THE COMMISSIONER OF AGRICULTURALINCOME-TAX, KERALAversusTHE PLANTATION CORPORATION OF KERALA LTD., KOTTAYAM

              THE COMMISSIONER OF AG RI CULTURAL                                    A
                      INCOME-TAX, KERALA
                              v.
                THE PLANTATION CORPORATION OF
                    KERALA LTD., KOTTAYAM

                           NOVEMBER 29, 2000                                        B

             [S.P. BHARUCHA, DORAISWAMY RAJU AND
                       MRS. RUMA PAL, JJ.]


      Agricultural Income Tax
                                                                                    c
     Kera/a Agricultural Income-tax Act, 1950-Section 5; Explanation 2-
Rent paid to landlord for the entire estate including the area covered by
immature plants and interest paid on the loan obtained and utilised for the
purpose of cultivation both mature yielding and unyielding immature plants-         D
Whether could be allowed deduction-Held, no.

      Interpretation of Statutes:

      Explanation under a section-Whether applies to the whole section or
to a particular clause of the section-Held, Explanation applies to the whole        E
section-Kera/a Agricultural Income-Tax Act, 1950-Section 5 clause OJ
Explanation 2.

       Respondent-assessee claimed deduction for rent paid to landlord in
respect of the entire estate including the area covered by immature oil palm
plants and for interest paid on the loan obtained and utilised for the purpose      p
of cultivation both mature yielding and unyielding immature oil palm plants
in the returns filed under the Kerala Agricultural Income-Tax Act, 1950. The
Revenue as well as the Tribunal disallowed the deductions on the basis of
Explanation 2 to Section 5 of the Act. In appeal by the assessee, the High
Court allowed the deductions holding that Explanation 2 to Section 5 of the
Act is an explanation only to clause (j) of the Section and not to the other sub-   G
clauses of the Section. Hence the appeals by the Revenue.

      Allowing the appeals, the Court

      HELD : 1.1. Section 5 in providing for computation of agricultural
                                      135
                                                                                    H
    136                      SUPREME COURT REPORTS [2000] SUPP. 5 S.C.R.

A    income for the purpose of the Kera la Agricultural Income-Tax Act, 1950
    stipulates that the agricultural income of a person shall be computed after
     making the various deductions enumerated in Clauses(a) to (n) to the extent
     mentioned and also in the manner specified therein. It is an admitted position
    and the High Court also proceeded on such basis that clause (j) of Section S
B   of the Act is in the nature of a residuary provision, in which event, it
     necessarily means that the other clauses are in relation to a few of the
    enumerated items of expenditure envisaged for deduction and the mere fact
    that some alone are illu~trated specifically do not render those provisions to
    be read in to truncated or disjointed manner from the residuary clause
    ignoring the avowed object of section 5 as a whole, viz., computation of
C   agricultural income, as defined in Section 2(a) of the Act after making the
    deductions to which an assessee is found eligible. When Explanation 2
    specifically uses the words, "nothing contained in this section shall be..... "
    expressing a specific intention to encompass the entire Section 5 of the Act
    reading it otherwise and to confine its relevance and application to only clause
D   (j) of Section 5 would amount to not only rewriting the statutory provision by
    the Court, but also doing violence to the plain and simple language used. When
    an Explanation or Proviso was to apply to any one clause or limb alone of
    Section 5, the legislature has chosen to incorporate it even in the very Section
    below the specific or particular clause which it was meant to explain or except
    as in clause (c) or (I) and (n). The fact that instead of doing so Explanation
E   2 has been incorporated at the end of Section 5 along side Explanation I, which
    also used the words "for the purpose of this section....", the intention of the
    legislature must be considered to have been made certain, positive and
    unambiguous, leaving no room or scope whatsoever for having recourse to
    either internal or external aids for interpretation or construction of the said
    provision. (142-A-F)
F
           1.2. The High Court appears to have been carried away by the fact of
    some assumed similarity of the purpose of expenditure envisaged in clause
    (j) of Section 5 and those covered by Explanation 2 and from the further fact
    of retrospective effect having been given to the said Explanation with effect
G   from 1.4.1951, to presume that in doing so the legislative intention indicated
    was to avoid refunds being made on account of Travancore Rubber & Tea Co.
    Ltd. case. This is fallacious and cannot be so presumed. The decision declari,ng
    the position of law on the scope of clause (j) to Section 5 might have been the .
    occasion for the legislature to enact Explanation 2, and that too with
    retrospective effect but the said occasion would have equally enlightened and
H   served as an eye opener about the need for enacting the Explanation in such
         COMMR. OF AGRICULTURAL INCOME-TAX·,, PLANTATION CORPN OF KERALA LTD.   137

