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CASE NO.: Appeal (civil) 2243-2249 1993

PETITIONER: THE COMMISSIONER OF AGRICULTURAL INCOME-TAX.  KERALA

       Vs.

RESPONDENT: THE PLANTATION CORPORATION OF KERALA LTD., KOTTAYAM

DATE OF JUDGMENT:       29/11/2000

BENCH: S.P.Bharucha, Doraswamy, Ruma Pal

JUDGMENT:

Raju, J.

     The correctness of a decision of the Full Bench of the Kerala  High Court construing Explanation 2 to Section 5  of the  Agricultural  Income-Tax Act, 1950, inserted by  Kerala Act  9  of 1961, to be confined in its application  only  to Clause  (j) of Section 5 and not to Section 5 as a whole  is put   in  issue  in  these   appeals.   Section  5  of   the Agricultural   Income-Tax  Act  reads   as   follows:    5. Computation  of  agricultural  income.  -  The  agricultural income  of  a  person  shall be computed  after  making  the following deductions, namely :-

     (a) any sums paid in the previous year on account of -

     (i) land revenue or any tax in lieu thereof due to the Government, the Sreepandaravagai or the Sreepadam;

     (ii) Jenmikaram;

     (iii) Thiruppuvaram;  and

     (iv)  local  rates and cesses and municipal taxes,  in respect  of  the land from which the agricultural income  is derived.

     (b) any rent paid in the previous year to the landlord or  superior  landlord,  as the case may be, in  respect  of land, from which the agricultural income is derived;

     (c)  any expense incurred in the previous year on  the maintenance of any irrigation or protective work constructed for  the  benefit  of the land from which  the  agricultural income is derived;

     Explanation  - Maintenance includes current  repairs and  includes  also,  in the case of  protective  dykes  and embankments  all such work as may be necessary from year  to year for repairing any damage or destruction caused by flood or other natural causes.

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     (d)  any  expenses  incurred in the previous  year  on repairs  in respect of any capital asset which was purchased or  constructed for the benefits of the land from which  the agricultural income is derived;

     (e)  any  interest  paid in the previous year  on  any amount   borrowed   and  actually   spent  on  any   capital expenditure  incurred for the benefit of the land from which the agricultural income is derived;

     (f)  where land from which the agricultural income  is derived  is  subject to a mortgage or other capital  charge, any  interest  paid in the previous year in respect of  such mortgage or charge;

     (g)  any  interest  paid in the previous year  on  any debt,  whether  secured or not, incurred for the purpose  of acquiring  the  land from which the agricultural  income  is derived;

     (h)  any sum paid in the previous year as interest  in respect of agricultural loans taken and expended on the land from which agricultural income is derived;

     (i)  interest paid on any amount borrowed and actually spent   for  the  purpose  of  re-claiming,   improving   or cultivating  the property from which agricultural income  is derived;

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

     (k)  such  other  deductions  as  may  be   prescribed generally or in particular cases;

     (l)   in  respect  of   depreciation   of   buildings, machinery, plant and furniture which are the property of the assessee  and  are required for the purpose of deriving  the agricultural  income, a sum equivalent to such percentage on the  written down value, thereof as may in any case or class of  cases  be prescribed and where the buildings  have  been newly  erected  or the machinery or plant newly installed  a further sum subject to such conditions as may be prescribed:

     Provided   that  full  particulars   have  been   duly furnished:

     Provided  further  that  the  aggregate  of  all  such allowances  made under this Act shall in no case exceed  the original  cost to the assessee of the buildings,  machinery, plant or furniture, as the case may be;

     (m)  in the case of agricultural income under the head rent  or revenue derived from land referred to in sub-clause (1)  of clause (a) of section 2 - (agricultural income  from rent or revenue) :-

     (i)  any  expenses actually incurred in  the  previous year in the collection of agricultural income;

     (ii)  any  expenses incurred in the previous  year  on repairs  in respect of any capital asset used in  connection

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with  the collection of rent due in respect of the land from which the agricultural income is derived;

     (n)  in the case of agricultural income referred to in sub-clause   (2)   of  the  clause   (a)  of  section  2   - (agricultural income from agriculture) :-

     (i)  the  expenses  other   than  capital  expenditure incurred  in the previous year of cultivating the crop  from which the agricultural income is derived and of transporting such   crop   to  market,   including  the  maintenance   of agricultural  implements  and  cattle   required  for   such cultivation and transport or both;

