TaxTMI 
TaxTMI 
1983 (10) TMI 42
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....erned in this case mainly with the coffee plantation. Before the Agrl. ITO, the assessee claimed deductions in respect of interest on borrowings from bank. The Agrl. ITO allowed the claim in part subject to the limitation provided in s. 5(k) of the Act. When the matter was taken on appeal to the AAC, he sustained the order of the ITO. On a further appeal to the Tribunal, the Tribunal held that the interest on the amount borrowed for maintaining the immature coffee plants on the replanted area cannot be excluded from the purview of s. 5(k), even though the interest on amounts borrowed on the plantation in general will fall under s. 5(e). In that view, the Tribunal remitted the matter back to the Agrl. ITO for further consideration in the lig....
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....erived. The expression " land " occurring in s. 5 was substituted for the original word " plantation " by s. 6(1) of the TamilNadu Plantation Agricultural Income-tax (Amendment) Act, 1958. The first proviso to s. 5(k) says that the borrowing should be genuine having due regard to the assets of the assessee at the relevant time. The second proviso stipulates that the interest allowed under s. 5(k) shall be limited to 9% on an amount equivalent to 25% of the agricultural income from the land in that year. It is well established that there is a clear-cut distinction between moneys borrowed and expended wholly and exclusively for the purposes of the land and money borrowed and actually spent on the land. (G. J. Coelho v. State of Madras [196....
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....P.) Ltd. [1961] 41 ITR 755 (SC) and Ouchterlony Valley Estates (1938) Ltd. v. Government of Madras [1962] 44 ITR 770 (Mad). If the cost of maintaining the immature plantation is a revenue expenditure as has been held by the Tribunal, then any interest paid on the amount borrowed for maintaining the immature plantations will clearly fall under s. 5(e) and it will not fall under s. 5(k) as the amount borrowed cannot be said to have been actually spent on the land from which the agricultural income is derived. The Tribunal, having said that the expenses incurred for maintaining the immature plant is a revenue expenditure, has proceeded to say : " It is not possible to make a distinction between land which yielded some produce and the rest, and....
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....unt borrowed and actually spent on the land from which agricultural income is derived. " This means that s. 5(k) is intended to apply to the interest payments on the borrowings which have been spent on the land from which agricultural income is being derived. The land from which agricultural income is derived cannot be equated to the entire plantation area. Thus, s. 5(k) appears to apply only to interest paid on the amounts borrowed and actually spent on the existing crop in the land from which income is derived and will not apply to any interest payments on amounts borrowed for maintaining the other areas or plants from which agricultural income is not derived in the assessment year. When the statute makes a distinction between land in gen....
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....sion Bench of this court in State of Madras v. Thiru Arooran Sugars Ltd. [1965] 55 ITR 307 has observed that " there is a clear difference between moneys borrowed for expenses wholly and exclusively for purposes of the land " referred to in s. 5(e) and ' moneys borrowed and actually spent on the land ' referred to in s. 5(k), that for s. 5(k) to apply, the money borrowed should have been actually 'spent on the land' and it is not enough that the money was spent for the purpose of the land in connection with the business activities of the assessee which resulted in the earning of agricultural income, and that it is for the State to establish that particular items represent moneys actually spent on the land so as to take out any portion of th....