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2008 DIGILAW 1 (KER)

Mrs. Kunjamma Mathai v. State Of Kerala

2008-01-01

C.N.RAMACHANDRAN NAIR, T.R.RAMACHANDRAN NAIR

body2008
Judgment :- C.N. Ramachandran Nair, J. The question raised in this Revision Petition filed under 78 of the Agricultural Income-tax Act, 1991 is as to whether the assessee is entitled to deduction of sales tax paid on sale of rubber trees in the computation of agricultural income. During the accounting year, relevant for the assessment year 1998-99, revision petitioner assigned the right to slaughter tap and cut and remove rubber trees for consideration at the rate of Rs. 1000/-per tree. Since the value of the rubber latex that is crop and timber were not shown separately in the agreement the assessing officer estimated 40% of the sale price towards crop value and 60% of sale price towards timber. The estimation of assessment made as above is not under challenge. However, in the AIT assessment petitioner claimed deduction of sales tax paid on the sale of rubber trees, that is, tax at 60% of the total value of sale. The claim was disallowed and confirmed in two levels of appeal. This Revision Petition is filed against the order of the Tribunal confirming disallowance. We have heard senior counsel appearing for the petitioner and Government Pleader appearing for the respondents. 2. Petitioner has relied on the decision of the Supreme Court in Sivakantappas Case, 204 I.T.R. 349 And R.G.A. Bakers Case, 116 I.T.R. 570 and contended that claim is allowable under clause (l) of Section 5 of the AIT Act as it is similar to Section 37 of the Income-tax Act. In the alternative counsel contended that claim is allowable under Section 5(o)(ii) of the Act. Government Pleader on the other hand contended that sales tax is paid on the sale of timber and is therefore not allowable as expenditure under any provision of Section 5 of the Act. In order to appreciate the contentions raised, we have to refer to relevant provisions of Section 5 of the Act, which are extracted hereunder: 5. Computation of Agricultural Income:-The agricultural income of a person shall be computed after making the following deductions, namely:- (a) (i) any sum paid in the previous year on account of land revenue or any tax in lieu thereof due to the Government; (ii) Local rates and cess and municipal taxes in respect of the land from which agricultural income is derived. ............... ............... (l) 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; ............... (o) In the case of agricultural income referred to in sub-clause (b) of clause (1) of section 2- (i) ............ (ii) Any tax, cess or rate paid on the cultivation or sale of the crop from which such agricultural income is derived; ....................... In clause (a) the Legislature has enumerated taxes and cess payable in respect of land that could be allowed in the computation of agricultural income of a person. So far as clause (o) is concerned, tax, cess or rate that are allowable are those payable on the cultivation or sale of the crop from which such agricultural income is derived. These provisions establish beyond doubt that the taxes and cess allowable in the computation of agricultural income are the taxes and cess payable on land in which cultivation is made or taxes or cess payable on the sale of crop out of which agricultural income is derived. In this case, the crop involved is rubber latex and admittedly petitioner did not pay any sales tax on rubber latex. Sales tax liability claimed by the petitioner pertains to sale of rubber wood that is timber, which does not answer the description of agricultural crop. Therefore the sales tax paid on sale of rubber wood is outside the scope of Section 5(o)(ii) of the Act. 3. The next question to be considered is whether sales tax paid on the sale of timber can be allowed under residuary clause, namely, clause (l) of Section 5 of the Act. No doubt the Supreme Court has consistently held that this provision of the AIT Act is similar to Section 37 of the Income Tax Act which is a residuary entry providing for deduction of business expenditure. However, resort can be had to residuary clause only when the item of expenditure is not specifically enumerated in the statute. In other words, when the item is specifically provided for in any of the other provisions of the statute, deduction has to be claimed subject to limitations provided therein. However, resort can be had to residuary clause only when the item of expenditure is not specifically enumerated in the statute. In other words, when the item is specifically provided for in any of the other provisions of the statute, deduction has to be claimed subject to limitations provided therein. In this particular case, we find the claim of deduction is nothing but sales tax paid which is specifically covered by Section 5 (o) (ii) of the Act which provides for deduction of sales tax only when it is payable for the crop sold out of which agricultural income is derived. In other words, sales tax payable in respect of any other commodity cannot be allowed as a deduction. As already stated, sales tax paid by the petitioner is not on latex that is agricultural crop but on the rubber wood, that is timber, sold after extraction of latex. If we allow the claim under residuary clause (l) above, we feel the same will go against section 5(o)(ii) which is certainly not the intention of the Legislature. In other words, we are of the view that the sales tax which could be allowed in the computation of agricultural income is the tax payable only on the sale of crop and not on anything else. In this view of the matter, we uphold the order of the Tribunal and reject the Revision Petition.