Agricultural income-tax deduction test excludes return-preparation fees; only expenses wholly and exclusively incurred to earn the income qualify.

Auditor's fees for preparing an agricultural income-tax return were not deductible under section 5(j) because the provision allows only expenditure laid out wholly and exclusively for deriving agricultural income. Expenses connected with cultivation, crop management, processing for market, and transport may qualify, but return-preparation fees do not form part of the process of earning the income itself. The earlier Division Bench view was followed, and a later Supreme Court decision under a differently worded provision of the Income-tax Act was held inapplicable, so the disallowance was upheld.

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Issues: Whether fees paid to auditors for preparing the assessee's agricultural income-tax return were deductible under section 5(j) of the Agricultural Income-tax Act as expenditure laid out wholly and exclusively for the purpose of deriving agricultural income.

Analysis: The deduction provision permits only expenditure incurred wholly and exclusively for deriving agricultural income. On that construction, the allowable expenses are those connected with cultivation operations, management of the crop, processing for market, transport and similar activities directly related to earning agricultural income. Fees paid for preparation of the return are not expenditure incurred for deriving the agricultural income itself. The earlier Division Bench view disallowing such expenditure was followed, and the later Supreme Court decision on a differently worded provision under the Income-tax Act was held inapplicable.

Conclusion: The auditor's fees were not deductible under section 5(j) and the disallowance was upheld, against the assessee and in favour of the revenue.

Ratio Decidendi: Expenditure is deductible under section 5(j) only if it is incurred wholly and exclusively for the purpose of deriving agricultural income, and fees for preparing the income-tax return do not satisfy that test.

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