a manner as to avoid similar claims being projected in respect of expenditure          A
or deductions envisaged in the various other limbs of Section 5 as well, apart
from clause (j) alone. This Court has always been reiterating that if the
intendment is not in the words used, it is nowhere else and so long as there
is no ambiguity in the statutory language resort to any interpretative process
to unfold the legislative intent becomes impermissible and the need for                B
interpretation arises only when the words in the statute are on their own terms
ambivalent and do not manifest the intention of the legislature. That apart, an
Explanation is intended to either explain the meaning of certain phrases and
expressions contained in a statutory provision or depending upon its language,
it might supply or take away something from the contents of a provision and
at times even to, by way of abundant caution, clear any mental cobwebs                 C
surrounding the meaning of a statutory provision spun by interpretative
process to make the position beyond controversy or doubt
                                                           [142-G-H; 143-A-D)

       1.3. The reasoning of the High Court as to the need for having recourse
to internal or external aids to interpret Explanation 2 to Section 5 as well as        D
its ultimate conclusion to whittle down the otherwise wide range and area of
operation and application of Explanation 2 to the entirety of Section 5 of the
Act. Explanation 2 to Section 5 of the Act, cannot be approved, therefore
explains generally as to what are not deductible as expenditure for the purpose
of computing the agricultural income in the light of the various clauses of            E
Section 5 of the Act, as a whole. [143-E-F)

      1.4. The claims of the respondent, be it in respect of rent or interest
paid to the creditors by the assessee on the loans obtained and utilised for the
purpose of cultivation etc. shall not be eligible for deduction so far as it relates
to the respective portions spent in respect of land or the bringing up of the          F
immature oil palm plantation. [143-G)

     Travancore Rubber & Tea Co. Ltd., (1961) 41 ITR 751 SC; Mis.
Doypack Systems Pvt. Ltd. etc. v. Union of India & Ors. etc., [1988) 2 SCC
299 and Mis Keshavji Ravji & Co. & Ors. v. Commissioner of Income Tax,
[1990) 2 sec 231, referred to.                                                         G
        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2243-49 of
1993.

      From the Judgment and Order dated 17 .11.92 of the Kerala High Court
in T.R. C. Nos. 106, 111, 129, 133, 143 and 162of1991.
                                                                                       H
    138                         SUPREME COURT REPORTS [2000) SUPP. 5 S.C.R.

A         T.L.V. Iyer, G. Prakash and Jyothish for the Appellant.

          S. Ganesh (A.C) for the Respondent

          The Judgment of the Court was delivered by

B         RAJU, J. The correctness ofa decision of the Full Bench of the Kerala
    High Court construing Explanation 2 to Section 5 of the Agricultural Income-
    Tax Act, 1950, inserted by Kerala Act 9 of 1961, to be confined in its application
    only to Clause U) of Section 5 and not to Section 5 as a whole is put in issue
    in these appeals. Section 5 of the Agricultural Income-Tax Act reads as
    follows:
c
          "5. Computation of agricultural income.-The agricultural income of a
    person shall be computed after making the following deductions, namely :-

            (a) any sums paid in the previous year on account of -

D           (i)    land revenue or any tax in lieu thereof due to the Government,
                   the Sreepandaravagai or the Sreepadam;
            (ii)   Jenmika.raIJl;
            (iii) Thiruppuvaram; and
E           (iv) local rates and cesses and municipal taxes, in respect of the land
                 from which the agricultural income is derived.

