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Commissioner of Income-tax Versus Brihan Maharashtra Sugar Syndicate Ltd.

1989 (10) TMI 235 - HIGH COURT OF BOMBAY

IT REFERENCE NO.567 OF 1976 - Dated:- 4-10-1989 - S. J. BHARUCHA AND T.D. SUGLA., JJ.. JUDGMENT Sugla J. Two questions of law in this reference at the instance of the department are- '1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing as a deduction the payment of bonus made to the agricultural staff and workers in the computation of the total income of the assessee-company for the assessment years 1962-63 to 1966-67? 2. Whether, on the fact .....

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2. The assessee-company owns a sugar mill. It also owns sugar farms and grows sugarcane. Its business is that of manufacture of sugar involving activities which are partly agricultural and partly non-agricultural. The proceedings relate to assessment years 1962-63 to 1966-67 (both inclusive). The assessee, inter alia, claimed deduction in respect of bonus, amount of provident fund contribution and gratuity paid to agricultural staff and workmen. It also claimed deduction in respect of gratuity .....

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. The AAC confirmed the disallowances made by the ITO before the Tribunal, the assessee relied on this Court's decisions in CIT v. Maharashtra sugar Mills Ltd. [1968] 68 ITR 512 , Walchandnagar Industries Ltd. v. CIT [1970] 76 ITR 478 , and the Madhya Pradesh High Court decision in CIT v. Bhopal Sugar Industries Ltd. [1970] 78 ITR 209 , and stated that it had to pay bonus, provident fund and gratuity to the agricultural staff and workmen not in the capacity of an agriculturist but in its cap .....

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arcane in the hands of the assessee was taken to be the cost of growing sugarcane as well as all other expenses incurred in connection therewith. Income arising from such an activity was treated as agricultural income and was liable to agricultural income-tax. A part of that expenditure could not also be allowed as deduction while computing the assessee-company's business income. As regards the decisions relied upon by the Tribunal, Shri Jetley stated that the expenses involved in those case .....

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tated that the agricultural staff and workmen were not entitled to bonus as such. In this case they were entitled to bonus only because the assessee was not merely an agriculturist but was also an industrialist. In support of the proposition, Shri Inamdar reiterated his reliance on the Supreme Court decision in the case of Harinagar Cane Farm v. State of Bihar [1963] I ILJ 692, and the Madras High Court decision in Thiru Arooram Sugars Ltd. v. Industrial Tribunal [1970] II ILJ 249. He argued tha .....

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ill which owns a farm and cultivates sugarcane is an industry and is, therefore, liable to pay bonus to its agricultural staff. The Tribunal has, on that basis, given a finding in paragraph 4 of its order to the effect, viz., that the assessee-company constitutes an industry, for that reason the workers were entitled to bonus, and as such the claim of the assessee to deduct amounts paid as bonus even to the agricultural staff and workmen was an allowable expenditure. Accordingly, we are in agree .....

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tuity paid to the agricultural staff. No decision has been brought to our notice where it has been held that these payments were also made by the assessee-company in the capacity of owner of industry and not as owner of agricultural farm. It is true that the Tribunal has followed the Madhya Pradesh High Court decision in the case of Bhopal Sugar Industries Ltd. (supra) in which there are observations which suggest that expenses of this type could also be allowed as deduction against business inc .....

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