State of Tamil Nadu vs C.H. Simpson

Mishra, J.—Heard. A sum of Rs. 700 was claimed as legal expenses The respondent assessee had to suffer to ordeal of a protracted proceeding until finally the claim that the said sum should be exempted from the agricultural Income Tax has been upheld by the Agricultural Income Tax Appellate Tribunal. The State, however, has not left the matter at that. It has come to this court.

The Revenue''s case has been noticed by the Tribunal in these words : Jayanarayan Singh Deo file return for the assessment year 1982-83 also.

"... The Revenue''s case is that the legal expenses have been claimed towards the properties already sold by the appellant and hence it is not an expense... incurred for deriving agricultural income."

The Tribunal has noticed the contention of the assessee thus :

Learned counsel contended that there was obstruction from the Government while cultivating the lands and he had to file a suit in the civil court to remove the obstruction for the peaceful enjoyment of the property. He had to contest the matter against the State up to the Supreme Court and he was thus force to incur the legal expenses. The appellant has sold part of the lands during pendency of the proceedings. He contended that if he had not got a decree from the court, he would have lost the lands to the Government and the sales effected by him would have become invalid. In order to preserve the title to the lands he had before sale, he incurred the expenses in the appeals preferred by the State."

Indeed, the State was responsible for the litigation that the assessee had to suffer up to the Supreme court for establishing his title to the land with respect to which he was called upon to pay tax, so much so that the said protracted proceedings caused a sale of a portion of the properties belonging to the petitioner because he had to establish his title against the State. The Tribunal has said :

"We are satisfied that the appellant has incurred these expenses in order to preserve his title to the lands, even though the lands were sold by him earlier. Hence, these expenses have to be regarded as expenses for getting income from agricultural lands. Otherwise, the appellant would have lost his title as well as possession of the lands. Hence, the claim is allowed."

This court in Commissioner of Income Tax, Tamil Nadu-IV Vs. O.P.N. Arunachala Nadar, , has left to doubt as to the legal expenses incurred by the assessee to protect the source of his income or the title to his business or to preserve or maintain his business assests to be regarded as expenditure incurred wholly and exclusively for the purpose of his business and, therefore, allowable as deduction for the purpose of computing the profits for Income Tax purpose. This ruling has to be applied to agricultural income as well.

The impugned order, in our opinion, does not suffer from any illegality or impropriety. The same is, accordingly, confirmed. This tax revision case is dismissed. There will be no order as to costs.