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M/s. New Ambadi Estate Pvt. Ltd. v. The State of Tamil Nadu represented - T.C.(Rev)No.388 OF 1997  RD-TN 992 (18 December 2002)
IN THE HIGH COURT OF JUDICATURE AT MADRAS
THE HON'BLE MR.JUSTICE N.V.BALALSUBRAMANIAN
THE HON'BLE MR.JUSTICE K.RAVIRAJA PANDIAN
T.C.(Rev)No.388 OF 1997
M/s. New Ambadi Estate Pvt. Ltd.,
No.2 Jahangir Street,
Chennai 1 ... Petitioner -Vs-
The State of Tamil Nadu represented
By the Commissioner of Agricultural
Income Tax, Chennai 5. .. Respondent For Applicant: Mr.P.H.Aravind Pandian
For Mr. K.Vaitheeswran
For Respondent: Mr.T.Ayyasamy,
Spl. Government Pleader (Taxes)
Tax case revision filed against the order of the Tamil Nadu Agricultural Income Tax Appellate Tribunal, Chennai -1 in ATA No.48/95 dated 29th August 1996.
The petitioner a private limited Company , derives agricultural income from its plantation and also income from investments in shares and deposits. For the assessment year 1993-94, the petitioner Company filed a return under the Tamil Nadu Agricultural Income Tax Act, disclosing a net income of Rs.1,10,323. The Agricultural Income Tax Officer, while completing the assessment, after disallowing certain expenses finally determined the net assessable income at Rs.32,22,175/-. On appeal, the Assistant Commissioner allowed the appeal in part and while rejecting the petitioner's claim for deduction of expenditure pertaining to purchase of drums, he remanded the issue to the assessing authority to determine the value of the raw rubber as according to him a sum of Rs.2,13,84,603/-represented sale value of Chemically processed rubber which was inclusive of the cost of chemical and cost of empty drums. The petitioner company carried the matter on further appeal to the Tamil Nadu Agricultural Income Tax Appellate Tribunal, objecting the disallowance of expenditure such as wages, common expenses etc and also questioning the remand order made by the Assistant Commissioner.
2. The appellate Tribunal except allowing the contribution to SSLAP and temple expenses and remanding the claim under `wages' sustained the disallowance of other expenditure including the claim under " common expenses" and sustained the remand order of the Assistant Commissioner in respect of cost of empty drums. That order is put in issue in the present tax case revision.
3. Mr. P.H.Aravind Pandian, learned counsel appearing for the petitioner disputed the disallowance of the expenditure incurred under live stock maintenance, rejection of claim for allowances of common expenses and disallowance of managerial expenditure. Though in the memorandum of revision, the order of remand by the Assistant Commissioner which has been upheld by the Appellate Tribunal has also been taken as one of the question of law, learned counsel appearing for the petitioner has not pressed that issue in the revision.
I. LIVE STOCK EXPENSES in a sum of Rs. 53,373/-
4. In respect of live stock expenditure claimed in a sum of Rs.53,3 73/-, learned counsel for the petitioner submitted that maintenance of live stock is necessary for obtaining natural manure for the crops and further the milk of the live stock was used in the workers canteen and hence the expenses towards the maintenance of live stock has to be allowed since such expenses has direct nexus with the agricultural operation of the estate. The fact finding authority has found that the petitioner company was having 1320 acres of rubber estate and the Company could not get the required quantity of natural manure from the live stock the petitioner company maintained and they further found that there was no chance of utilizing the natural manure to the rubber crop. For rubber crops chemical manure only is being used not only in the petitioner's estate but also in several other rubber estates and further found that the natural manure from live stock was used for the non-plantation crops in the estate.
5. The further contention of the petitioner that the milk from the live stock was used in the workers canteen has also been rejected on the ground that in the workers canteen coffee and tea were sold for prices to the workers and the canteen was run in a business motive not as a welfare measure. As the natural manure obtained from the live sock was found to be used for non-plantation crops and the milk obtained from the live stock was found to be used in the workers' canteen for commercial and business purpose to earn profit, the expenses expended towards maintenance of live stock is not an allowable deduction since there is no connection between the expenses incurred and the agricultural income derived from the plantation crops. Hence we are of the view that there is absolutely no irregularity in the orders of the authorities below in disallowing the expenses claimed in a sum of Rs.53,373/-.
