1990 (9) TMI 49 - HC - Income Tax

Summary

Issues involved: The judgment addresses two main issues: 1. Whether rubber replantation subsidy should be treated as agricultural income or revenue receipt for taxation purposes. 2. The appropriate estimation of capital gains on the sale of timber.

Issue 1 - Rubber Replantation Subsidy: The respondent, a public limited company, received subsidy from the Rubber Board for rubber replanting during the assessment year 1979-80. The Income-tax Officer initially treated this subsidy as a revenue receipt taxable under "Income from other sources." However, the Commissioner of Income-tax (Appeals) ruled that the subsidy was not taxable under the Income-tax Act. The Revenue appealed to the Income-tax Appellate Tribunal, arguing that the subsidy should be considered a revenue receipt based on a previous decision of the Kerala High Court. The Tribunal, however, deemed the subsidy as agricultural income since it was provided for agricultural operations. The High Court, considering a subsequent Full Bench decision, concluded that the subsidy should not be taxed as revenue and directed the Tribunal to reexamine the issue in light of the Full Bench ruling.

Issue 2 - Capital Gains Estimation: The Income-tax Officer initially estimated the capital gains from the sale of timber at 50% of the sale value. The Commissioner of Income-tax (Appeals) later reduced this estimation to 30%, a decision upheld by the Appellate Tribunal. The High Court found that the determination of the percentage of capital gains is primarily a factual matter. Since both the Commissioner of Income-tax (Appeals) and the Appellate Tribunal had concurrently decided on 30% as the appropriate estimation, the High Court held that no question of law arose in this regard. Therefore, the High Court answered the second question in favor of the assessee, affirming the 30% estimation of capital gains.

Conclusion: The High Court disposed of the income-tax case by directing the Tribunal to reconsider the treatment of rubber replantation subsidy in accordance with the Full Bench decision and affirming the 30% estimation of capital gains on the sale of timber.