           (b) any rent paid in the previous year to the landlord or superior
           landlord, as the case may be, in respect of land, from which the
           agricultural income is derived;
F
           (c) any expense incurred in the previous year on the maintenance of
           any irrigation or protective work constructed for the benefit of the
           land from which the agricultural income is derived;

          Explanation-"Maintenance" includes current repairs and includes aim.
G   in the case of protective dykes and embankments all such work as may be
    necessary from year to year for repairing any damage or destruction caused
                                                                                         .-
    by flood or other natural causes.

           (d) any expenses incurred in the previous year on repairs in respect
           of any capital asset which was purchased or constructed for the
H          benefits of the land from which the agricultural income is derived;
    COMMR OF AGRICULTURAL INCOME-TAX'· PLANTATION CORPN. OF KERALA LTD [RAJc, J l   J39

        (e) any interest paid in the previous year on any amount borrowed                 A
        and actually spent on any capital expenditure incurred for the benefit
        of the land from which the agricultural income is derived;

        (f) where land from which the agricultural income is derived is subject
        to a mortgage or other capital charge, any interest paid in the previous
        year in respect of such mortgage or charge;                                       B
        (g) any interest paid in the previous year on any debt, whether
        secured or not, incurred for the purpose of acquiring the land from
        which the agricultural income is derived;

        (h) any sum paid in the previous year as interest in respect of                   C
        agricultural loans taken and expended on the land from which
        agricultural income is derived;

        (i) interest paid on any amount borrowed and actually spent for the
        purpose of re-claiming, improving or cultivating the property from
        which agricultural income is derived;                                             D
        (j) any expenditure (not being in the nature of capital expenditure or
        personal expenses of the assessee) laid out or expended wholly and
        exclusively for the purpose of deriving the agricultural income;

        (k) such other deductions as may be prescribed generally or in                    E
        particular cases;

        (l) in respect of depreciation of buildings, machinery, plant and furniture
        which are the property of the assessee and are required for the
        purpose of deriving the agricultural income, a sum equivalent to such
        percentage on the written down value, thereof as may in any case or               F
        class of cases be prescribed and where the buildings have been newly

]       erected or the machinery or plant newly installed a further sum subject
        to such conditions as may be prescribed:

        Provided that full particulars have been duly furnished:

        Provided further that the aggregate of all such allowances made under             G
        this Act shall in no case exceed the original cost to the assessee of
        the buildings, machinery, plant or furniture, as the case may be;

        (m) in the case of agricultural income under the head rent or revenue
        derived from land referred to in sub-clause (I) of clause (a) of section
        2 - (agricultural income from rent or revenue) :-                                 H
    140                     SUPREME COURT REPORTS [2000] SUPP. 5 S.C.R.

A         (i)    any expenses actually incurred in the previous year in the
                 collection of agricultural income;
          (ii)   any expenses incurred in the previous year on repairs in respect
                 of any capital asset used in connection with the collection of
                 rent due in respect of the land from which the agricultural income
B                is derived;

          (n) in the case of agricultural income referred to in sub-clause (2) of
          the clause (a) of section 2-(agricultural income from agriculture) :-

          (i)    the expenses other than capital expenditure incurred in the
                 previous year of cultivating the crop from which the agricultural
c                income is derived and of transporting such crop to market,
                 including the maintenance of agricultural implements and cattle
                 required for such cultivation and transport or both;
          (ii)   any tax, cess or rate paid on the cultivation or sale of the crop
                 from which such agricultural income is derived;
D
          (iii) the cost incurred in the previous year in the purchase of
                replacement of cattle or implements, which are necessary for
                cultivation, to such extent as may be prescribed, less the amount
                realized by sale of the cattle or implements replaced" or their
                estimated value;
                                                                                      ...
E
          (iv) any sum paid in the previous year in order to effect an insurance
               against loss or damage of crops or property from which the
               agricultural income is derived or insurance against loss or damage
               in respect of building, machinery, plant and furniture necessary
               for the purpose of deriving the agricultural income: Provided
F              that any amount received in respect of such insurance in any
               year shall be deemed to be agricultural income for the purposes
               of this Act, and shall be liable to agricultural income-tax after
               deducting the portion, thereof, if any, which has been assessed
               to income-tax under the Indian Income-tax Act, 1922;
G         (v) any expenses incurred in the previous year on the maintenance
              of any capital asset if such maintenance is required for the
              purposes of deriving the agricultural income:
                 Provided that no deduction shall be made under this section if
                 it has already been made in the assessment under the Indian
H                Income-tax Act, 1922.
       COMMR OF AGRICULTURAL INCOME-TAX'· PLANTATION CORPN OF KERALA LTD (RAJU. J]   ]4 J
            Explanation /-For the purpose of this section "paid" means actually             A
            paid or incurred according to the method of accounting upon the
            basis of which agricultural income is computed under this section;

