Sudhindra Mohan Guha, J.:— This reference under s. 256(1) of the I.T Act, 1961, at the instance of the assessee relates to the assessment year 1973-74, for which the previous year ended on 31st August, 1972. The assessee in the year under consideration was carrying on agricultural activity of growing sugarcane, manufacturing sugar and selling the same, etc. In respect of the sugarcane unit the claim of the assessee for allowing agricultural development allowance under s. 35C of the Act was disallowed by the ITO on the ground that the conditions laid down therein had not been fulfilled. The amount claimed was Rs. 3,16,855.
2. The said disallowance was also upheld by the AAC. Aggrieved by the said order of the AAC the assessee came in further appeal before the Tribunal. It was urged on behalf of the assessee that the agricultural development allowance was available to the assessee even if the assessee itself was a cultivator, grower or producer of the products as mentioned in s. 35C of the Act and the provision of the goods, services or facilities was by the assessee-company to the assessee-company itself. This view of the assessee was controverted by the departmental representative by urging that the agricultural development allowance stipulated in s. 35C would cover only that expenditure which had been incurred to provide goods, services or facilities to certain classes of persons, viz., cultivators, growers or producers in India, persons distinct from the assessee-company. In support of such view reference was made to the language used in els. (a) and (b) of sub-s. (1) of s. 35C of the Act and also to the language used in the Explanation thereto. The Tribunal upheld the order of the AAC by observing as under:
“A perusal of this provision shows that the following conditions must co-exist before the agricultural development allowance stipulated therein can be allowed:
(1) The assessee should be a company.
(2) The company must be utilising any product of agriculture, animal husbandry or dairy or poultry farming. Such product may be utilised by the assessee as raw materials in its manufacture or processing.
(3) It applies to expenditure incurred after 29th February, 1968, whether directly by the assessee or through an approved association or body, by the prescribed authority.
(4) The expenditure covered by the section should have been incurred to provide goods, services or facilities to certain classes of persons and should be of the types mentioned in clause (b) of sub-section (1).
(5) The class of persons contemplated by the provision, to assist whom the expenditure is to be incurred, is the class of ‘cultivators, growers or producers in India’ of the agricultural product in question, but he should not be one of the persons closely connected with the assessee within the meaning of section 40A(2)(b) of the Act, and
(6) The relief available is the deduction of 120 per cent, instead of 100 per cent, of the expenditure in question incurred during the previous year.”
3. Thereafter, looking to the language used in cl. (a) of sub-s. (1) as also in cl. (b) thereof, it was opined by the Tribunal that it was apparent, though the provision of s. 35C should be interpreted liberally, that the person who was a cultivator, grower or producer of such products in India had to be a person distinct from the company itself. With reference to the Explanation it was observed that in computing the expenditure with reference to which deduction under the said provision was to be allowed, the amount, if any, received by the company in consideration of or as compensation for such goods, services or facilities should be deducted.
4. Next, it was observed by the Tribunal that the mere fact that the person to whom the provision of any goods, services or facilities are to be provided for by the’ Company should not be a person referred to in cl. (b) of sub-s. (2) of s. 40A of the Act, indicates that the said person has to be a ‘person distinct and not connected with the assessee. Thus, disagreeing with the assessee, the Tribunal agreed with the I.T authorities that the agricultural development allowance claimed by the assessee could not be allowed to it because the manufacture in question in respect of which agricultural development allowance is claimed had been incurred by providing seeds, manure, etc., to the assessee which is for the purpose of its sugarcane farm. On the above facts and circumstances found by the Tribunal, the following question was referred to this court for its opinion:
“Whether, on the facts and in the circumstances of the case, the assessee is entitled to agricultural development allowance of Rs. 3,16,855 under section 35C of the Income-tax Act, 1961, in its assessment for the accounting period relevant to the assessment year 1973-74?”
