1978 (7) TMI 101

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....sault and theft cases, industrial disputes, etc., and expenditure towards batta, T.A. and wages to witnesses, are allowable deductions under s. 5 of the Agrl. I.T. 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 cumbly to the inspector of plantation 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 insta....

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....ing 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(j) of the Agrl. I.T. Act reads : " 5. Computation of agricultural income.---The agricultural income of a person shall be computed after making the following deductions, namely :---... (j) 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. "....

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....expended for the purpose of deriving the income, whether the adventure results in profits or gains. The same is the position under the Indian I.T. Act. The purpose of a business is deriving profits and gains ; and, in our opinion, an expenditure for the purpose of business is one for the purpose of deriving income therefrom. " Faced with this clear pronouncement, counsel for the revenue made a courageous attempt to canvass its correctness by leaning heavily on the decision of the judicial Committee of the Privy Council in CIT v. Kamakhaya Narayan Singh [1948] 16 ITR 325, where the meaning of the term " derived " was considered. The question there was whether interest on arrears of rent payable in respect of land used for agriculture was ag....

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....f the accounting year, and that expenses incurred in respect of the non-yielding plants were not such expenses. But the Supreme Court reversed the decision and held the expenses on superintendence, weeding, etc., of the whole estate should have been allowed. Expenses for superintendence and for upkeep of non-yielding plants are not expenses directly incurred for " deriving " income, if the word is narrowly construed as contended for by the revenue ; and such a narrow construction was not favoured by the Supreme Court. It is unnecessary to refer to the many decisions cited on behalf of the assessee. What s.5(j) provides for is a deduction from the agricultural income in respect of expenditure laid out wholly and exclusively for the purpose ....