Bombay Burmah Trading Corporation Limited vs State of Kerala

Om Prakash, C.J.—Pursuant to the judgment dated September 9, 1994, of this court, the Kerala Agricultural Income Tax and Sales Tax Appellate Tribunal referred the following question for the opinion of this court :

"Whether, on the facts and circumstances of the case, the Tribunal was justified in confirming the disallowance of the claim for deduction of proportionate head office expenses amounting to Rs. 61,210 ?"

The assessee--a public limited company--having its head office at Bombay and various estates in several States, including Kerala, allocated agricultural expenses, incurred under the "head office expenses". The assessing authority finalised the agricultural Income Tax assessment on the assessee for the assessment year 1975-76 for which accounting year ended on March 31, 1975, and disallowed claim of proportionate head office expenses amounting to Rs. 61,210. The assessing authority disallowed the head office expenses in part, which according to him, were not really incidental to the earning of agricultural income in Kerala. The head office claimed to have incurred expenses under several heads and the expenditure relating to Kerala State was apportioned. The assessing authority disallowed a portion of the head office expenses mainly for the reason that the assessee failed to produce any evidence to show that the items of expenditure are really incidental to the earning of agricultural income in the State of Kerala and that the assessee also did not prove by any cogent evidence the linkage of such expenses with the earning of agricultural income in Kerala.

The first appellate authority, affirming the disallowance, held as under :

"No evidences have been adduced before me to prove the claims. Hence, the disallowance made by the assessing authority are upheld."

On further appeal, the Appellate Tribunal held as under :

". . . it is evident that the assessing authority had disallowed a portion of head office expenses mainly for the reason that the appellant failed to produce any evidence to show that the items mentioned are really incidental to the earning of agricultural income in the State of Kerala. The appellant has also not proved with evidences the connection of these expenses to the earning of agricultural income before the first appellate authority. ............... In our opinion, the appellant is duty bound to prove each and every item before the assessing authority in order to get deduction ............. A detailed analysis of such expenditure to any of the functions described above are not seen furnished by the appellant-company at any stage of assessment or appeal. The appellant-company has not done that before us also. Instead, the appellant is pleading before us for a blanket acceptance of eligibility for deduction for the nomenclature ''head office expenses''. This is not sufficient for our interference on the point. In the circumstances, we are unable to interfere on the point and we uphold the findings of the lower authorities."

From the order of the Tribunal, it is clear that the claim of the assessee for deduction was not accepted for want of evidence. No evidence in support of its claim, much less cogent evidence, has been pointed out to us as well by the assessee. In the absence of evidence, the claim of the assessee could not be accepted and, therefore, we do not see any prima facie illegality in the view taken by the Appellate Tribunal.

The above mentioned question is, therefore, answered in the affirmative, that is, in favour of the Department and against the assessee.