STATE OF MADRAS Vs. THIRU AROORAN SUGARS LIMITED

JUDGEMENT

(1.) THE State has preferred this revision petition against the order of the Tribunal, allowing certain deductions under section 5(e) and section 5(k) of the Madras Agricultural Income-tax Act.

(2.) THE assessee is Thiru Arooran Sugar Mills Ltd., and the assessment relates to the year 1958-59. THE dispute in the revision case relates to two categories of deductions : (a) interest paid by the assessee in respect of the balance of the purchase consideration due by the assessee; (b) interest paid on money borrowed for expenses incurred by the assessee while carrying on its business, i.e., agricultural operations and manufacture of sugar. THEre is no dispute about other items. THE assessee for the purpose of his business had purchased large extends of lands for raising sugarcane for about rupees 58 lakhs out of which after payments so far made there is a balance of about rupees 21 lakhs carrying interest at 6%. THE assessee claimed a deduction of a sum of Rs. 1,22,520 towards interest paid on the unpaid purchase money aforesaid. THE Tribunal upheld this claim following the Bench decision of this court in G. J. Coelho v. State of Madras. In that case the assessee had borrowed money for purchasing an estate consisting of tea, coffee and rubber plantations in Nilgris, Madras State. THE Bench held that the loan which was utilised and spent for acquiring the plantations was wholly and exclusively for the purpose of the sources of income of the assessee, and that the payment of interest on the amount so borrowed was an allowable deduction under section 5(e) of the Act. THE matter went in appeal to the Supreme Court and in State of Madras v. G. J. Coelho the Bench decision of the Madras High Court was affirmed. In view of this, the State cannot resit the claim of the assessee for deduction under section 5(e).

(3.) ACCORDING to the judgment of the Supreme Court there is no difference between interest paid on moneys borrowed for the acquisition of a plantation and interest paid on moneys borrowed for the purpose of working the existing plantation, and that both would be for the purposes of the plantation, or expended wholly and exclusively for the purpose of the land. It may be noticed that the Supreme Court decided the case on the ground that the money borrowed was wholly and exclusively for the purpose of the land and did not advert to this aspect, i.e., the general provision in section 5(e) being excluded by the special provision in section 5(k).