D.N. BARUAH, J. :
All the above civil rules involve common questions of law and fact, therefore, I propose to dispose of these cases by a common judgment.
2. In all the above civil rules, the petitioners have challenged the common order dt. 22nd Nov., 1989, annexure-3 to the petitions, passed by the Dy. Commr. of Taxes, Assam, Guwahati, dismissing the revision application filed by the petitioner-company for the asst. yrs. 1980-81, 1981-82 and 1982-83 and confirming the order dt. 9th Dec., 1986, passed by the Agrl. ITO, Assam, Guwahati, disallowing the exemption claimed by the petitioner on certain expenditure.
3. The facts, for the purpose of disposal of these cases, may be stated as follows :
The above civil rules are in connection with the assessment of agricultural income for the asst. yrs. 1980-81, 1981-82 and 1982-83. The petitioners claimed exemption for the expenses incurred on payment of salary paid to the employees of the tea garden engaged in the operation and manufacture of tea, i.e., Rs. 61,587 in C.R. No. 1371 of 1990, Rs. 3,906 in C.R. No. 1372 of 1990 and Rs. 1,587 in C.R. No. 1373 of 1990; transit accommodation, i.e., Rs. 9,882 in C.R. No. 1371 of 1990, Rs. 6,070 in C.R. No. 1372 of 1990 and Rs. 6,433 in C.R. No. 1373 of 1990 and travelling expenses of Rs. 53,350 in C.R. No. 1371 of 1990, Rs. 53,350 in C.R. No. 1372 of 1990 and Rs. 28,042 in C.R. No. 1373 of 1990 and disallowance of legal expenses of Rs. 5,100 in C.R. No. 1372 of 1990 and Rs. 4,200 in C.R. No. 1373 of 1990. According to the petitioner, the expenditures were incurred wholly and exclusively for the purpose of earning or deriving agricultural income. While making the assessment the ITO under the Agrl. IT Act disallowed the claim of the petitioner. The petitioner preferred an appeal before the Asstt. Commr. of Taxes (A), Tinsukia. The Asstt. Commr. of Taxes allowed the claim of the petitioner on account of donation but dismissed the appeal disallowing the expenditure claimed under S. 8(2)(f)(vii) of the Act. The petitioner being aggrieved filed a revision application before the Commr. of Taxes, Assam, Guwahati. The Commr. of Taxes by a common order dt. 22nd Nov., 1989, dismissed the revision application and held thus :
'In my view, once the claims for deduction are considered and allowed under the IT Act, albeit in part, the learned Agrl. ITO has no right or authority to consider afresh the claim for deductions and any such reconsideration of any claim, once considered and allowed either in whole or part by the ITO under the IT Act will violate the provisions of the IT Act and be contrary to the proviso to r. 5 of the Assam Agrl. IT Rules. Once the income is determined under the IT Act, the Agrl. ITO has no authority to alter the same or refuse to accept the computation of the ITO.
Under the circumstances, I do not find any justification to uphold the petitioners claim and consequently reject the same.
In the result, the revisions fail and are dismissed. The Agrl. ITO will, however, revise the assessment orders for the asst. yrs. 1981-82 and 1982-83 in the light of the revised assessment made under S. 251 of the IT Act on receipt of the certified copies of such assessment orders from the petitioner-company.'
4. According to the petitioner, the respondents totally ignored the various provisions of the Act and illegally and arbitrarily disallowed the expenditure claimed under S. 8(2)(f)(vii) of the Assam Agrl. IT Act, 1939. Hence, the present petition.
5. I have heard Dr. A.K. Saraf, counsel for the petitioner, and Dr. B.P. Todi, Government Advocate, Assam, appearing on behalf of the respondents.
Dr. Saraf submits that the respondents are totally misguided while determining as to whether the exemption should be granted as claimed or not. The ITO disallowed the claim without assigning any reason. He further submits that the ITO disallowed the claim of the petitioner in respect of the expenses claimed and computed the agricultural income as per the order of assessment of income passed by the ITO and this cannot be a ground for disallowing the claim of the petitioner. He further submits that the claim was made in respect of 60 per cent of income which falls under the Agrl. IT Act, therefore, the assessee is entitled to get exemption. The Agrl. ITO is only required to see whether the claim for exemption is outside the prohibition referred to in S. 8(2) of the IT Act. However, the authorities brushed aside the claim without considering those aspects of the matter.
