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H.S. Shivakantappa Vs. Commissionor of Agariculture Income Tax [1993] INSC 352 (14 September 1993)

Jeevan Reddy, B.P. (J) Jeevan Reddy, B.P. (J) Bharucha S.P. (J)

CITATION: 1994 SCC (1) 741 1993 SCALE (4)695

ACT:

HEAD NOTE:

ORDER

1. The High Court of Kerala answered in the affirmative, that is, in favour of the Revenue and against the assessee, the following question :

"Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the fee paid to the auditors has been correctly disallowed in computing the agricultural income of the appellant for the assessment year 1972-73?" 742

2. The short question before the High Court was whether the amounts expended by the assessee, who is in appeal before us, by way of charges paid to his auditors for the purposes of preparing his returns of income under the Agricultural Income Tax Act, 1950 were allowable expenditure under Section 5(j) thereof. Thereunder, a deduction could be allowed in respect of " any expenditure laid out or expended wholly and exclusively for the purposes of deriving the agricultural income". The High Court, basing itself on its earlier judgment in CIT v. Nilambur Rubber Co. Ltd. I held that only amounts expended in connection with the raising and processing of crops, rendering them in a condition to be taken to the market and transportation charges could legitimately fall within the scope of the said Section 5(j).

3. It was brought to our notice by learned counsel for the appellant that a Full Bench of the Kerala High Court had, in Plantation Corpn. of Kerala Ltd. v. Commissioner of Agricultural Income TaX2 considered the earlier judgment in Nilambur Rubber Co. Ltd.' and held that the interpretation put upon Section 10(2)(xv) of the Indian Income Tax Act, 1922 and upon Section 37(1) of the Income Tax Act, 1961 by this Court in Travancore Rubber and Tea Co. Ltd. v. Commissioner of Agricultural Income Tax, Kerala3 and State of Madras v. G.J. Coelho4 would be as applicable to the said Section 5(j). Section 5(j) is, therefore, wide enough to cover the fee paid by the assessee to his auditors for preparing returns under the said Act. We must note that learned counsel for the Revenue stated that a special leave petition against the full bench judgment was pending.

4. We see no reason whatsoever why the principle that applies to the interpretation of Section 37 of the Income Tax Act, 1961, should not apply to the said Section 5(j).

The fact that Section 5(j) uses the words "for the purposes of deriving the agricultural income", stressed by learned counsel for Revenue, do not, in our view, mean anything very different from the words used in the Section 37 of the Income Tax Act, 1961. Expenditure of this kind falls under Section 37 of the Income Tax Act, 1961, and must, therefore, fall within the said Section 5(j).

5. Our attention was also drawn to the judgment in Nilambur Rubber Co. Ltd. case'. That judgment states that it was not disputed that expenditure incurred for maintaining accounts and getting them audited was a permissible deduction under the said Section 5(j) but it was submitted that expenditure incurred for preparing the return of income and statements to be filed before the Income Tax Officer and the remuneration paid to counsel for conducting the case before the Income Tax authorities was not an allowable deduction, and this was upheld. We see no real distinction between expenditure incurred for the purpose of maintaining accounts and getting them audited and for the purpose of preparing a return of income under the 1 (1969) 71 ITR 686 (Ker) 2 (1993) 200 ITR 27 (Ker) (FB) 3 (1961) 41 ITR 751 : (1961) 3 SCR 279 : AIR 1961 SC 604 4 (1964) 53 ITR 186: AIR 1965 SC 321 :(1964) 8 SCR 60 743 said Act. It must follow that the professional fee paid to an auditor for the purpose also falls under Section 5(j).

6. In the result, the appeal is allowed. The judgment and order under appeal are set aside. The question referred to the High Court is answered in the negative, that is, in favour of the assessee and against the Revenue. There shall be no order as to costs.

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