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TMI Blog2012 (2) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... chemicals. The assessee files return of Income for the year 2004-2005. Assessee claimed deduction under Section 10-B of the Income Tax Act, 1961 (for short hereinafter referred to as 'the Act'). The Assessing Authority disallowed the cultivation expenses amounting to Rs. 90.64 Lakhs. The Appeal preferred by the Assessee to the Commissioner of the Income Tax (Appeals) came to be dismissed. In the further appeal against the said order to the Tribunal the Tribunal held the assessee had not generated any agriculture income out of it's venture; the Assessee has not engaged in any agriculture activities but for cultivation of coleus plants to facilitate its business and due to commercial expediency. It had incurred cultivation expenses to the tun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch was required to make a commercial cultivation of the plant. To cultivate this plant the Assessee had to undertake farm trials to optimize in different fields such as:- (i) Optimization of the right season for cultivation. (ii) Standardization of the right fertilizer application. (iii) Optimization of the right solid conditions. (iv) use of various organic fertilizers. (v) Use of bio-controls and other control measures for disease control. These exercise done by the assessee during the relevant period for maximizing the yield did not result in a desired effect. In order to promote the cultivation of coleus the farmers were roped-in to cultivate this rare herbal plant and encouraged them to opt for this crop. For this purpose the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e wholly and exclusively for the purpose of business. Such expenses are therefore allowable......" 6. In fact the Apex Court had an occasion to consider this question in the case Commissioner of Income Tax, Mysore Vs. Mysore Sugar Co. Ltd., reported in 1962 ITR vol. XLVI Page 649. The question which was posed for consideration was for what was the money laid out? Was it to acquire an asset of an enduring nature for the benefit of the business or was it an outgoing in the doing of the business?. If money be lost in the first circumstance it is a loss of capita but if lost in the second circumstance it is a revenue loss. In the first, it bears the character of an investment but in the second to use a commonly understood phrase, it bears the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y settled. If the money spent by the Assessee is by way of investment, then the assessee is not entitled to deduct the same as expenditure. It would be in the nature of capital expenditure, which is not deductible. However if the money spent is not for acquiring asset of enduring nature for the benefit of the business but which is only an outgoing in the doing of the business, them it would be an expenditure in the course of this business. 9. If the Assessee has spent money by way of financial accommodation to the farmers or expenses incurred in supplying seeding fertilizers and for other cultivation expenses, then it would be in the nature of revenue expenditure. It is incurred by the Assessee for a commercial expediency. It was incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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