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TMI Blog1985 (9) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows : " 5. Computation of agricultural income.--The agricultural income of a person shall be computed after making the following deductions, namely :--... (j) any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of deriving the agricultural income. " The Commissioner, later on, having detected that a deduction to which the assessee was not entitled was allowed by the Income-tax Officer, under section 34 of the Act, took up the matter in suo motu revision and directed the Agricultural Income-tax Officer to complete the assessment without giving deduction to the payment of rent in 1972-73 and 1973-74. The questions ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day all lands in the possession of the cultivating tenants shall stand vested in the Government, the assessee had any legal obligation to pay rent to the landowner. Counsel for the assessee placed strong reliance on sections 61 and 72-0 of the Land Reforms Act which read as follows : " 61. Cultivating tenant to Pay rent Pending determination of Purchase price.--(1) Notwithstanding the filing of an application under section 54, the cultivating tenant shall, pending the determination of the purchase price under section 55 or, where there has been an appeal against the determination of the purchase price, pending orders on such appeal, deposit with the Land Tribunal an amount equal to the rent which would have been payable by him on the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) Where, consequent on the determination of the fair rent in respect of a holding, the rent payable by the cultivating tenant to the landowner or any intermediary has been reduced, the amount paid by the cultivating tenant in excess of the rent so determined to the landowner or the intermediary for the period commencing from the beginning of the agricultural year in which the cultivating tenant filed the application for such determination and ending with the date of such determination shall be adjusted towards the purchase price payable by the cultivating tenant and such amount received by the landowner or any intermediary shall be adjusted towards the compensation payable to him under section 72A." On a careful reading of the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entitled to get the benefit of deduction. Two decisions of the Supreme Court in Sassoon J. David Co. (P.) Ltd. v. CIT [1979] 118 ITR 261 and CIT v. Nainital Bank Ltd. [1966] 62 ITR 638 were cited before us. So also a decision of the Madras High Court in CIT v. Sree Rajendra Mills Ltd. [1974] 93 ITR 122 and a Fall Bench decision of this court in CIT v. Standard Furniture Co. Ltd. [1979] 116 ITR 751, were cited before us. The basic question is whether the amount paid amounted to an item of expenditure or, in the ultimate analysis, a capital investment. In case it is found to be a capital investment only, the assessee is not entitled to the deduction. As rightly pointed out by the counsel for the Revenue, deduction was not sought as aris ..... X X X X Extracts X X X X X X X X Extracts X X X X
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