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TMI Blog1979 (9) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... T. Act, 1961, and rule 7 of the I.T. Rules, 1962, the portion of expenses incurred by the assesseecompany on its agricultural operations for raising sugarcane was allowable in computing the income from business?" At the outset we may point out that the aforesaid question does not arise out of the order of the Tribunal. We shall state the admitted facts which are as follows: The assessee is a limited company manufacturing sugar from the sugarcane grown on its lands. The sugarcane grown by the assessee and purchased from other ryots was being used as raw material for the purpose of manufacturing sugar. While computing the total income of the assessee for the assessment year 1962-63, the ITO disallowed an amount of Rs. 3,92,600 out of the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Tribunal has not been framed. We may re-frame the question thus : " Whether, on the facts and in the circumstances of the case, the amount of Rs. 1,84,000 is liable to be added to the returned income of the assessee on the ground that it represents overhead expenses attributable to the agricultural activity of the assessee-company ? " The ITO has added Rs. 3,92,600 on the ground that it represents the proportion of the common expenses, disallowed as attributable to agricultural operations. But according to him, the cost of farm cane was Rs. 89,99,176 ; the cost of ryots' cane was Rs. 2,06,00,794 and the manufacturing expenses were Rs. 2,83,69,794. The total cost of production of sugar by the assessee-company was Rs. 5,79 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as contended by the learned standing counsel for the revenue, the expenses incurred by the assessee-company towards agricultural operations such as tilling of the land, sowing of the seeds, planting and similar, operations on the lands are not allowable deductions. But, as held by the Supreme -Court in CIT v. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466, " agriculture ", in its primary sense, denotes the cultivation of the field and is restricted to cultivation of the land in the strict sense of the term, meaning thereby " tilling of the land, sowing of the seeds, planting and similar operations on the land ". Hence, the money actually spent for agricultural operations referred to above can be said to be expenditure incurred by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which sugarcane is grown by it. The sugarcane grown on the lands owned by the assesseecompany is taken as raw material by the company to produce sugar in its own factory. In addition to the sugarcane grown by the assessee-company on its own lands, it was purchasing sugarcane grown by other ryots in the adjacent area as the sugarcane grown from its own lands was not sufficient to run the assessee-sugar factory. In the circumstances, it cannot be said that the cultivation of sugarcane and the manufacture of sugar by the assessee do not constitute one single and indivisible business. We have, therefore, no hesitation to hold that the assessee is entitled to succeed in the present reference as the department has no legal basis to disallow e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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