1950, to be confined in its application only to Clause 0) of S.5 and not to S.5 as a whole.
Ratio Decidendi: The Explanation.2 applies to the entirety of S.5 and explains generally what are not deductible as expenditure for computing agricultural income. The claims for deduction of rent and interest paid by the assessee on loans utilized for cultivation were found ineligible for deduction in relation to the immature oil palm plantation.
Final Decision: The appeals were allowed, and the claims for deduction of rent and interest paid by the assessee on loans utilized for cultivation were found ineligible for deduction in relation to the immature oil palm plantation.
1. The correctness of a decision of the Full Bench of the Kerala High Court, construing Explanation.2 to S.5 of the Agricultural Income Tax Act, 1950, inserted by Kerala Act 9 of 1961, to be confined in its application only to Clause 0) of S.5 and not to S.5 as a whole, is put in issue in these appeals. S.5 of the Agricultural Income Tax Act reads as follows:
"5. Computation of agricultural income.- The agricultural income of a person shall be computed after making the following deductions, namely:
(a) any sum paid in the previous year on account of
(i) land revenue or any tax in lieu thereof, due to the Government, the Sreepandaravagai or the Sreepadam;
(ii) Jenmikaram;
(iii) Thiruppuvaram; and
(iv) local rates and cesses and municipal taxes, in respect of the land from which the agricultural income is derived.
(b) any rent paid in the previous year to the landlord or superior landlord, as the case may be, in respect of land, from which the agricultural income is derived;
(c) any expense incurred in the previous year on the maintenance of any irrigation or protective work constructed for the benefit of the land from which the agricultural income is derived;
Explanation- "Maintenance" includes current repairs and includes also, in the case of protective dykes and embankments, all such work as may be necessary from year to year for repairing any damage or destruction caused by flood or other natural causes.
(d) any expense incurred in the previous year on repairs, in respect of any capital asset which was purchased or constructed for the benefits of the land from which the agricultural income is derived;
(e) any interest paid in the previous year on any amount borrowed and actually spent on any capital expenditure incurred for the benefit of the land from which the agricultural income is derived;
(f) where land, from which the agricultural income is derived, is subject to a mortgage or other capital charge, any interest paid in the previous year in respect of such mortgage or charge;
(g) any interest paid in the previous year on any debt, whether secured or not, incurred for the purpose of acquiring the land from which the agricultural income is derived;
(h) any sum paid in the previous year as interest in respect of agricultural loans taken and expended on the land from which agricultural income is derived;
(i) interest paid on any amount borrowed and actually spent for the purpose of reclaiming, improving or cultivating the property from which agricultural income is derived;
0) 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;
(k) such other deductions as may be prescribed generally or in particular cases;
(1) in respect of depreciation of buildings, machinery, plant and furniture which are the property of the assessee and are required for the purpose of deriving the agricultural income, a sum equivalent to such percentage on the written down value, thereof as may in any case or class of cases, be prescribed and where the buildings have been newly erected or the machinery or plant newly installed, a further sum subject to such conditions as may be prescribed:
Provided that full particulars have been duly furnished:
Provided further that the aggregate of all such allowances made under this Act shall in no case exceed the original cost to the assessee of the buildings, machinery, plant or furniture, as the case may be;
(m) in the case of agricultural income under the head 'rent or revenue' derived from land referred to in sub-clause (1) of clause (a) of S.2 - (agricultural income from rent or revenue):
(i) any expense actually incurred in the previous year in the collection of agricultural income;
(ii) any expense incurred in the previous year on repairs in respect of any capital asset used in connection with the collection of rent due in respect of the land from which the agricultural inc