II. COMMON EXPENSES in a sum of Rs.14,37,274/-
6. It is contended by the learned counsel for the petitioner that the above said expenses related to salaries and other allowances incurred for the staff of the Head Office at Madras. The Agricultural Income Tax Officer allowed only a portion of Rs.6,02,133/-. It is evident from the records that the office of the petitioner at Madras is looking after two companies , one the petitioner herein and the other "New Ambadi Investment", an investment Company. The Agricultural Income Tax Officer apportioned the expenses relating to two companies and allowed 1/3 rd of the expenses as expenses incurred for the purpose of the petitioner company . The assessing officer has given reason for disallowing the 2/3rd of expenses to the effect that the common expenses represented the salaries and other allowance incurred for the staff at Head Office at Madras. During the previous assessment year 1992-93 the total expenses for Head Office at Madras was Rs.21,05,970/- and out of that total amount, the petitioner company themselves claimed 32.5 of the expenses towards the expenses incurred for the petitioner company. The assessing Officer followed the very same ratio for the present assessment year also. That has been confirmed by the Assistant Commissioner as well as Appellate Tribunal.
7. Learned counsel for the petitioner contended that as in the assessment year in question, there was no income from the investment company, the entire expenses expended for the Head Office at Madras has to be allowed from and out of the total income of the petitioner company. He further contended that the disallowance is directly opposed to Rule 9 of the Tamil Nadu Agricultural Rules. According to him, the expenses should be allocated in proportion to the income assessable to the Agricultural Income Tax and the Central Income Tax . During the relevant assessment year, the Central Income tax assessment resulted in a loss and since there was no central income tax, the entire expenses has to be allowed under the Agricultural Income Tax Act. We are afraid to accept the contention of the learned counsel for the petitioner since we are of the view that Rule 9 cannot be construed as contended by the learned counsel to the fact of the present case. Rule 9 provides that where a deduction in respect of any item, admissible under section 5 or under rule 3,4 or 5 is a common charge incurred for the purpose of deriving both agricultural income assessable under the Act and income chargeable under the Indian Income tax Act, the deduction allowable under the Act shall be such proportion of the common charge. The petitioner is engaged only in Rubber plantation assessable under the Tamil Nadu Agricultural Income-tax Act not engaged in tea or coffee plantation so as to consider the petitioner as assessable under the Agricultural Income Tax as well as Indian Income Tax Act so as to invoke Rule 9 of the Tamil Nadu Agricultural Income Tax Act. The decisions which were cited in COMMISSIONER OF INCOME TAX, MADRAS VS. MANJUSHREE PLANTATIONS LTD. 130 ITR 908 and CONSOLIDATED COFFEE LTD VS. STATE OF KARNATAKA 248 ITR 432 were all rendered in respect of the assesses, who were liable to be assessed under the Agricultural Income Tax Act as well as Central Income Tax Act in respect of the income derived from tea and coffee plantation.
8. It is admitted fact that the expenses had been incurred for the head office at Madras in respect of both the companies. Whether the investment company for which the expenses incurred earned profit or not is not a matter for consideration in apportioning the expenses incurred for that company also. In the absence of any materials adduced by the petitioner to show that the expenses incurred toward the petitioner company is more in proportion than the one incurred in the previous year, the adoption of the ratio as adopted to the previous year by the authorities cannot be found faulty. Hence in this head also the finding arrived at by the authorities below has to be confirmed, since there is no irregularity in apportioning the expenses as claimed by the petitioner themselves in respect of the earlier assessment year.
III. MANAGERIAL REMUNERATION Rs. 1,05,000/-
9. The petitioner company claimed a sum of Rs.1,05,000 towards Managerial Remuneration under common expenses. The Agricultural Income Tax Officer has disallowed 1/3rd share relating to the New Ambadi Estate Private Limited on the ground that the expenses has commercial orientation and no relevance to agriculture, which finding has been confirmed by the Assistant Commissioner of Agricultural Income Tax and on appeal by the Appellate Tribunal.
10. Learned counsel contended that the said amount represents the commission paid to the General Manger as per the terms of appointment and it was purely in the nature of salary for the services rendered by the General Manager since he was responsible for all the activities relating to the cultivation of rubber and marketing of the produce and therefore, the entire claim made by the petitioner was wholly allowable in the computation of the agricultural income. However, learned counsel for the petitioner fairly admitted on instructions from the petitioner that the said amount has been expended as commission in respect of 7 Directors at the rate of Rs.15,000/- each, who are neither in whole time employment nor Managing Directors of the petitioner Company . In view of the fair admission by the learned counsel for the petitioner it requires no further consideration except confirming the order of the lower authorities. As stated already in respect of the expenses for empty drums, it has not been seriously disputed by the petitioner.
11. In view of the above discussion, we are of the view that there is no irregularity or infirmity as to the finding arrived at by the authorities below in respect of the disallowance of above said three expenses as claimed by the petitioner .
12. In fine, the revision deserves to be dismissed and as such it is dismissed.
1.The Assistant Registrar
Income Tax Appellate Tribunal,
Besant Nagar, Chennai.
2. The Secretary
Central Board of Revenue
3. The Commissioner of Agricultural
Income Tax, Chepauk, Madras.
4. The Assistant Commissioner of Agricultural
Income Tax, Grade I, Nagercoil.
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