Expenses must be laid out or expended wholly and exclusively for the purpose of deriving the agricultural income, and there should be a connection between the expenditure and the earning or ensuring of income.

1. In these three references made by the Kerala Agricultural Incometax Appellate Tribunal, under S.60 (1) of the Agricultural Incometax Act, 1950 the common question referred is the following:

"Whether on the facts and in the circumstances of the case, the Tribunal is justified in holding that expenses like police expenses, litigation expenses incurred for conducting encroachment cases, assault and theft cases, industrial disputes, etc., and expenditure towards Batta, T. A. and wages to witnesses, are allowable deductions under S.5 of the Agricultural Incometax Act, 1950?"

The assessee is the same in all the cases. It was deriving agricultural income from tea and rubber. It claimed deduction under S.5 of the Act in respect of various items like police expenses, litigation expenses, expenses by way of wages and T. A. to witnesses, expenses for sending curably to the Inspector of Plantations, and under other miscellaneous heads. The Assessing Officer disallowed their claims, and on appeal, the Deputy Commissioner concurred. The Appellate Tribunal took a different view and allowed the claims. The references have then been made at the instance of the Commissioner of Agricultural Income-tax

2. Police expenses were incurred for stationing police force in the assessee's estates to maintain law and order during strikes and other disturbances. Litigation expenses were incurred in connection with encroachment cases, assault cases and industrial disputes, and the claims represented advocate's fee, court expenses etc. Amounts were also spent towards wages and T. A. of the assessee's employees who were witnesses in courts in cases relating to theft of rubber and assault cases. Samples of the cumblies to be distributed among the workers under the Plantations Labour Act had to be approved by the Inspector of Plantations, and expenses had been incurred for sending these cumblies to the Inspector. These were generally the nature of the expenses in dispute; there were also some miscellaneous items of a similar nature.

3. The Appellate Tribunal held that these were permissible deductions under S.5 0) of the Act, as the amounts had been spent wholly and exclusively for the purpose of deriving the agricultural income In so holding, it relied on certain decisions rendered under the Indian Incometax Act, 1922 and expressed the view that S.5 0) of the Agricultural Incometax Act corresponds to S.0 (2) (xv) of the former. The revenue challenges this view, and the contention is that the scope of the two provisions is different

4. S.10 (2) (xv) of the Indian Incometax Act, 1922 reads: 10 Business. (1) (2) Such profits or gains shall be computed after making the following allowances, namely:

(xv) any expenditure (not being an allowance of the nature described in any of the clauses (i) to(xiv) inclusive, and 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 such business, profession or vocation."

S. 5 0) of the Agricultural Incometax Act reads.

"5. Computation of agricultural income: The agricultural income of a person shall be computed after making the following deductions, namely:

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;"

The argument is that in the context of the word "deriving" used in the Kerala Act, the scope of the deductions in clause 0) of S.5 is narrower than the allowance referred to in clause (xv) of sub-section (2) of the Incometax Act.

5. The very same question was considered by a Division Bench of this Court in Commissioner of Agricultural Incometax v. Nilambur Rubber Co. Ltd. (1969) 71 I.T.R. 686 and it was observed:

'The learned counsel for the revenue submitted that the provisions of the two statutes are not the same in this respect. He submitted that under clause 0) of S.5 of the Ag