2016 (7) TMI 1098

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....appreciating that the assessee has undertaken cultivation as a separate activity by way of entering into agreements with the farmers which is in the nature of contract farming?" 2. Whether on the facts and circumstances of the case, the Tribunal is right in allowing setting of losses claimed by assessee by following the decision of this Hon'ble Court in case of CIT v/s. Yokogowa when same has not reached finality"? 2. We have heard Mr.E.I.Sanmathi, learned Counsel appearing for the appellants-Revenue. 3. The perusal of the order passed by the Tribunal which is impugned in the present appeal shows that the Tribunal has relied upon the decision of this Court in case of ITA No.207/2011 dated 21.02.2012 in respect of the very asses....

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....held that authorities below were not justified in disallowing the cultivation expenses of Rs. 90.64 Lakhs claimed by the Assessee. Aggrieved by the said order, Revenue is in appeal. 3. The learned Senior Counsel appearing for Revenue, assailing the impugned order, contended that the Tribunal has recorded a finding that Assessee was involved in agricultural activity. In fact, it has advanced money to the farmers for growing coleus crop. The expenses incurred in connection with the cultivation of said crop could be set-off against the income which was exempted from payment of Income Tax. But, it cannot be construed as an expenditure incurred in carrying on the business. Such activity is a separate activity of the Assessee which is no....

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.... iii) Arranging payments to them. To propagate its intention to supply seedlings from its nursery to other farmers, it had entered into agreements and supplied coleus seedlings to the farmers with a condition to recover the cost of coleus seedling at 10 paise per seedling at the time of harvest. However, the Assessee was not able to achieve the desire of generating sufficient quantities of coleus. Instead, it had rather gone to purchase spree of coleus seedlings in a large scale from other farmers. Therefore, the assessee did not generate any agricultural income of the said income. In fact they did not involve themselves in any agricultural activities but they encouraged cultivation of coleus plants to facilitate business. In this contex....

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.... 7. After referring to three English judgments, it was held to be a use of money in the course of the company's business and not an investment of capital at all. The cases referred to therein illustrate the distinction between an expenditure by way of investment and an expenditure in the course of business, which has been described as current expenditure. The first may truly be regarded as on the capital side but not the second. The amount was an advance against price of one crop. The oppigedars were to get the assistance not as an investment by the assessee company in its agriculture, but only as an advance payment of price. The amount, so far as the assessee company was concerned, represented the current expenditure towards the purchas....

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....ial expediency. It was incurred wholly and exclusively for the purpose of business and the Assessee would be entitled for allowance of the said cultivation expenses as revenue expenditure. 10. In the instant case, material on record disclose, the Assessee is in the business of manufacture and export of standardized herbal extracts as well as in the manufacture of fine chemicals. In order to carry on their business, they were in need of herbal coleus plants. they thought of roping the farmers for growing said herbal plant. They provided seedlings, fertiliser and financial assistance to the farmers with an agreement to deduct the expenses out of the cost of the plaint sold by the farmers. But, even the farmers could not grow the said herba....