Bonaventure Estate vs State of Tamil Nadu

Abdul Hadi, J.—The assessee, a coffee planter is the petitioner in this tax case revision u/s 54(1) of the Tamil Nadu Agricultural Income Tax

Act, 1955. The relevant assessment year is 1981-82. The only question involved in this revision is whether the disallowance of interest claimed by

the assessee to the extent of Rs. 2,91,664 by all the authorities below is justified. The Assessing Officer and the first appellate authority disallowed

the same on the ground that the borrowal, with reference to which the abovesaid interest claimed is made, itself is not genuine. But, the Tribunal

reversed this factual finding and held that the said borrowal was genuine. But, according to it, all interest claim should only come u/s 5(k) and

cannot come u/s 5(e) of the Tamil Nadu Agricultural Income Tax Act.

Section 5(k) of the Tamil Nadu Agricultural Income Tax Act runs as follows :

any interest paid in the previous year and any amount borrowed and actually spent on the land from which the agricultural income is derived :

Provided that the need, for borrowing was genuine having due regard to the assets of the assessee at the time :

Provided further that the interest allowed under this clause shall be limited to nine per cent. on an amount equivalent to twenty-five per cent. to the

agricultural income from the land in that year.

Section 5(e) of the Tamil Nadu Agricultural Income Tax Act, which is a residuary clause runs as follows :

Any expenditure incurred in the previous year (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 the land.

Thus section 5(k) of the Act deals with interest on amounts borrowed and actually spent on the land from which the agricultural income is

derived and with reference to this interest as per the second proviso therein, the allowance can be given only up to 9 per cent. on 25 per cent. of

the ""agricultural income"" from the land in the year in question. The Tribunal, holding that only u/s 5(k) of the Act, ""any interest"" claimed would fall,

further observed that in view of the fact that the abovesaid second proviso speaks of ""agricultural income"", that expression cannot be taken to

mean a loss. Since the assessee in the present case returned a net loss, the Tribunal held that there is no scope for the application of the second

proviso and hence even u/s 5(k) of the Act, deduction is not allowable in respect of any portion of the abovesaid sum of Rs. 2,91,664.

Now before us, learned counsel for the Revenue fairly submits that the abovesaid sum of Rs. 2,91,664 would entirely fall only under the

abovesaid residuary clause section 5(e) and not u/s 5(k) of the Act. According to the said counsel, the reason for such submission is twofold, one

is as found by the Tribunal that when there is a net loss, there cannot be any deduction u/s 5(k) of the Act. The other reason is that a portion of the

borrowal was not utilised on the land from which the agricultural income is derived.

Anyway, since learned counsel for the Revenue herself submits that the abovesaid entire amount of Rs. 2,91,664 would fall u/s 5(e) of the Act

and, hence, deductible, the assessee will in no way be aggrieved. No doubt, learned counsel for the assessee sought to initially argue that the term

agricultural income"" used in the abovesaid proviso to section 5(k) of the Act would also include a loss. But, he could not press that point very

much. In our view also, that term would mean only a plus figure and not a minus figure. It must be noted that the term used in the said proviso is

only ""agricultural income"" as defined u/s 2(a) of the Act, and from which all the deductions u/s 5 of the Act are allowed. The term used in the

abovesaid proviso is not ""total agricultural income"" as defined in section 2(x) of the Act, which alone is charged to tax under the charging provision,

viz., section 3 of the Act. Though total agricultural income may also include a minus figure (loss) the term ""agricultural income"" would not include a

minus figure or loss.

At any rate, as already stated, since learned counsel for the Revenue herself fairly submits that the abovesaid entire sum of Rs. 2,91,664 would

be deductible u/s 5(e) of the Act, the assessee must be fully satisfied and there could be no grievance on the part of the assessee. Even before

giving the abovesaid deduction of Rs. 2,91,664 there is a loss which, it is said, could be carried forward in accordance with the provisions of the

Act. Then, the abovesaid figure of Rs. 2,91,664 also could be carried forward in accordance with the provisions of the Act.

Accordingly, the tax case revision is allowed. The order of the authorities below are set aside. No costs.