            "Plant" includes vehicles and Scientific apparatus purchased for the
            purpose of deriving the agricultural income; and "written down value"
            means-                                                                          B
            (i)    in the case of assets acquired in the previous year, the actual
                   cost to the assessee and

            (ii)   in the case of assets acquired before the previous year the
                   actual cost to the assessees less such sum as may be prescribed.         C
            Explanation 2-Nothing contained in this section shall be deemed to
            entitle a person deriving agricultural income to deduction of any
            expenditure laid out or expended for the cultivation, upkeep or
            maintenance of immature plants from which no agricultural income has
            been derived during the previous year."                              D
           The appeals before us relate to three Assessment Years 1975- 76, 1976-
    77 and 1977-78. Revisions came to be filed before the High Court in respect
    of the three assessment years against the original remand orders and orders
    subsequently passed by the Tribunal on appeals filed before it against orders
    giving effect to earlier orders of remand. The respondent-assessee projected E
    claims for deduction of the rent paid to its landlord in respect of the entire
    estate including the area covered by immature oil palm plants, which did not
    as also could not yield any income and interest paid on the loan obtained and
    utilised for the purpose of cultivation etc. in respect of the entire estate
    comprising both mature yielding as well as unyielding immature oil palm F
]   plants. It is in adjudicating the tenability or otherwise of these claims that the
    High Court has chosen to consider the role of Explanation 2 to Section 5 and
    held that Explanation 2 is to be an Explanation to only Section 5 (j) and not
    to the other sub-clauses of Section 5. The High Court has chosen to come
    to such a conclusion despite the opening words used, "nothing in this
    section ..... " in Explanation 2 by adopting and applying what it chose to G
    describe as internal as well as external aids of construction. In the opinion
    of the High Court, its conclusion about the limited role and applicability of
    Explanation 2 only to Section 5 (j) arrived at on the basis of internal aids gets
    confirmed by construction with reference to external aids also.

         Heard the learned senior counsel for the aooell•nt-.<;;totP onn thP. learned       H
     142                      SUPREME COURT REPORTS [2000] SUPP. 5 S.C.R.

A counsel for the respondent-assessee. Section 5 in providing for computation
  of agricultural income for the purposes of the Act stipulates that the agricultural
  income of a person shall be computed after making the various deductions
  enumerated in Clauses (a) to (n) to the extent mentioned and also in the
  manner specified therein. It is an admitted position and the High Court also
B proceeded on such basis only having regard to some of the decisions of this
  Court as well as of the Kerala High Court that Clause U) of Section 5 of the
  Act is in the nature of a residuary provision, in which event in our view, it
  necessarily means that the other clauses are in relation to a few of the
  enumerated items of expenditure envisaged for deduction and the mere fact
  that some alone are illustrated specifically do not render those provisions to
C be read in a truncated or disjointed manner from the residuary clause ignoring
  the avowed object of Section 5 as a whole, viz., computation of agricultural
  income, as defined in Section 2 (a) of the Act after making the deductions to
  which an assessee is found eligible. Thus, viewed when Explanation 2
  specifically use the words, "nothing contained in this section shall be ...... "
  expressing a specific intention to encompass the entire Section. 5 of the Act
D reading it otherwise and to confine its relevance and application to only
  clause U) of Section 5 would amount to not only rewriting the statutory
  provision by the Court, but also doing violence to the plain and simple
  language used. When an Explanation or Proviso was to apply to any one
  clause or limb alone of Section 5, the legislature has chosen to incorporate
E it even in the very Section 5 below the specific or particular clause which it
  was meant to explain or except as in clause (c) or (1) and (n). The fact that
  instead of doing so the Explanation 2 has been incorporated at the end of
  Section 5 along side Explanation I, which also use the words "for the purpose
  of this section ..... ", the intention of the legislature must be considered to have
  been made certain, positive and unambiguous, leaving no room or scope
F whatsoever for having recourse to either internal or external aids for
  interpretation or construction of the said provision.

