1986 (3) TMI 72 - HC - Income Tax

Agricultural Income Tax Business Expenditure Expenditure Incurred Profession Tax Stock Exchange Listing Fee Wholly And Exclusively

Issues Involved:
1. Deductibility of salary paid to the poojari and pooja expenses.
2. Deductibility of stock exchange listing fees.
3. Deductibility of expenditure on serving food and refreshments to government officers and audit staff.
4. Deductibility of auditor's fees for tax matters and certification work.
5. Deductibility of salary paid to teachers and profession tax.
6. Deductibility of donations to Cyclone Relief Fund and Admar Mutt Education Council.

Detailed Analysis:

1. Deductibility of Salary Paid to the Poojari and Pooja Expenses:
The assessee claimed deductions for salary paid to the poojari and pooja expenses under section 5(1)(k) of the Karnataka Agricultural Income-tax Act, 1957. The court observed that a company, being a juristic person, cannot profess or follow any religion. Even if the assessee were an individual, the religious expenses would not benefit all employees. The court held that these expenses do not help in deriving agricultural income and cannot be allowed as permissible deductions under section 5(1)(k) of the Act. The court referenced the case of Kolhapur Sugar Mills Ltd. v. CIT, where similar claims were rejected, and expressed agreement with those views.

2. Deductibility of Stock Exchange Listing Fees:
The assessee claimed deductions for stock exchange listing fees. The court noted that these fees are generally incurred to facilitate trading in the company's shares and cannot be considered expenses laid out wholly and exclusively for deriving agricultural income. The authorities' rejection of this claim was upheld.

3. Deductibility of Expenditure on Serving Food and Refreshments to Government Officers and Audit Staff:
The assessee claimed deductions for expenses incurred on serving food and refreshments to government officers and audit staff. The court found that these expenses were not laid out wholly and exclusively for deriving agricultural income. The authorities' rejection of this claim was upheld.

4. Deductibility of Auditor's Fees for Tax Matters and Certification Work:
The assessee claimed deductions for auditor's fees for tax matters and certification work. The court referenced the case of Nilgiri Plantations Limited v. State of Karnataka, where a similar claim was allowed. The court found no reason to deviate from this precedent and allowed the deductions for auditor's fees.

5. Deductibility of Salary Paid to Teachers and Profession Tax:
The assessee claimed deductions for salary paid to teachers of a school maintained in the estate and profession tax. The court noted that maintaining a school in a remote area is a welfare measure benefiting the employees' children and is not a fanciful claim. The profession tax is an obligation under the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976. Both claims were allowed as legitimate expenses under section 5(1)(k) of the Act.

6. Deductibility of Donations to Cyclone Relief Fund and Admar Mutt Education Council:
The assessee claimed deductions for donations to the Cyclone Relief Fund and Admar Mutt Education Council. The court noted that these donations were approved by notifications issued by the Government. Under section 12(g) of the Act, the court allowed these donations as deductible expenses.

Orders and Directions:
(a) The court reversed the orders of the Tribunal, Deputy Commissioner, and Agricultural Income-tax Officer regarding:
- Auditor's fee for tax matters.
- Donation to Cyclone Relief Fund, Karnataka.
- Auditor's fee for certification work.
- Salary paid to teachers of the school in the estate.
- Donation to the Admar Mutt Education Council, Udupi.
- Profession tax.
The court directed the Agricultural Income-tax Officer to modify the assessments accordingly.

(b) The court dismissed the revision petitions in all other respects and directed the parties to bear their own costs.

← Previous Next →