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Issues: Whether the assessee was entitled to deduct the licence fee, Government share of profit, and interest payment under section 8 or section 8(9) of the Maharashtra Agricultural Income-tax Act, 1962, for the assessment year 1964-65.
Analysis: The relevant scheme of the Maharashtra Agricultural Income-tax Act, 1962 taxes agricultural income derived from and received in the previous year, and deductions under section 8, including the residuary allowance in section 8(9), are confined to expenditure incurred in that relevant previous year. The payments in question were made after the close of the relevant previous year ending on 31 March 1964. The contention based on real income and diversion of income at source was rejected because the agreement imposed only a liability to make payments and did not create any charge on income or any diversion before accrual. The earlier decision relied upon by the assessee was distinguished because there the relevant payments had been made within the previous year.
Conclusion: The Tribunal was right in disallowing the deductions claimed by the assessee under section 8 and section 8(9); the question was answered against the assessee and in favour of the Revenue.
Ratio Decidendi: Under the Maharashtra Agricultural Income-tax Act, 1962, a deduction under section 8, including section 8(9), is allowable only for expenditure actually incurred in the relevant previous year; payments made after the close of that year cannot be deducted, and a mere contractual liability does not amount to diversion of income at source.
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