5. Mr. Nirmal Mukherjee, learned counsel for the assessee, contends that for the purpose of claiming agricultural development allowance a person who is a cultivator, grower or producer of agricultural products in India need not be a person distinct from the company itself. He draws our attention to the order of the Tribunal at page 57 of the paper book. In para. 10 it is stated that in respect of the sugarcane unit, the claim of the assessee for allowing agricultural development allowance under s. 35C has been disallowed by the ITO on the ground that the condition laid down therein had not been fulfilled. Section 35C of the Act makes provision for agricultural development allowance. The AAC at page 58 of the paper book, while confirming the order of the ITO, observed as under:
“The above provision shows that the allowance is available only to such company which is engaged in the manufacture or processing of any article which is made from or used for processing as raw materials of any product of agriculture, etc. The appellant is not manufacturing or processing any of these items. It is in fact a consumer of these items. The purpose of giving weighted deduction under section 35C is to encourage production of articles like fertilizer, pesticides, etc. The benefit is available to the manufacturer of these products only.”
6. Next, he draws our attention to the submission made by the departmental representative before the Tribunal. It was urged that agricultural development allowance stipulated in s. 35C would cover only that expenditure which had been incurred to provide goods, services or facilities to certain class of persons—cultivators, growers or producers in India—persons distinct from the assessee-company. He also draws our attention to page 61 of the paper book wherein the Tribunal lays down conditions for entitling a company to development allowance which we have already set forth before.
7. Next, Mr. Mukherjee argues that in the assessment year 1975-76, the Tribunal held that the assessee was entitled to claim agricultural allowance in terms of s. 35G of the Act. It was observed by the Tribunal at page 73 of the paper book that it could not be held that the benefit of s. 35C in terms of what was contained in sub-s. (1) of that section, was deprived to a person who cultivated for itself to make the product marketable and it was in this sense the Tribunal considered the weighted deduction given by Parliament. It was also observed at page 75 of the paper book that s. 35C being an incentive section a liberal construction should be put upon that section. Even if it was stated that two views were possible, the provision being a provision in a taxing statute with reference to an incentive matter, the view that was taken in favour of the assessee was to be applied. In this view of the matter, the claim for agricultural development allowance was allowed to the assessee. As we could not agree with Mr. Mukherjee that the earlier decision of the Tribunal was a precedent, or operated as a res judicata, with reference to the divergent opinion of the Tribunal as to the interpretation of s. 35C of the Act, Mr. Mukherjee asks us to accept the view which was in favour of the assessee.
8. Mr. Mukherjee next takes us through the proposals for the proposed amendments to the I.T Act as reported in [1968] 67 ITR (St.) 79 at p. 84. Paragraph 50 at p. 84 mentions about tax incentives for improving agricultural productivity and increasing supplementary food resources. Paragraph 50(2) lays down that a company which uses the products of agriculture, animal husbandry or dairy or poultry farming as raw material for their industry or process, such product is eligible for weighted deduction in the computation of its business profits with reference to expenditure incurred by the company in providing goods, services or facilities under specified heads to a cultivator, grower or producer of the products of agriculture, etc. Thus, according to Mr. Mukherjee, both ss. 35B and 35C were imported into the I.T Act for giving a scope for market development allowance and agricultural development allowance, respectively.
9. Next, Mr. Mukherjee refers to the decision of this court in the case of CIT v. Clive Insurance Co. Ltd., [1972] 85 ITR 531. At p. 577 of the report, their Lordships observed as under:
“To us, however, it appears that section 49D which has been enacted for the purpose of granting relief to an assessee should be so construed as will serve the object and purpose of the said section and the said section should be construed liberally in favour of an assessee and necessary relief should be granted whenever the requisite conditions are fully satisfied.”
