Maharashtra State Farming Corporation Ltd. Vs. State of Maharashtra - Court Judgment

Excerpt:
[a] maharashtra agricultural income-tax act, 1962 - section 8(6) - capital asset - does not include land from which agricultural is derived.;the expression 'capital asset in clause (6) of section 8 of the act, cannot be construed to include the land from which agricultural income is derived.;[b] maharashtra agricultural income tax rules, 1962 - rule 3 - s. no. 21 in the statement - does not provide for allowance of depreciation - prescribes only rates for depreciation allowance.;rule 3 of the rules does not provide for allowance of depreciation. it merely prescribes the rates at which the depreciation allowance under clause (6) of section 8 of the act in respect of various types of irrigational or protective work and capital assets should be made. none of the assets referred to in above statement can be construed to mean or include any asset which is not 'capital asset' within the meaning of clause (6) of section 8 of the act. land is not a capital asset under that clause. - orderdr. b.p. saraf, j.1. by these references under section 39(1) of the maharashtra agricultural income tax act, 1962, the maharashtra sales-tax tribunal has referred the following question of law to this court for opinion at the instance of the assessee :'whether on the facts and circumstances of the case and on true and correct interpretation of section 8(6) of the maharashtra agricultural income-tax act, 1962 the tribunal was right in coming to conclusion (sic. assessee) that the dealer is not entitled to depreciation on the value of land which is cultivated by him?'2. the assessee, maharashtra state farming corporation ltd. is a company registered under the companies act, 1956. the entire share capital of the assessee company is held by the government of maharashtra. the assessee company was formed with a view of undertaking cultivation of land rendered surplus as a result of implementation of the maharashtra agricultural (ceilings and holdings) act, 1961. the main activity of the assessee is to plant, grow, cultivate and produce sugar cane and other crops,trees etc. in respect of agricultural income derived by it from cultivation of land, the assessee is liable to pay tax under the maharashtra agricultural income tax act, 1962 ('act'). these references pertain to the assessment years 1974-75 to 1978-79. the dispute referred to this court by these references pertain to allowability of depreciation of the value of land cultivated by the assessee under clause (6) of section 8 of the act. the tribunal has held that the assessee is not entitled to depreciation on the value of land. the assessee seeks to challenge this decision of the tribunal.3. we have heard mr. pardiwala, the learned counsel for the petitioner. section 8 of the act sets out the allowances which are available to an assessee in computation of his income under the head 'agricultural income from agriculture'. clause (6) thereof, which provides for allowance of depreciation in respect of assets specified therein, reads:'(6) depreciation at such rate as may be prescribed, in respect of any irrigation or protective work or other capital asset (including machinery or plant) constructed or acquired 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.'it is clear from a plain reading of the above provision that depreciation is allowable only in respect of any irrigational or protective work or other capital asset constructed or acquired 'for the benefit of land from which such agricultural income is derived'. according to the learned counsel for the assessee, land is also capital asset of the assessee and hence he is entitled to depreciation in respect of the value thereof. this submission of the learned counsel, in our opinion, is not tenable in view of the clear and unambiguous language of clouse (6) of section 8 of the act which provides for allowance of depreciation only in respect of such of the capital assets which are acquired for the benefit of the land from which agricultural income is derived. the expression 'capital asset' in clause (6) of section 8 of the act, cannot be construed to include the land from which agricultural income is derived. the claim of the assessee for depreciation in respect of land is wholly misconceived and untenable. the answer to the question referred to us is self-evident from clause (6) of section 8 of the act itself. in fact, on the face of the clear language of clause (6) of section 8, the tribunal should have refused to refer the question proposed by the assessee to this court on the ground that the answer thereto was self-evident.4. we have also considered the alternate submission of the learned counsel for the assessee that 'land' would fall under the residuary item of capital assets under serial no. 21 of the statement of rates in rule 3 of the maharashtra agricultural income -tax rules, 1962 ('rules') which provides for allowance of depreciation at the rate of 5 percent on the 'general (machinery, implements and other assets ) not provided for in any of the items 1 to 20 specifically'. the expression 'other assets' in entry 21, according to the learned counsel, would cover 'land'. this contention of the learned counsel, in our opinion, is wholly misconceived. rule 3 of the rules does not provide for allowance of depreciation. it merely prescribes the rates at which the depreciation allowance under clause (6) of section 8 of the act in respectof various types of irrigational or protective work and capital assets should be made. none of the assets referred to in above statement can be construed to mean or include any asset which is not' capital asset' within the meaning of clause (6) of section 8 of the act. as stated earlier, land is not a capital asset under that clause.5. in the premises, we answer the question referred to us in the affirmative i.e. against the assessee and in favour of the revenue.6. reference disposed of accordingly with no orders as to costs.

