Essa Esmail vs The State of Kerala

M.S. Menon, C.J.—This is a reference u/s 60 (1) of the Agricultural income tax Act, 1950. The assessment year concerned is 1957-58 (accounting period: 1131 M.E.) and the question referred:

Whether on the facts and circumstances of this case the disallowance of the claim of Rs. 3,173.09 incurred by the assessee in effecting repairs to the huts is correct in law.

Section 5 of the Agricultural income tax Act, 1950, provides that the; agricultural income of a person shall be computed after making the deductions enumerated in that section and the deduction contemplated by Section 5 (j) - the provision invoked by the assessee - reads as follows:

any expenditure (not being in the nature of capital expenditure or personal expense of the assessee) laid out or expended wholly and exclusively for the purpose of deriving the agricultural income.

The expenditure with which we are concerned was incurred by the assessee in the repairing of huts which did not belong to the assessee but to the kudikidappukars on the estate. That the huts belonged not to the assessee but to his kudikidappukars was not even disputed before the Tribunal.

The Tribunal has also stated:

It was admitted that the kudikidappukars are paid employees. There was also no case for the assessee/applicant that the repairs were effected expending a portion of the remuneration for their work. The records revealed that all workmen were properly paid for their work and that no portion of the wages was in the hands of the assessee as deferred wages. The amount expended was thus found to be from the assessee''s/applicant''s pocket in effecting repairs on huts which belong to kudikidappukars and in which it is open to kudikidappukars to house whom they want including persons who are not workers in the estate. The expenditure was thus found to be nothing but ex gratia and therefore not coming within the ambit of section 5 (j) as there was no connection between the purposes of the payment and the earning of the agricultural income.

On the facts found by the Tribunal it is not possible for us to hold that the expenditure of Rs. 3,173-09 incurred by the assessee in repairing the huts of the kudikidappukars on his estate was warranted either by the terms of their employment or under the customary practice obtaining in that behalf. It follows that we must agree with the Tribunal that the payment concerned was nothing more than an ex gratia payment which cannot be considered as exempted u/s 5 (j) of the Agricultural income tax Act, 1950, and answer the question referred in the affirmative, that is, against the assessee and in favor of the Department. We do so; but without any order as to costs. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be sent to the Tribunal as required by sub-section (6) of Section 60 of the Agricultural income tax Act, 1950.