10. On the basis of this observation of their Lordships, Mr. Mukherjee asks us to interpret the word “person” in s. 35C of the Act to include the “company itself”. He also refers to Maxwell on the Interpretation of Statutes, 12th Edn., p. 228, wherein it is observed that “canons of construction are not so rigid as to prevent a realistic solution”. According to Mr. Mukherjee, s. 35C should be liberally construed so as to give relief to the assessee. Next, Mr. Mukherjee refers to the observation of the Supreme Court in the case of Babu Manmohan Das Shah & Others v. Bishun Das, AIR 1967 SC 643. It is argued by him that the word “or” was interpreted as “and” in the facts and crcumstances of that case. Next, Mr. Mukherjee relies on the decision of the Supreme Court in the case of State of Madhya Pradesh v. Azad Bharat Finance Co., AIR 1967 SC 276. At p. 278 it has been observed by their Lordships that if a statute leads to absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence. On the basis of this decision and also to avoid hardship or injustice he asks us to read s. 35C and to put a construction upon it so as to include the company itself. He also cites the decision of the Supreme Court in the case of Budhan Singh v. Babi Bux, (1969) 2 SCC 481 : AIR 1970 SC 1880. In this case, their Lordships of the Supreme Court interpreted the word “held” as “lawfully held”. Being encouraged by the addition of the word “lawfully” he asks us to accept his contention.
11. In our opinion, the question of interpretation of any section or word arises if and when there is any ambiguity. If the meaning of the section is clear, in that case the aid of interpretation as suggested by Mr. Mukherjee need not be sought for. The law of interpretation does not authorise the court to supplement any word for giving effect to the section itself. As already pointed out no such question would arise if there is no ambiguity. It is very clear from s. 35C itself that it was never the intention of the Legislature to give relief by way of agricultural development allowance to all concerned, but only to a particular category. The allowance can be claimed by a company or a co-operative society engaged in the, manufacture or processing of articles or things made out of or by using any product of, agriculture, animal husbandry, dairy or poultry farming. | The expenditure may be incurred directly or through an approved body or institution.
12. Thus, while concluding his arguments, Mr. Mukherjee points out that if the word “person” can be interpreted in two ways, the one that is in favour of the assessee should be accepted. In support of his contention, he relies on a decision of the Supreme Court in the case of CIT v. Naga Hills Tea Co. Ltd., [1973] 89 ITR 236. It is held therein that if a provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee has got to be accepted. We have already pointed out that there is no scope for interpretation of the section in two ways.
13. Mr. B.K Bagchi, learned advocate for the revenue, without disputing the law as enunciated by their Lordships in CIT v. Naga Hills Tea Co. Ltd., [1973] 89 ITR 236 (SC), contends that there is no scope for interpretation of s. 35C of the Act. With reference to s. 35C of the Act, he argues that a company can claim development allowance provided any expenditure is made for the provision of any goods, services or facilities specified in cl. (b) to a person who is a cultivator, grower, etc. Thus, according to him, expenditure means something which goes out of a trader's pocket. According to him, it is not even an expenditure if a company or a person spends any amount for itself or himself. He refers to an observation made by my Lord Mr. Justice Sabyasachi Mukharji in the case of Commissioner Of Income-Tax (Central-I) v. Eastern Spinning Mills Ltd., [1980] 126 ITR 686 at p. 695. It is stated therein that expenditure in this sense was equal to disbursement which, to use a homely phrase, meant something which went out of a trader's pocket. Thus, according to Mr. Bagchi, in order to avail of the development allowance as provided in s. 35C of the Act, the company was to make an expenditure for the provision of any goods, services, etc. Next, he refers to s. 35C(1)(b). Under this provision the goods, services or facilities referred to in cl. (a) are, amongst others, the following:
14. Fertilizers, seeds, pesticides, concentrates for cattle and poultry feed, tools or implements, for use by such cultivator, grower or producer.
15. According to him cost of cane would not come within any of the items referred to above. We need not enter into this question not pressed before the Tribunal, as we have interpreted the main section as not to include the company itself within the word “person”.
16. We, therefore, agree with the view taken by the Tribunal that the agricultural development allowance stipulated in s. 35C would cover only that expenditure which had been incurred for goods, services or facilities to certain classes of persons—cultivators, growers or producers in India, viz., the persons distinct from the assessee-company. On the facts and circumstances found by the Tribunal and also on the interpretation of s. 35C made by the Tribunal we answer the question in the negative and in favour of the revenue. There will, however, be no order as to costs. The assessee orally prays for the grant of a certificate for leave to appeal to the Supreme Court. We do not think that it is a fit case for granting the said certificate. Oral application is, therefore, dismissed.
Sabyasachi Mukharji, J.:— I agree.