Judgment:
ORDER

Dr. B.P. Saraf, J.

1. By these references under section 39(1) of the Maharashtra Agricultural Income Tax Act, 1962, the Maharashtra Sales-tax Tribunal has referred the following question of law to this Court for opinion at the instance of the assessee :

'Whether on the facts and circumstances of the case and on true and correct interpretation of section 8(6) of the Maharashtra Agricultural Income-tax Act, 1962 the Tribunal was right in coming to conclusion (sic. assessee) that the dealer is not entitled to depreciation on the value of land which is cultivated by him?'

2. The assessee, Maharashtra State Farming Corporation Ltd. is a Company registered under the Companies Act, 1956. The entire share capital of the assessee Company is held by the Government of Maharashtra. The assessee Company was formed with a view of undertaking cultivation of land rendered surplus as a result of implementation of the Maharashtra Agricultural (Ceilings and Holdings) Act, 1961. The main activity of the assessee is to plant, grow, cultivate and produce sugar cane and other crops,trees etc. In respect of agricultural income derived by it from cultivation of land, the assessee is liable to pay tax under the Maharashtra Agricultural Income Tax Act, 1962 ('Act'). These references pertain to the assessment years 1974-75 to 1978-79. The dispute referred to this Court by these references pertain to allowability of depreciation of the value of land cultivated by the assessee under Clause (6) of section 8 of the Act. The Tribunal has held that the assessee is not entitled to depreciation on the value of land. The assessee seeks to challenge this decision of the Tribunal.

3. We have heard Mr. Pardiwala, the learned Counsel for the petitioner. Section 8 of the Act sets out the allowances which are available to an assessee in computation of his income under the head 'Agricultural income from Agriculture'. Clause (6) thereof, which provides for allowance of depreciation in respect of assets specified therein, reads:

'(6) Depreciation at such rate as may be prescribed, in respect of any irrigation or protective work or other capital asset (including machinery or plant) constructed or acquired 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.'

It is clear from a plain reading of the above provision that depreciation is allowable only in respect of any irrigational or protective work or other capital asset constructed or acquired 'for the benefit of land from which such agricultural income is derived'. According to the learned Counsel for the assessee, land is also capital asset of the assessee and hence he is entitled to depreciation in respect of the value thereof. This submission of the learned Counsel, in our opinion, is not tenable in view of the clear and unambiguous language of Clouse (6) of section 8 of the Act which provides for allowance of depreciation only in respect of such of the capital assets which are acquired for the benefit of the land from which agricultural income is derived. The expression 'capital asset' in Clause (6) of section 8 of the Act, cannot be construed to include the land from which agricultural income is derived. The claim of the assessee for depreciation in respect of land is wholly misconceived and untenable. The answer to the question referred to us is self-evident from Clause (6) of section 8 of the act itself. In fact, on the face of the clear language of Clause (6) of section 8, the Tribunal should have refused to refer the question proposed by the assessee to this Court on the ground that the answer thereto was self-evident.

4. We have also considered the alternate submission of the learned Counsel for the assessee that 'land' would fall under the residuary item of capital assets under serial No. 21 of the statement of rates in Rule 3 of the Maharashtra Agricultural Income -Tax Rules, 1962 ('Rules') which provides for allowance of depreciation at the rate of 5 percent on the 'General (Machinery, implements and other assets ) not provided for in any of the items 1 to 20 specifically'. The expression 'other assets' in Entry 21, according to the learned Counsel, would cover 'land'. This contention of the learned Counsel, in our opinion, is wholly misconceived. Rule 3 of the Rules does not provide for allowance of depreciation. It merely prescribes the rates at which the depreciation allowance under Clause (6) of section 8 of the Act in respectof various types of irrigational or protective work and capital assets should be made. None of the assets referred to in above statement can be construed to mean or include any asset which is not' capital asset' within the meaning of Clause (6) of section 8 of the Act. As stated earlier, land is not a capital asset under that clause.

5. In the premises, we answer the question referred to us in the affirmative i.e. against the assessee and in favour of the revenue.

6. Reference disposed of accordingly with no orders as to costs.