Dr. Todi, on the other hand, supports the impugned orders. According to him, the ITO having disallowed the claim after consideration, the Agrl. ITO has no option but to refuse it on the ground that the Central assessing authority might have found that this amount was not actually incurred wholly and exclusively for the purpose of earning agricultural income.
6. On the rival contentions of the parties, it is to be seen whether the claim of exemption of the petitioner can be justified or not.
To appreciate the position it will be apposite to look to the provisions of S. 8(2)(f)(vii) of the Assam Agrl. IT Act. I quote the relevant portion hereunder :
'8(2)(f)(vii) any expenditure not being in the nature of capital expenditure laid out or expended wholly and exclusively for the purpose of earning or deriving the agricultural income;....
Provided always that no deduction shall be made under this clause, if it has already been made under S. 7 of this Act or in the assessment under the Indian IT Act :
Provided further that in cases of agricultural income from cultivation and manufacture of tea the agricultural income for the purposes of this Act shall be deemed to be that portion of the income from cultivation, manufacture and sale which is agricultural income within the meaning of the Indian IT Act, 1922 (XI of 1922), and shall be ascertained by computing the income from the cultivation, manufacture and sale of tea as computed for Indian income-tax from which shall be deducted any allowance by this Act authorised in so far as the same shall not have been allowed in the computation for the Indian IT Act, 1922.'
From a plain reading of the section quoted above, it appears that while considering the claim for exemption, the Agrl. ITO is required to see whether the expenditure is laid out or expended wholly and exclusively for the purpose of earning or deriving agricultural income and to see whether in respect of the said amount the IT authority or the Central assessing authority has already granted exemption. If the claim is made outside the restrictions imposed under the provisions quoted above, then the petitioner is entitled to get tax exemption. Therefore, it is necessary for the income-tax assessing authority to consider whether the exemption is claimed in respect of the amount laid out as expenditure wholly and exclusively for the purpose of earning or deriving the agricultural income. If the amount of the exemption claimed is not wholly and exclusively used for the purpose of earning or deriving agricultural income then in that case exemption cannot be allowed.
7. The apex Court while dealing with a similar matter in connection with the Kerala Agrl. IT Act, held that 'for the purpose of deriving agricultural income' in S. 5(j) of the Kerala Agrl. IT Act, 1950, did not mean anything very different from the words used in S. 37 of the IT Act, 1961, for the allowance of business expenses, and the principles applicable to the interpretation of S. 37 of the IT Act, 1961, will also apply to S. 5(j) of the Kerala Act. In that case, the question was whether the amounts expended for maintaining accounts and getting them audited and expenditure incurred for the purpose of preparing a return of agricultural income under the Kerala Agrl. IT Act was deductible or not. The Supreme Court held that the amounts expended by the appellant by way of charges paid to auditors for the purpose of preparing his returns of agricultural income under the Kerala Agrl. IT Act, 1950, were allowable expenditure under S. 5(j) of that Act in computing his agricultural income.
8. In the present case, the contention of the petitioner is that the expenditures are incurred in connection with salary paid to the employees of the tea garden engaged in the operation and manufacture of tea and transit accommodation. Now it is to be seen whether such expenditures were incurred wholly and exclusively for the purpose of earning or deriving agricultural income and these can be exempted. Dr. Todi very fairly submits that at least from the records it does not appear that the exemptions claimed were not for the operation and manufacture of tea, etc.
From the impugned judgments and orders, I do not find that the ITO or the appellate authority scrutinised this aspect of the matter and came to a definite finding. Under the provisions of S. 8(2)(f)(vii) of the Act, it is the duty of the Agrl. ITO to see whether the exemption claimed comes within the restriction mentioned in the said section. However, I do not find that any endeavour was made by the Department before arriving at a conclusion. Therefore, in my opinion, the impugned orders cannot be sustained in law. Accordingly, I set aside the impugned orders of assessment. However, the Department may reassess the income for the years 1980-81 to 1982-83 strictly in accordance with the provisions of law and in the light of the decision of the apex Court and the observations made hereinbefore.
Considering the facts and circumstances of the case, I make no order as to costs.