Law: Income Tax Act, 1961

Section: 37

Income-tax--Business expenditure ---Assessee engaged in manufacture of farm equipment----Maintaining 200 acres demonstration farm to train salesmen and dealers---Farm expenditure incurred wholly and exclusively for business---Deductible---Though incurred in relation to agricultural land--­Indian Income Tax Act, 1961, S.37. The assessee was a manufacturer of tractors and form equipment and had a demonstration farm of an extent of 200 acres of land maintained by it to provide training to salesmen and demonstrators employed by it and its dealers, as well as to familiarise farmers with the use of the equipment manufactured by it. The Income-tax Officer rejected the assessee's claim for deducting the expenditure incurred by it on the from solely on the ground that it was expenditure on agricultural land. The Tribunal allowed it. On a reference: Held, that once it was found that the expenditure incurred was one which was laid out wholly and exclusively for the purpose of the assessee's business, the deduction had to be allowed. The expenditure, though incurred in relation to agricultural land, was for the purpose of the assessee's business and was entitled to deduction under section 37 of the Income Tax Act, 1961. CIT v. Maharashtra Sugar Mills Ltd. (1971) 82 ITR 452 (SC) rel. CIT v. Indian Bank Ltd. (1965) 56 ITR 77 (SC); 35 Comp. Cas, 321 ref. THIS JUDGMENT DELIVERED BY: R. JAYASIMHA BABU, J.---The question referred at the instance of the Revenue arising out of the assessment of the respondent's income for the assessment year 1976-77 is, as to whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the disallowance of Rs. 71,088 being the farm expenditure incurred by the assessee. The assessee is a manufacturer of tractors and farm equipment and has a demonstration farm on an extent of 200 acres which has been taken on lease by it for that purpose. It is the case of the assessee that this demonstration farm is maintained by it to provide training to salesmen and demonstrators employed by it and its dealers. The farm is also used as a school where farmers are familiarised with the use of the equipment manufactured by…

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