Richardson Hindustan Ltd. vs Commissioner of Income Tax Commissioner of Income Tax Vs Richardson Hindustan Ltd.

R.S. Mohite, J.—The questions of law referred to this Court u/s 256(1) of the Income Tax Act, 1961, are as under:

At the instance of the assessee:

(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in rejecting the claim of the assessee-company for weighted deduction u/s 35C on:

(a) various expenses incurred on provision of distillation services;

(b) expenses on transportation services provided to farmers;

(c) depreciation on assets used for agricultural research centre?

At the instance of the Revenue:

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the assessee''s claim of weighted deduction u/s 35C on fertilizer subsidy to farmers as cash subsidy amounting to Rs. 2,78,384?

In our view, question No. 1(a) is covered by a judgment passed in Income Tax Reference No. 315 of 1998 wherein in respect of the same assessee and on a similar factual background, we have held that expenses on distillation services provided to the cultivator would not be admissible for deduction u/s 35C of the Income Tax Act. In the circumstances, for the same reasons as in the aforesaid judgment, question No. 1(a) is answered in the affirmative and against the assessee.

As regards question No. 1(b), we have answered the same in a judgment and order dated March 18, 2009, passed in Income Tax Reference No. 3 of 1998. The said question has been answered in the affirmative and against the assessee and hence for the reasons given in our judgment passed in Income Tax Reference No. 3 of 1998, question No. 1(b) is answered in the affirmative and against the assessee.

As regards question No. 1(c), on behalf of the assessee it was sought to be contended that the assets of the agricultural research centre which is admittedly owned and run by the assessee-company must be held to be "tools or implements" for the use by such cultivator. In the judgment given in Income Tax Reference No. 315 of 1988 we have already held that the expenses on scientific farming in respect of the agricultural farm belonging to the assessee and cultivated through their own staff cannot be allowed a weighted deduction u/s 35C of the Income Tax Act. In our view, the asset used for agricultural research centre cannot be said to be tool or implement for use by the cultivator. In a judgment given in Income Tax Reference No. 315 of 1988 we have also held that the expenses on research cannot be granted on weighted deduction u/s 35C. This being the position, in our view, depreciation of such research centre also cannot be granted u/s 35C. Question No. 1(c) is, therefore, answered in the affirmative and against the assessee.

As regards the question raised at the instance of the Revenue, it was the assessee''s case that a fertilizer subsidy amounting to Rs. 2,78,384 was paid to the farmers in cash because fertilizer was in short supply. The Income Tax Appellate Tribunal has held that the assessee''s claim was covered by the judgment of the Special Bench decision in the case of (1990) 34 ITD 50 . In our view, Section 35C(1)(b) contemplates that goods, services or facilities in respect of fertilizers may be considered for grant of weighted deduction. In our view, if cash subsidy is granted in relation to the purchase of fertilizers that would be no different than providing services relating to supply of fertilizer. Such services or facilities would be covered by Section 35C(1)(b)(ii) of the Income Tax Act. We find no error in the reasoning and finding of the Income Tax Appellate Tribunal in relation to this question. The question is, therefore, answered in the affirmative and in favour of the assessee.

In view of the answers as given above, reference is disposed of with no order as to costs.