COMMISSIONER OF AGRICULTURAL Income Tax, BIHAR vs MOTIPUR ZAMINDARY CO. LTD.

Under section 28(3) of the Bihar Agricultural Income Tax Act the Board of Revenue has stated a case on the following question of law for the determination of the High Court :

"Whether the printing and stationery charges amounting to Rs. 3,154-6-9 should be deducted from the gross income of the assessee u/s 7 of the Bihar Agricultural Income Tax Act in the circumstances of this case ?"

On behalf of the commissioner of Agricultural Income Tax the learned Government Pleader contended that the Board of Revenue was erroneous in law in allowing the claim of the assessee for deducting printing and stationery charges amounting to Rs. 3,154-6-9 from its gross income u/s 7 of the Bihar Agricultural Income Tax Act. It was contended that this claim does not fall within the language of the items of deduction specified in section 7, sub-section (2), of the statute and, therefore, the assessee is not entitled to claim this exemption for purposes of assessment. The opposite view-point was put forward by learned counsel appearing on behalf of the assessee. It was conceded on its behalf that the deduction cannot be entertained u/s 7, sub-section (2), clause(e), under which deduction can be made from the gross agricultural income, for "the expenses of cultivating the crop from which such agricultural income is derived, of transporting such crop to market including the maintenance of agricultural implements and cattle required for the purpose of such cultivation and for transporting the crop to market." It was also conceded on behalf of the assessee that the claim for exemption does not fall within the language of the items u/s 7, sub-section (2), of the statute. The point taken on behalf of the assessee was that the items of deduction mentioned in section 7(2) are not exhaustive and the assessee was entitled to claim the deduction as an item of expenditure incidental to the earning of the agricultural income in question. In support of this submission learned counsel on behalf of the assessee referred to Russell v. Aberdeen Town and County Bank, Naval Colliery Co. Ltd. v. Commissioners of Inland Revenue and also to the decision of the Supreme Court in Calcutta Company Ltd. v. Commissioner of Income Tax where the principle laid down in the English authorities has been accepted and followed. It was held by the Supreme Court in Calcutta Co. Ltd. v. Commissioner of Income Tax that the enumeration of deductions u/s 10(2) of the Indian Income Tax Act, 1922, was not exhaustive, and u/s 10(1) of the Income Tax Act a deduction may be allowed if the amount was an expenditure incidental to the business of the assessee and having regard to the accepted commercial practice and trading principles. In our opinion the principle laid down by the Supreme Court in this case cannot be applied to the present case. The language of section 7 of the Bihar Agricultural Income Tax Act is markedly different from the language of sections 10(1) and 10(2) of the Indian Income Tax Act, 1922. Section 7(1) of the Agricultural Income Tax Act states as follows :

"7. (1) The agricultural income mentioned in sub-clauses (2) and (3) of clause (a) of section 2 shall be assessed on the net amount of such income determined in prescribed manner."

Section 7(2) reads as follows :

"7. (2) Rules prescribing the manner of determining the net amounts of agricultural income for the purpose of sub-section (1) shall provide that the following deductions shall be made from the gross amounts of such income, namely :

(a) the sum actually paid in the previous year as revenue to the Government or as rent to a landlord in respect of the land from which such agricultural income is derived;

(b) the sum actually paid in the previous year in respect of such land as any local cess or rate collected under any Bengal Act or under any Bihar and Orissa Act or under any Bihar Act;

(c) any rate paid under the Village Chaukidari Act, 1870 (Bengal Act VI of 1870), or the Chota Nagpur Rural Police Act, 1914. (Bihar & Orissa Act 1 of 1914), in respect of any building used exclusively for the purposes of the cultivation of the land from which such agricultural income is derived;

(d) any sum paid in respect of the land from which such agricultural income is derived in accordance with rules made under the Bengal Irrigation Act, 1876 (Bengal Act III of 1876);

(e) the expenses of cultivating the crop from which such agricultural income is derived, of transporting such crop to market, including the maintenance of agricultural implements and cattle required for the purpose of such cultivation and for agricultural the crop to market;

(f) any tax, cess or rate paid under any Bihar Act on the cultivation or sale of the crop from which such agricultural income is derived;

(g) (i) any expense incurred on the maintenance of any irrigation or protective work constructed exclusively for the benefit of the land from which such agricultural income is derived :

Explanation. - Maintenance includes current repairs and includes also in the case of protective dukes and embankments all such work as may be necessary from year to year for repairing any damage or destruction caused by flood or other natural causes;

(ii) any expense incurred exclusively on the maintenance of any capital asset purchased or constructed before the 1st 1948, if such maintenance is required for the purpose of deriving such agricultural income from such land;

(iii) interest paid on any amount borrowed and actually spent on any capital expenditure incurred after the 12th October, 1938, exclusively for the benefit of the land from which such agricultural income is derived, or for the purpose of deriving such agricultural income is from such land :

Provided that the interest allowable under this clause shall not exceed the interest which the assessee is liable to pay in respect of such amount as a borrower under sections 5, 6 and 7 of the Bihar Money-lenders (Regulation of Transactions) Act, 1939 (Bihar Act VII of 1939);

(iv) depreciation at the prescribed rate in respect of any capital asset purchased or constructed after the 12th October, 1938, exclusively for the benefit of the land from which such agricultural income is derived, or for the purpose of deriving such agricultural income from such land; and

(v) any interest paid on any mortgage or other capital charge incurred exclusively for the purpose of acquiring the property from which such agricultural income is derived or for the purpose of cultivation of the property :

Provided that no deduction shall be made under this clause, if it has already been made u/s 6 :

Provided further that the interest allowable under this clause shall not exceed the interest which the assessee is liable to pay in respect of such mortgage or charge as a borrower u/s 5, 6, and 7 of the Bihar Money-lenders (Regulation of Transactions) Act, 1939 (Bihar Act VII of 1939); and

(h) such other deductions as may be prescribed."

Sections 3 deals with charge of agricultural Income Tax and states that "agricultural Income Tax shall be charged for each financial year in accordance with, and subject to the provisions of, this Act on the total agricultural income of the previous year of every person." The expression "total agricultural income". is defined in section 2(t) of the Act to mean "the aggregate of the amounts of agricultural income of the different classes specified in section 6 and 7 as determined respectively in the manner laid down in the said sections."

In our opinion the scheme of section 6 and 7 of the Bihar Agricultural Income Tax Act is different from that of section 10 of the Indian Income Tax Act, 1922. The difference is that while section 10(1) of the Indian Income Tax Act imposes a charge on the profits and gains of trade it does not expressly provide how those profits are to be computed, but in section 7 of the Bihar Agricultural Income Tax Act the legislature has expressly mentioned how agricultural Income is to be computed in cases mentioned in sub-clauses (2) and (3) of clause, (a) of section 2. We are of opinion that the deductions specified in section 7(2) of the Act are exhaustive and it is not open to the assessee to claim any deduction which falls outside the categories of the deduction mentioned in section 7(2). If the view that we have expressed is correct, it follows that the assessee is not entitled to claim deduction of printing and stationery charges from its gross income u/s 7 of the Bihar Agricultural Income Tax Act in the circumstances of this case. We accordingly answer the question of law referred by the Board of Revenue against the assessee and in the favour of the Commissioner of Agricultural Income Tax. The assessee must pay the costs of this reference. Hearing fee Rs. 250.

Questions answered in the negative.