     (ii)  any tax, cess or rate paid on the cultivation or sale  of  the  crop from which such agricultural  income  is derived;

     (iii)  the  cost incurred in the previous year in  the purchase  of replacement of cattle or implements, which  are necessary  for  cultivation,  to  such   extent  as  may  be prescribed,  less the amount realized by sale of the  cattle or implements replaced or their estimated value;

     (iv)  any  sum paid in the previous year in  order  to effect  an  insurance  against loss or damage  of  crops  or property  from  which the agricultural income is derived  or insurance  against  loss or damage in respect  of  building, machinery,  plant and furniture necessary for the purpose of deriving  the agricultural income:  Provided that any amount received  in respect of such insurance in any year shall  be deemed  to  be agricultural income for the purposes of  this Act,  and  shall be liable to agricultural income-tax  after deducting  the  portion,  thereof, if any,  which  has  been assessed  to  income-tax  under the Indian  Income-tax  Act, 1922;

     (v)  any expenses incurred in the previous year on the maintenance  of  any  capital asset if such  maintenance  is required  for  the  purposes of  deriving  the  agricultural income:

     Provided  that  no deduction shall be made under  this section  if it has already been made in the assessment under the Indian Income-tax Act, 1922.

     Explanation 1 - For the purpose of this section paid means  actually paid or incurred according to the method  of accounting  upon  the basis of which agricultural income  is computed under this section;

     Plant  includes  vehicles and  Scientific  apparatus purchased  for  the  purpose of  deriving  the  agricultural income;  and written down value means-

     (i)  in  the case of assets acquired in  the  previous year, the actual cost to the assessee and

     (ii)  in  the  case  of  assets  acquired  before  the previous year the actual cost to the assessees less such sum as may be prescribed.

     Explanation  2  -  Nothing contained in  this  section shall  be  deemed to entitle a person deriving  agricultural income  to deduction of any expenditure laid out or expended

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for  the  cultivation,  upkeep or  maintenance  of  immature plants  from  which no agricultural income has been  derived during the previous year.

     The appeals before us relate to three Assessment Years 1975-  76, 1976-77 and 1977-78.  Revisions came to be  filed before  the  High Court in respect of the  three  assessment years   against  the  original   remand  orders  and  orders subsequently  passed by the Tribunal on appeals filed before it against orders giving effect to earlier orders of remand. The  respondent-assessee  projected claims for deduction  of the  rent  paid  to its landlord in respect  of  the  entire estate  including  the  area covered by  immature  oil  palm plants, which did not as also could not yield any income and interest  paid  on  the loan obtained and utilised  for  the purpose of cultivation etc.  in respect of the entire estate comprising  both  mature  yielding  as  well  as  unyielding immature  oil  palm  plants.   It  is  in  adjudicating  the tenability  or otherwise of these claims that the High Court has  chosen to consider the role of Explanation 2 to Section 5  and  held that Explanation 2 is to be an  Explanation  to only  Section  5  (j) and not to the  other  sub-clauses  of Section  5.   The  High Court has chosen to come to  such  a conclusion  despite the opening words used, nothing in this section..  in Explanation 2 by adopting and applying  what it chose to describe as internal as well as external aids of construction.   In  the  opinion  of  the  High  Court,  its conclusion  about  the  limited role  and  applicability  of Explanation  2 only to Section 5 (j) arrived at on the basis of  internal  aids  gets   confirmed  by  construction  with reference to external aids also.

     Heard   the   learned    senior    counsel   for   the appellant-State   and   the   learned    counsel   for   the respondent-assessee.  Section 5 in providing for computation of  agricultural  income  for  the   purposes  of  the   Act stipulates that the agricultural income of a person shall be computed  after making the various deductions enumerated  in Clauses  (a) to (n) to the extent mentioned and also in  the manner  specified  therein.  It is an admitted position  and the  High  Court  also proceeded on such basis  only  having regard  to some of the decisions of this Court as well as of the  Kerala  High Court that Clause (j) of Section 5 of  the Act  is  in  the nature of a residuary provision,  in  which event  in  our  view, it necessarily means  that  the  other clauses  are in relation to a few of the enumerated items of expenditure  envisaged for deduction and the mere fact  that some  alone are illustrated specifically do not render those provisions  to  be read in a truncated or disjointed  manner from  the  residuary  clause ignoring the avowed  object  of Section  5  as  a whole, viz., computation  of  agricultural income,  as defined in Section 2 (a) of the Act after making the  deductions  to  which an assessee  is  found  eligible. Thus,  viewed when Explanation 2 specifically use the words, nothing contained in this section shall be  expressing a specific  intention to encompass the entire Section 5 of the Act  reading  it otherwise and to confine its relevance  and application  to only clause (j) of Section 5 would amount to not only rewriting the statutory provision by the Court, but also  doing violence to the plain and simple language  used. When  an  Explanation  or Proviso was to apply  to  any  one clause  or  limb  alone of Section 5,  the  legislature  has chosen  to  incorporate it even in the very Section 5  below the  specific  or  particular clause which it was  meant  to explain or except as in clause (c) or (l) and (n).  The fact

