9911796707
TMI Blog1997 (1) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant time, the company used to spend about Rs. 70,00,000 yearly in welfare activities such as running schools and hospitals, etc., in the State. In the relevant year, namely, assessment year 1984-85, the appellant-company made contributions of Rs. 2 crores each to Apeejay Educational Association Ltd. and Apeejay Medical Research and Welfare Association Ltd. for the benefit of the workmen and for other welfare activities in the tea estates owned by the appellant-company. The Agricultural Income-tax Officer made the assessment. While making the assessment, the Agricultural Income-tax Officer ("AITO") disallowed the amount of Rs. 4 crores, i.e., Rs. 2 crores each contributed to Apeejay Educational Association Ltd. and Apeejay Medical Research and Welfare Association Ltd., on the ground that the assessee's income was partly agricultural and partly business and, therefore, the entire expenditure incurred in the welfare activities as mentioned above could not be deducted. However, no effort was made by the Agricultural Income-tax Officer to find out what was the agricultural expenditure. Being aggrieved, the appellant preferred an appeal before the Assistant Commissioner of Taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served. However, for certain clarification the appeal is listed for further hearing. Dr. Paul, learned senior counsel assisted by Dr. A.K. Saraf, learned counsel appearing on behalf of the appellant, submitted before us that the authorities as well as the learned single judge committed a manifest error in holding that the appellant-petitioner was not entitled to get the benefit of allowance of the amount spent in the welfare activities mentioned above solely on the ground that the expenditure was not wholly agricultural. In this connection, Dr. Paul drew our attention to section 2(a)(2) of the Assam Agricultural Income-tax Act, 1939 (for short, "the Act"), which provides that agricultural income derived from the land which is used for agricultural purposes by the cultivation of tea means that portion of the income derived from the cultivation, manufacture and sale of tea as is defined to be agricultural income for the purposes of the enactments relating to Indian income-tax. Dr. Paul also drew our attention to section 2(1) of the Income-tax Act, 1961, which defines "agricultural income" and rule 8 of the Income-tax Rules, 1962, which provides that income derived from the sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultural income" appearing in section 8(2)(f)(vii) of the Act do not mean anything very different from the words "for the purpose of business" appearing in section 37 of the Income-tax Act. On facts, Dr. Paul submitted that the respondents did not challenge the bona fides or genuineness of the expenditure. According to him, the claim was rejected only on the ground that it was not only for the purpose of earning agricultural income. Dr. Paul assailed the reasoning of the learned single judge that the expenditure incurred indirectly for the welfare activities was not allowable expenditure. Elaborating his submission, Dr. Paul submitted that it was well-settled that an expenditure incurred indirectly even in the course of business and even indirectly to facilitate the carrying on of the business was also an expenditure incurred wholly and exclusively for the purpose of the business. In this connection, Dr. Paul had relied on a decision of the apex court in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1. Relying on the said decision, Dr. Paul emphasised on his contention that the expenditure incurred indirectly for welfare activities to facilitate the carrying on of the business is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature thought it fit to apportion the agricultural income and the business income in the manner prescribed under rule 8 of the Rules. As per the said rule, the entire income of the tea garden business shall be first taken as a composite income derived from business and the allowances deductible under the provisions of the Income-tax Act shall be deducted. Thereafter net income shall be found out and after finding out the net income, forty per cent. of the said income shall be deemed to be income liable to tax under the Income-tax Act. The procedure of apportioning the income at the rate of 40 per cent. and 60 per cent. has been prescribed as it may not always be possible to determine the actual business income and the agricultural income. The Income-tax Act and the Rules do not, however, prescribe any apportionment so far as expenses are concerned unlike the manner prescribed for agricultural and business income. In fact, it is not possible. I quote rule 8 of the Rules : "(1) Income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent. of such income shall be deemed to be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islative wisdom not to prescribe any percentage for the purpose of ascertaining the expenses. On going through all the provisions of the Act and the relevant Rules, in our opinion, whatever amount spent is disallowed by the Income-tax Officer can be allowed by the Agricultural Income-tax Officer. However, we make it clear that it must relate to plantation, manufacture and sale of tea." We find no reason to come to a different conclusion in the present case. Regarding the contention of Dr. Todi that the amount was spent through a sister concern of the company and, therefore, deduction was not allowable, we have given our considered thought. The question is whether the amount was spent for welfare activities. If the spending of the amount was not doubted, whether it was spent by the company or through agency or through the sister concern was immaterial. On this ground also the submission of Dr. Todi fails. As regards the submission of Dr. Todi that the amount was not spent in the relevant year, the amount was transferred to the agencies mentioned above. We find sufficient force in the submission of Dr. Paul in this regard and accordingly we hold that when the amount was given b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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