1992 (7) TMI 33 - HC - Income Tax

Issues Involved:
1. Entertainment expenditure disallowance (50%).
2. Marriage present of Rs. 500.
3. Motor car expenditure (25% disallowance).
4. Advertisement expenditure of Rs. 770.
5. Donation of Rs. 3,001 to INTUC.
6. Rubber subsidy of Rs. 13,566.
7. Doubtful debts of Rs. 17,830.

Detailed Analysis:

1. Entertainment Expenditure Disallowance (50%):
The petitioner argued that expenses for supplying coffee, tea, etc., to clients should not be considered entertainment expenditure based on CIT v. Karuppuswamy Nadar and Sons [1979] 120 ITR 140. However, the court held that the ratio of this decision, which pertains to the Income-tax Act, cannot be applied to the Tamil Nadu Agricultural Income-tax Act. The court concluded that the deduction claimed does not fall under any sub-clauses of section 5 of the Tamil Nadu Agricultural Income-tax Act, 1955. Hence, the disallowance by the authorities was upheld as not erroneous in law.

2. Marriage Present of Rs. 500:
The court found no relevance of this expenditure in calculating agricultural income under section 5 of the Tamil Nadu Agricultural Income-tax Act. Therefore, the disallowance was deemed appropriate and without legal error.

3. Motor Car Expenditure (25% Disallowance):
The partial disallowance was upheld as the authorities aimed to apportion the relief to agricultural activities. The court referenced a similar decision in T. C. No. 487 of 1981, dated January 2, 1991 (Vaikundam Rubber Co. Ltd. v. State of Tamil Nadu (No. 1) [1993] 202 ITR 586), where such disallowance was sustained. Hence, the partial disallowance was considered reasonable and lawful.

4. Advertisement Expenditure of Rs. 770:
The court found the denial of deduction reasonable due to the combined nature of the activity, which included non-agricultural areas. The partial disallowance was upheld as it was not illegal or perverse in approach.

5. Donation of Rs. 3,001 to INTUC:
The court ruled that the donation had no direct or indirect relevance to agricultural activities or income. As the claim could not be brought under any clauses of section 5 of the Act, the disallowance was upheld as lawful.

6. Rubber Subsidy of Rs. 13,566:
The court acknowledged that this issue was covered by previous decisions in favor of the assessee, specifically Velimalai Rubber Co. Ltd. v. Agrl. ITO [1991] 188 ITR 262 (Mad) and Vaikundam Rubber Co. Ltd. v. CIT [1991] TLR 379 (Mad). Consequently, the expenditure of Rs. 13,566 was entitled to be deducted from the computation of agricultural income, and the disallowance was overturned.

7. Doubtful Debts of Rs. 17,830:
The petitioner argued that since the sale consideration was not fully received, a deduction should be allowed. However, the court referenced Dooars Tea Co. Ltd. v. Commr. of Agrl. I.T. [1962] 44 ITR 6 and other relevant cases, concluding that agricultural income arises from the production, receipt, and derivation of produce from the land, not necessarily from its sale. Therefore, the disallowance of doubtful debts was upheld as consistent with the law.

Conclusion:
The tax cases were allowed only in respect of the rubber subsidy claim of Rs. 13,566, which was deducted from the computation of agricultural income. All other claims were dismissed, and no costs were awarded.

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