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that  instead  of  doing  so  the  Explanation  2  has  been incorporated  at the end of Section 5 along side Explanation 1,  which  also  use  the words for  the  purpose  of  this section..,  the  intention  of  the  legislature  must  be considered   to  have  been   made  certain,  positive   and unambiguous,  leaving no room or scope whatsoever for having recourse   to   either  internal  or   external   aids   for interpretation or construction of the said provision.

     The  High  Court appears to have been carried away  by the  fact  of  some  assumed similarity of  the  purpose  of expenditure  envisaged in Section 5 (j) and those covered by Explanation  2  and from the further fact  of  retrospective effect having been given to the said Explanation with effect from  1.4.51,  to presume that in doing so  the  legislative intention  indicated  was  to avoid refunds  being  made  on account  of the Supreme Court judgment reported in (1961) 41 ITR  751 SC:  Travancore Rubber & Tea Co.  Ltd.  case which, in  turn,  concerned Section 5 (j) of the Act.  This in  our view  is fallacious and cannot be so presumed.  The decision of  the  Supreme Court declaring the position of law on  the scope  of Section 5 (j) might have been the occasion for the legislature  to  enact  Explanation  2, and  that  too  with retrospective  effect  but  the  said  occasion  would  have equally  enlightened  and served as an eye opener about  the need  for  enacting the Explanation in such a manner  as  to avoid   similar  claims  being   projected  in  respect   of expenditure  or  deductions envisaged in the  various  other limbs  of  Section 5 as well, apart from clause  (j)  alone. This  Court  has  always  been   reiterating  that  if   the intendment  is not in the words used it is nowhere else  and so  long as there is no ambiguity in the statutory  language resort   to  any  interpretative   process  to  unfold   the legislative  intent  becomes impermissible and the need  for interpretation arises only when the words in the statute are on  their  own  terms  ambivalent and do  not  manifest  the intention  of the legislature.  (vide 1988 (2) SCC 299  (M/s Doypack Systems Pvt.  Ltd.  etc.  vs.  Union of India & Ors. etc.) and 1990 (2) SCC 231 (M/s Keshavji Ravji & Co.  & Ors. vs.  Commissioner of Income Tax).  That apart an Explanation is intended to either explain the meaning of certain phrases and  expressions  contained  in  a  statutory  provision  or depending  upon  its language it might supply or  take  away something from the contents of a provision and at times even to,  by  way of abundant caution, clear any  mental  cobwebs surrounding  the  meaning of a statutory provision  spun  by interpretative   process  to  make   the   position   beyond controversy or doubt.

     Consequently,  we are unable to approve the  reasoning of  the  High  Court as to the need for having  recourse  to internal  or external aids to interpret the Explanation 2 to Section 5 as well as its ultimate conclusion to whittle down the  otherwise  wide  range  and   area  of  operation   and application of Explanation 2 to the entirety of Section 5 of the  Act.   In our view, Explanation 2 to Section 5  of  the Act,  therefore  explains  generally  as  to  what  are  not deductible  as expenditure for the purpose of computing  the agricultural  income in the light of the various clauses  of Section 5 of the Act, as a whole.

     The  appeals  pertaining to all the  assessment  years involve  in common the question of deduction of rent and the further  question  of deduction of interest arises  only  in respect  of the appeals for the assessment years 1975-76 and

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1976-77.   The claims of the respondent, be it in respect of rent  or  interest paid to the creditors by the assessee  on the  loans  obtained  and  utilised   for  the  purpose   of cultivation etc.  shall not be eligible for deduction so far as it relates to the respective portions spent in respect of land or the bringing up of the immature oil palm plantation. The appeals, therefore, have to be and are allowed.  Cost on parties.