TMI Blog2009 (3) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. P. S. Sahadevan for the respondent. JUDGMENT R. S. Mohite, J - The questions of law referred to this Court under Section 156(1) of the Income-tax Act are as under:- Common question for the assessment years 1970-71 and 1972-73 :- 1. "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in rejecting the claim of the assessee-company for weighted deduction under section 35C on :- (a) expenses on research on mentha arvensis at the assessee-company's mentha research centre ; (b) expenses on distillation services provided to the cultivators ; (c) expenses on scientific farming. Additional question for the assessment year 1972-73 only :- "Whether, on the facts and in the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses : Rs.1,96,480/- Demonstration expenses : Rs.2,16,449/- The Income-tax officer then went into the details of these expenditures challenging the assessee's ad-hoc bifurcation of the expenses between research and demonstration at 1/4 th and 3/4 th respectively. He held that allocation @ 50% for research and 50% for demonstration would be fair and reasonable. He further objected to the allocation of expenditure on salaries, entertainment, stationery, office expenses, postal and telephone expenses, motor-cycles and jeeps. He granted a deduction in respect of expenditure of Rs.1,03,094/- on demonstration of modern techniques or methods of agriculture under Section 35C(b)(ii). He held that research expenses were not entitled to a weight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in its judgment and order dated 30.4.1986, held that they were unable to agree with the CIT(A) in respect of claim of weighted deduction on (a) research expenses (b) distillation services (c) scientific farming expenses and held that these expenses could not be said to be covered under Section 35-C(b). (f) ITAT however, did not approve of the action of the Income-tax officer in tinkering with the allocation and bifurcation of expenses as made by the assessee between research and demonstration. They accordingly accepted the assessee's claim of demonstration expenses of Rs.2,16,449/-. ITAT rejected the deduction in respect of research expenses claimed by the assessee for an amount of Rs.1,96,480/-, the expenditure on distillatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, pesticides, concentrates for cattle and poultry feed, tools or implements, for use by such cultivator, grower or producer ; (ii) dissemination of information on, or demonstration of, modern techniques or methods of agriculture, animal nusbandry, or dairy or poultry farming, or advice on such techniques or methods ; (iii) such other goods, services or facilities as may be prescribed. Explanation - In computing the expenditure with reference to which deduction under this section is to be allowed, the amount, if any, received by the company or co-operative society in consideration of, or as compensation for, such goods, services or facilities shall be deducted. (2) Where a deduction under this section is claimed and allowed for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT reported in 253 ITR 766. In that case before the Gujrat High Court the assessee was a union of co-operative societies engaged in manufacturing and processing of milk and milk products. The assessee incurred expenditure in the provision of goods, services or facilities viz. salary of veterinary doctors, expenditure for veterinary medicines, veterinary transport, artificial insemination and fodder growing to the persons who supplied raw milk to the assessee. The Gujrat High Court held that under Section 35-C, dissemination of information or demonstration of modern techniques or methods of agriculture, animal husbandry, dairy or poultry farming need not be of such a nature that they should benefit the recipient to adopt such method or te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... start afresh from scratch. We are in agreement with the findings of the ITAT in this regard and therefore, answered question-(1)(a) in the affirmative and in favour of revenue. 7. In so far as expenses on providing distillation services, it was contended by the Counsel that the distillation plant must be interpreted to be a "tool or implement" within the meaning of these terms as contained in Section 35-C(b)(ii), by giving a wider meaning to these terms. It was however, conceded that the distillation plant was not being used directly by cultivators and it was being operated by expert operators engaged by the assessee. We find that the distillation process was carried on firstly for determining the quantum of mentha oil in the crops grow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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