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TMI Blog1992 (7) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... e us concerns the disallowance by the authorities of seven items of claims which may be set out hereunder: 1. Entertainment expenditure disallowance 50 per cent. 2. Marriage present of Rs. 500 3. Motor car expenditure-25 per cent. 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. So far as item No. 1 relating to entertainment expenditure on which the authorities granted deduction of 50 per cent. and disallowed in respect of the other 50 per cent., learned counsel for the petitioner relied on decision of this court in CIT v. Karuppuswamy Nadar and Sons [1979] 120 ITR 140. While construing the scope of section 37(1) of the Income-tax Act, 1961, the learned judges expressed the view that expenses incurred by the assessee for supplying coffee, tea, etc., to the clients or customers could not really be said to be entertainment expenditure, but must be considered to be expenditure incurred really for purposes of the business and, therefore, the same was allowable as a deduction under the provisions of the Income-tax Act. In our view, we cannot import the ratio of the said decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perversity of approach warranting our interference. So far as the claim in respect of the donation of Rs. 3,001 granted to INTUC is concerned, we are not able to countenance the claim that the said donation has any direct or indirect relevance to the land or the activities connected with the land or the earning of the agricultural income. In our view, inasmuch as the claim could not be brought under any of the clauses enumerated under section 5 of the Act, in spite of our earnest endeavour to reasonably and liberally construe those clauses, the disallowance in this regard by the authorities below, therefore, cannot be said to be bad in law. So far as the item relating to rubber subsidy is concerned, there is no serious controversy as the issue is since covered by decisions of this court in favour of the assessee. In Velimalai Rubber Co. Ltd. v. Agrl. ITO [1991] 188 ITR 262 (Mad), the claim in respect of the entire amount for deduction has been sustained and in Vaikundam Rubber Co. Ltd. v. CIT [1991] TLR 379 (Mad), T. C. No. 877 of 1981, dated February 13, 1991, in respect of the assessment year 1977-78, the assessee before us in the present case itself was granted relief on that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral produce realised but not sold and used in the assessee's business under the Bengal Agricultural Income-tax Act, 1944. Their Lordships categorically expressed the view that agricultural produce used by the appellant in its business also constituted agricultural income under the Bengal Agricultural Income-tax Act, 1944, inasmuch as there was no necessity that the agricultural produce should be sold or profits realised from such sale before it could be included within the meaning of the agricultural income, for the purpose of the Act under consideration. At the same time, their Lordships also made it clear that there could be no analogy or comparison of the concept of income as used in, the Indian Income-tax Act, 1922, on the one hand with the " agricultural income " used in the Bengal Agricultural Income-tax Act. In R. Vaidyanatha Mudaliar v. State of Madras [1976] 104 ITR 444, a Division Bench of this court had an occasion to consider as to when an agricultural income could be held to arise for the purpose of the very Act under our consideration. The learned judges of the Division Bench have considered extensively the earlier decisions on the point and declared the position to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (ii) and (iii) is all to the contrary. What this clause seems clearly to have in view is agricultural produce itself which has been used by the assessee.' A Division Bench of this court in Beverley Estates Ltd. v. Commr. of Agrl. I T. [1966] 61 ITR 374 (Mad), while considering the point as to when agricultural income can be said to have been actually received, and after noticing the above decision of the Supreme Court, observed: 'Looked at broadly, it seems clear that income derived from land by a process of agriculture is itself receipt of agricultural income. It may be in the shape of produce or it may be in the shape of rent received by a person owning land from a lessee or other person cultivating the land. It may in certain circumstances be taken to be the actual sale price of the produce respectively, raised or received by such a person. But where person raises a crop and realises the produce, such realisation itself amounts to the receipt of agricultural income.... The definition of " agricultural income ", however, indicates that a sale of the produce is not always necessary before one can expect the receipt of agricultural income. . . . Again at page 380 ( [1966] 61 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcial activity or mechanical process, but by the factum of production, receipt and derivation of the produce from the land." In the light of the said pronouncement of this court construing the scope of " agricultural income " under the Tamil Nadu Agricultural Income-tax Act itself, we are not able to countenance the plea raised on behalf of the petitioner since, in our view, the agricultural income arises not necessarily by any supervening trading or commercial activity or mechanical process but by the factum of production, receipt and derivation of the produce from the land. In the light of the resultant position, we hold that the provisions of the Act under our consideration do not envisage a sale of the produce as a condition precedent for charging the income received or derived in the shape of produce to agricultural income-tax. The question whether subsequently the produce has really been sold or whether the sale consideration has been actually realised from such a sale becomes wholly irrelevant for attracting liability to tax under the Act. Consequently, we are of the view that the disallowance made by the authorities below on this item of doubtful debts claimed for the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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