1993 (9) TMI 317 - SC - Income Tax

Whether Tribunal was right in law in holding that the fee paid to the auditors has been correctly disallowed in computing the agricultural income of the appellant - expenditure incurred for the purpose of maintaining accounts and getting them audited and for the purpose of preparing a return of income under the said Act. It must follow that the professional fee paid to an auditor for the purpose also falls u/s 5(j) - question is answered in negative

Summary

Issues: Interpretation of section 5(j) of the Kerala Agricultural Income-tax Act, 1950 regarding the allowability of fees paid to auditors for preparing income tax returns.

In this judgment, the High Court of Kerala had to determine whether the fees paid to auditors for preparing income tax returns could be considered as allowable expenditure under section 5(j) of the Kerala Agricultural Income-tax Act, 1950. The High Court, relying on previous judgments, held that only expenses directly related to agricultural activities could be considered as allowable under the said section. However, a subsequent Full Bench judgment in Plantation Corporation of Kerala Limited v. Commr. of Agrl. I. T. clarified that the interpretation of similar provisions in the Income-tax Act, 1961 could be applied to section 5(j), allowing for a broader interpretation of the provision. The Court noted that the wording of section 5(j) was similar to section 37 of the Income-tax Act, 1961, and thus, expenses related to deriving agricultural income should be considered as allowable under section 5(j).

The Court also considered the judgment in Nilambur Rubber Co. Ltd.'s case, which distinguished between expenditure for maintaining accounts and getting them audited, and expenditure for preparing income tax returns. However, the Court found no real distinction between the two types of expenditure and concluded that professional fees paid to auditors for preparing income tax returns should also fall under section 5(j). The Court allowed the appeal, set aside the judgment of the High Court, and answered the question in favor of the assessee and against the Revenue. No costs were awarded in the case.