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Issues:
Interpretation of section 5(e) of the Tamil Nadu Agricultural Income-tax Act, 1955 for deduction of interest paid on borrowings for specific purposes. Analysis: The High Court of MADRAS delivered a judgment in T.C. (R) No. 450 of 1999 concerning the disallowance of a claimed amount under section 5(e) of the Act. The Tribunal had disallowed a sum of Rs.94,571.91, stating it did not fall within the purview of section 5(e). The claimed amount was interest paid on loans borrowed for various agricultural purposes. The Tribunal's rationale was that the expenditure should be covered under section 5(k) due to its specific provisions limiting deductions based on income earned. However, the Court found the Tribunal's reasoning flawed. It explained that section 5(e) encompasses expenses not only directly related to agricultural income but also those connected to landholding and agricultural activities. The Court cited precedents to support its interpretation, emphasizing that expenses reasonably linked to agricultural income generation are eligible for deduction under section 5(e). In the specific case, the Court determined that the interest paid on borrowings for constructing roads, fencing, irrigation, and other agricultural purposes had a clear nexus with agricultural income. Relying on Supreme Court and previous High Court decisions, the Court concluded that the claimed interest fell within the ambit of section 5(e). Consequently, the Court set aside the Tribunal's order and allowed the deduction of Rs. 94,571 under section 5(e) for the assessee. Subsequently, the revision in T.C. (R) No. 450 of 1999 was allowed, and the Tribunal's order was overturned. Additionally, T.C. (R) Nos. 451 and 452 of 1999 were also allowed to the extent of expenditure disallowed by the Tribunal, as those expenses were deemed eligible under section 5(e). The Court made no cost orders in this matter.
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