DEBRA DUN TEA CO. LTD. & ANR. versus COMMISSIONER OF INCOME TAX, U.P., LUCKNOW

Citation: [1973] 3 S.C.R. 83 · Decided: 12-12-1972 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

Judgment (excerpt)

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DEBRA DUN TEA CO. LTD. & ANR. 
v. 
COMMISSIONER OF INCOME TAX, U.P., LUCKNOW 
December 12, 1972 
[K. S. HEGDE AND P. JAGANMOHAN REDDY, JJ.] 
Income-tax Act 1922 s. 10(2) (xv)-Deductib/e expenditure-Tax 
paid by tea growers under U.P. Large Land Holdings Act XXXJ of 1951 
whether deductible. 
The assessee companies were growers of tea. Their income was taxed 
under s. 10 of the Income-tax Act 1922 but under Rule 24 of the Rules 
framed under the Act only 40% of their income was brought to tax. 
The expenditure was also allowed to the extent of 40%. The companies 
claimed that the tax paid by them under the U.P. Large Land Holdings 
Tax Act 1957 was deductible under s. 10(2)(xv) of the Income-tax Act. 
The claim was disallowed by the income-tax authorities. In a reference 
under s. 66(1) the High Court, relying upon the deciaion of this Court 
in Travancore Titanium Product Ltd. v. CJ.T. Kera/a (60 I.T.R. 277) 
answered the questi0n in favour of t,he Revenue. 
Jn these appeals the 
companies relied on the decision of this Court in Indian A.lumlnhun Co. 
Ltd. v. Commissioner of Income Tax, West Bengal (84 I.T.R. 735). It was 
contended on behalf of the respondent that the decision in Indian Alumi-
nium was inapplicable to the case since the tax under the U.P. Act was 
laid on the companies as owners. 
Allowing the appeal, 
, 
HELD : (i) Applying the ratio of the decision in the Indian Alumi-
nium case to the facts of the present case it was clear that the lands 
owned by the assessee companies were their business assets and the tax 
paid threon under the U.P. Act XXX! of 1957 was an item of expendi-
ture laid out by the assessee companies as traders and as incidental to their 
business. Consequently the same must be treated as an item of expendi-
ture under Section 10(2) (xv) of the .Act. [84-H] 
The contention on behalf of the Revenue that the decision in Indian 
Aluminium was inapplicable could not be accepted. 
A tea-grower is 
considered under the Act read with Rules as an owner-cum-trader. 'Ibera-
fore any item of expenditure incurred by him must be considered as an 
item of expenditure incurred by a trader in connection with hil bual· 
ness activity. It is true that only 40 per cent of the net income of the 
tea-growers is brought to tax under- the Ac!; but at the same time the 
tea growers will also be entitled only to 40 per cent of the expenditure 
incurred by them. [8SCDJ 
Travancore Titanium Product Ltd. v. C.J.T, Kera/a. 
60 l.T.R. 277 
referred to. 
Indian Aluminium.;Co. Ltd. v~ Commissioner of Income Tax, West 
Bengal, 84 !.T.R. 735 applied. 
(ii) Section 40 of the Income Tax Act 1961 as amended in 1972 
had no bearing on the point arising for decilion in this case. [86A] 
CML APPELLATE JURISDICTION : Civil Appeals No. 56 to 61 
of 1970. 
81 
84 
SUPREME COURT REPORTS 
[1973) 3 S.C.R. 
Appeals by special leave from the judgment and order dated 
January 1, 1969 of the Allahabad High Court in l.T.R. No. 198 
and 199 of 1965. 
M. C. Chagla, A. K. Verma, J.B. Dadachanji, 0. C. Mathur 
and R. Narain, for the respondents. 
· 
N. C. Kharkhanis, J. Ramamurthi and R. N. Sachthey for the 
respondents. 
The Judgment of the Court was delivered by 
HEGDE, J. 
These are appeals by special leave. 
They are 
directed agains.t the decision of the High Court of Allahaba:i in 
B 
a reference under Section 66 (1) of the Indian Income Tax Act 
C 
1922 (to be hereinafter referred to as the Act). The common 
question of law referred in these appeals was : 
"Whether the tax paid by the assessee company on 
the tea-garden lands under the U.P. Large Land Hold-
ings Tax Act, 1957 (U.P. Act XXXI of 1957) is liable 
to be deduoted under Section 10(2) (xv) ?" 
D 
The High Court answered this question in favour 
of the 
Revenue. 
It did so following the decision of this Court in 
Travancore Titanium Product Ltd. v. C.1.T. Kerala( 1). 
l't may be noted that the assessee companies (there are two 
companies) are taxed under Section 
10 of the Act. 
Their 
income is considered as business income. 
The assessee compa-
nies are tea-growers and the activity they carry on is a business 
activity. 
Therefore, the question is whether the tax paid by 
them under the U.P. Act XXXI of 1957 is an item of expendi· 
ture coming within the scope of Section 10(2) (xv) of the Act. 
In Indian Aluminium Co. Ltd. v. Commissioner of Income Tax, 
West Bengal('), a Five-Judge Bench. of this Court modified the 
decision of this Court in Trav

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