1996 (6) TMI 80 - HC - Income Tax

Issues Involved:
1. Taxability of rubber replanting subsidy received by the assessee.
2. Applicability of section 10(31) of the Income-tax Act, 1961.
3. Interpretation of the term "income" under section 2(24) of the Income-tax Act, 1961.
4. Relevance of previous judgments and statutory provisions in determining the taxability of subsidies.

Detailed Analysis:

1. Taxability of Rubber Replanting Subsidy:
The primary issue is whether the rubber replanting subsidy received by the assessee is taxable. The Income-tax Officer initially subjected the subsidy amount of Rs. 9,502 to tax, considering it a revenue receipt. However, the first appellate authority, relying on a Tribunal decision, deleted this addition, which was subsequently confirmed by the Income-tax Appellate Tribunal.

2. Applicability of Section 10(31) of the Income-tax Act, 1961:
The court examined the provisions of section 10(30) and section 10(31) of the Income-tax Act, 1961. Section 10(30) excludes subsidies received from the Tea Board for replantation or replacement of tea bushes from the total income. The court noted that section 10(31), which excludes subsidies received from the Rubber Board, was inserted by the Finance Act, 1988, effective from April 1, 1989. The court observed that the statutory exclusion of subsidies for tea plantations indicates that such subsidies would otherwise be includible in the total income computation.

3. Interpretation of the Term "Income" under Section 2(24) of the Income-tax Act, 1961:
The court considered the inclusive definition of "income" under section 2(24) of the Income-tax Act, 1961, referencing the Supreme Court's decision in CIT v. G. R. Karthikeyan [1993] 201 ITR 866. The court emphasized that the inclusive definition is meant to widen the net of what constitutes income. However, the Full Bench decision in CIT v. Ruby Rubber Works Ltd. [1989] 178 ITR 181 clarified that subsidies received under the Rubber Board's scheme are intended for public interest and development of the rubber plantation industry, and thus, do not constitute income.

4. Relevance of Previous Judgments and Statutory Provisions:
The court referred to the Division Bench decision in CIT v. Malayalam Plantations Ltd. [1987] 168 ITR 63 and the Full Bench decision in CIT v. Ruby Rubber Works Ltd. [1989] 178 ITR 181. The Full Bench observed that the subsidy was received under a scheme designed for the development of the rubber plantation industry and had no connection with the assessee's normal trading activities. The court also noted that the inclusion of section 10(31) in the statute book from April 1, 1989, further supports the non-taxability of such subsidies before this date.

Conclusion:
The court concluded that the rubber replanting subsidy received by the assessee is not taxable. The Full Bench decision in CIT v. Ruby Rubber Works Ltd. [1989] 178 ITR 181 was upheld, ruling that the subsidy is not income under the Income-tax Act, 1961. The question was answered in the affirmative, against the Revenue and in favor of the assessee.

A copy of the judgment was directed to be sent to the Income-tax Appellate Tribunal, Cochin Bench, for passing consequential orders.

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