LexCOMMISSIONER OF INCOME-TAX BOMBAY versus MAHARASHTRA SUGAR MILLS LTD. BOMBAY
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230 COMMISSIONER OF INCOME-TAX BOMBAY A v. MAHARASHTRA SUGAR MILLS LTD. BOMBAY August 16, 1971 (K. S. HEGDE AND A. N. GROVER, JJ:] Income-tax Act (l 1 of 1922), s. l0(2)(xv) and r. 23 of Rules- Part of assessee' s income not exigible to tax-Commission to manag- ing agent-Whether part of commission relating to such income not deductible from assessee' s gross profits. The assessee was a limited company. It owned extensive lands iu which sugar cane was grown and the cane was used by the assessee for the manufacture of sugar in its factory. The cultivation of sugar cane and the manufacture of sugar by the assessee constituted one single and indivisible business. In the assessment year 1957-58, the assessee claimed deduction of remuneration paid to its managing agents under s.10(2)(xv) of the Indian Income-tax Act, 1922, as an item of expenditure laid out or expended wholly or exclusively for the purpose of its business. The Income-tax Officer and the Appellate Assistant Commissioner disallowed a part of the remuneration on the grounds that part of the assessee's business namely cultivation of sugar cane, being an agri- cultural operation, the income therefrom was not exigible to tax, and therefore, any expenditure incurred in respect of that activity was not deductible. The Tribunal and the High Court on reference, how- ever, upheld the plea of the assessee that the entire sum was deductible. Dismissing the appeal to this Court, HELD: (!) The mandate of s. 10(2)(xv) is plain and unambiguous. B c D E To find out whether a deduction claimed is permissible under the Act or not, all that the Court has to do is to examine the relevant provisions of the Act. Equitable considerations are wholly out of the place in con- struing the provisions of the taxing statute. If the allowance claimed is permissible under the Act then it has to be deducted from the gros F profits, and if it is not so permissible it has to be rejected. [232 H; 233 A-DJ In the present case, the allowance claimed was undoubtedly laid out or expended for the purpose of the business carried on by assessee. The fact that income arising from a part of that business was not exigible tO tax under the Act was not a relevant circumstance. [233 D-E] G C.l.T., Bombay v. Parakh and (India) Ltd., 29 T.T.R .. 661. and C.l.T. Madras v. Indian Bank Ltd., 56 J.T.R. 79, followed. S.A.S.S. Che!lappa Chettiar v. C.l.T. Madras, 5 I.T.R. 97 and Salt & Industries Agencies Ltd. Bombay v. C.l.T., Bombay City. 18 l.T.R. 58, referred to. (2) Rule 23 of the rules framed under the Income-tax Act says that in computing the taxable income of a business the agricultural incom as defined in s. 2 of the Act should be deducted from the tota H C.I.T. V. MAHARASHTRA SUGAR MILLS (Hegde, J.) 231 A income for arriving at the taxable income. The rule further says that- 'No further deduction shall be made of any expenditure incurred by the assessee as a cultivator or receiver of rent in kind'. If the rule is read with s. 2(1) it is clear that reference to the expenditure incurred by the assessee as a cultivator only applies to the process ordinarily employed by a cultivator in raising the crops and all other incrdental and supple B mentary activities up to the stage of sale of the produce, and has nothing to do with disbursements such as payment of managing agency commis- sion. [238E-H; 240A-B] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1658 of 1968. c Appeal by special leave from the judgment and order dated September 22, 1967 of the Bombay High Court in Income-tax Reference No. 83 of 1962~ B. D. Sharma, and R. N. Sachthey, for foe appellant V. Rajagopal, M. M. Vakil, B. Datta, J. B. Dadachanji, D 0, C. Mathur and Ravinder Narain, for the respondent. The Judgment of the Court was delivered by Hegde, J. This is an appeal by special leave. It arises from the decision of the Bombay High Court in Income-tax Reference No. 83 of 1962 on its file. That Reference was E made by the Income-tax Appellate Tribunal, Bench 'B', Bombay. The question of law which was referred for the opinion of the High Court under s.66(1) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the Act) is: F G "Whether on the facts and in the circumstances of this case the Department could disallow a sum of Rs. 1,26,359/- a portion of the managing agency commission paid by the assessee company for the assessment year 1957-58 in
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