Law:

Section:

-Section 5(e) - Tamil Nadu Agriculture Income-tax Act, 1955 CASES REFERRED TO Teekoy Rubbers (India) Ltd. v. State of Kerala [1966] 60 ITR 350 (Ker.), Gordon Woodroffe Leather Mfg. Co. v. CIT [1962] 44 ITR 551 (SC) JUDGMENT Ramanujam, J.-A common question arises in all these cases. For assessment years 1963-64 and 1964-65, the assessee, who is the same in all these cases, claimed deduction of certain amounts which had been paid as gratuity to certain employees who had retired, in the first two cases. This deduction was allowed by the Agricultural Income-tax Officer. But, later on, he chose to revise the assessment and disallowed the deduction claimed. For the assessment year 1967-68, even in the original assessment, the Agricultural Income-tax Officer did not allow the deduction claimed towards the gratuity amount paid. The reason given by the Income-tax Officer for not allowing the deduction of the amount paid as gratuity to a retired employee is that those payments had no nexus with the future conduct of the business of the assessee, and that, therefore, it could not be claimed as a deduction under section 5(e) of the Madras Agricultural Income-tax Act. This disallowance was upheld by the appellate authority. There was a further appeal to the Tribunal. 2. The Tribunal has, however, found that the amounts paid are not ex gratia, but payments made in pursuance of a consistent practice which has been followed right through by the assessee at least from 1949 and that, therefore, the claim for the amount of gratuity under section 5(e) has to be upheld. This decision of the Tribunal is challenged before us. 3. It is true that an assessee can claim deduction of any expenditure under section 5(e) only if such expenditure is laid out or expended wholly or exclusively for the purpose of the land. Therefore, unless there is sufficient nexus established between the expenditure incurred and the carrying on of the business of plantation, expenditure cannot be claimed as deduction. This is the view taken by the Supreme Court in Gordon Woodroffe Leather Mfg. Co. v. CIT [1962] 44 ITR 551 (SC), while construing the scope of section 10(2)(xv) of the Indian Income-tax Act, 1922,…

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