        The High Court appears to have been carried away by the fact of some
  assumed similarity of the purpose of expenditure envisaged in Section 5 U)
G and those covered by Explanation 2 and from the further fact of retrospective
  effect having been given to the said Explanation with effect from 1.4.51, to
  presume that in doing so the legislative intention indicated was to avoid
  refunds being made on account of the Supreme Court judgment reported in
  (1961) 41 !TR 751 SC: Travancore Rubber & Tea Co. ltd case which, in tum,
  concerned Section 5 U) of the Act. This in our view is fallacious and cannot
H be so presumed. The decision of the Supreme Court declaring the position
        COMMR OF AGRICULTURAL INCOME-TAX'· PLANTATION CORPN. OF KERALA LTD. [RAJU,!.)   143
     of law on the scope of Section 5 G) might have been the occasion for the                 A
     legislature to enact Explanation 2, and that too with retrospective effect but
     the said occasion would have equally enlightened and served as an eye
     opener about the need for enacting the Exp Ian a ti on in such a manner as to
     avoid similar claims being projected in respect of expenditure or deductions
     envisaged in the various other limbs of Section 5 as well, apart from clause             B
     G) alone. This Court has always been reiterating that if the intendment is not
     in the words used it is nowhere else and so long as there is no ambiguity
     in the statutory language resort to any interpretative process to unfold the
     legislative intent becomes impermissible and the need for interpretation arises
     only when the words in the statute are on their own terms ambivalent and
     do not manifest the intention of the legislature. (vide [1988] 2 sec 299                 c
     (Mis Doypack Systems Pvt. Ltd etc. v. Union of India & Ors. etc.) and [1990]
     2 SCC 231 (Mis Keshavji Ravji & Co. & Ors. v. Commissioner of Income Tax).
     That apart an Explanation is intended to either explain the meaning of certain
     phrases and expressions contained in a statutory provision or depending
     upon its language it might supply or take away something from the contents               D
     of a provision and at times even to, by way of abundant caution, clear any
     mental cobwebs surrounding the meaning of a statutory provision spun by
     interpretative process to make the position beyond controversy or doubt.

           Consequently, we are unable to approve the reasoning of the High
     Court as to the need for having recourse to internal or external aids to                 E
     interpret the Explanation 2 to Section 5 as well as its ultimate conclusion to
     whittle down the otherwise wide range and area of operation and application
     of Explanation 2 to the entirety of Section 5 of the Act. In our view, Explanation
     2 to Section 5 of the Act, therefore explains generally as to what are not
     deductible as expenditure for the purpose of computing the agricultural income
     in the light of the various clauses of Section 5 of the Act, as a whole.                 F
            The appeals pertaining to all the assessment years involve in common
,.   the question of deduction of rent and the further question of deduction of
     interest arises only in respect of the appeals for the assessment years 1975-
     76 and 1976-77. The claims of the respondent, be it in respect of rent or
     interest paid to the creditors by the assessee on the loans obtained and                 G
     utilised for the purpose of cultivation etc. shall not be eligible for deduction
     so far as it relates to the respective portions spent in respect of land or the
     bringing up of the immature oil palm plantation. The appeals, therefore, have
     to be and are allowed. Cost on parties.
     B.S.                                                             Appeals allowed.        H