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TMI Blog1996 (1) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... hted deduction of 11/5th times under section 35C of the I.T. Act on the amounts paid to the cane growers as 'early and late planting subsidy'. In the assessment, the claim was disallowed on the view that the section does not provide for weighted deduction on expenditure incurred as lumpsum payment to the agriculturists. The assessee's appeal before the CIT(Appeals) was not successful as he conquered with the view of the Assessing Officer that the claim for deduction was not on expenditure in the provision of any goods, services or facilities specified in clause (b) of section 35C. The assessee is in appeal before this Tribunal with the plea that the CIT(Appeals) was not justified in confirming the denial of the weighted deductions, on the early and late planting subsidy paid to the cane growers. 3. On behalf of the assessee, Shri Sankararaman C.A., submitted that the reason given by the Assessing Officer to deny weighted deduction on the ground that the payment was cash subsidy to the cane growers was not justified in law as there was nothing in the section to support the view that cash payment was outside the purview of the section. The learned counsel explained that the Society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he deduction without appreciating the real nature of the payment. 5. The learned counsel for the assessee also placed reliance on the decision of the Special Bench of the ITAT, in the case of K.C.P. Ltd. v. ITO [1990] 34 ITD 50 (Hyd.). It was pointed out that in the case of K.C.P. Ltd., the assessee was allowed deduction on the cash subsidy paid to the agriculturists towards higher price of superior variety of seeds. Shri Sundararaman submitted that in the present case also, what the assessee paid to the cane growers as cash subsidy was entitled to deduction in view of the decision of the Special Bench of the ITAT and that the CIT(Appeals) was not correct in relying on the Circular No. 6P dated 6-7-1968 issued by the C.B.D.T., to take a contrary view. 6. The learned Departmental Representative drew our attention to the provisions of section 35C which appears under the heading "Agricultural development expenses" and explained that the intention behind the legislation introduced by Finance Act 1968 was to encourage agricultural development. Referring to Circular 6P dated 6-7-1968, the learned Departmental Representative submitted that the Finance Act 1968 introduced the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manufacture or processing of any article or thing which is made from, or used in such manufacture or processing as raw materials, any product or agriculture, animal husbandry, or dairy or poultry farming, and has incurred, after the 29th day of February, 1968, whether directly or through an association or body which has been approved for the purpose of this section by the prescribed authority, any expenditure in the provision of any goods, services or facilities specified in clause (b) to a person (not being a person referred to in clause (b) of sub-section (2) of section 40A) who is cultivator, grower or producer of such product in India, the company or co-operative society shall, subject to the provisions of this section, be allowed a deduction of a sum equal to one and one-fifth times the amount of such expenditure incurred during the previous year. (b) the goods, services or facilities referred to in clause (a) are the following :---- (i) fertilisers, seeds, concentrates for cattle and poultry feed, tools or implements for use by such cultivators, grower or producer; (ii) dissemination of information on, or demonstration of, techniques or method of agriculture, animal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenditure incurred by the agriculturists in the purchase of specified goods is nonetheless expenditure incurred by the assessee in the provision of specified goods and what the section requires is that the assessee must have incurred the expenditure in the provision of specified goods and there is no necessity to import into the section the meaning as canvassed by the Revenue that the expenditure must be incurred on the provision of goods by the assessee itself before the same are provided by the agriculturist. " 9. In that case, the Tribunal noticed that the assessee has provided high quality seeds though the expenditure on providing such seeds was described as cash subsidy in its accounts. In the present case, the claim is not on wrong nomenclature made in respect of any expenditure incurred on the provision of any goods, services or facilities to the cane growers. The decision of the special bench of the Tribunal is thus distinguishable on facts. It only supports the view that for becoming eligible for weighted deduction under section 35C, the expenditure must have been incurred in the provision of goods, services or facilities. The other decision relied upon by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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