1987 (3) TMI 52 - HC - Income Tax

Summary

Issues Involved:
1. Expenditure on maintenance of bungalows and depreciation thereon u/s 40A(5).
2. Expenditure and depreciation on motor car u/s 40A(5).
3. Capital gains on the sale of rubber trees.
4. Subsidy received from the Rubber Board as income.

Summary:

Issue 1: Expenditure on maintenance of bungalows and depreciation thereon u/s 40A(5)
The Tribunal held that the expenditure on maintenance of bungalows owned by the assessee and depreciation thereon cannot be considered u/s 40A(5) of the Income-tax Act, 1961. The High Court, referencing CIT v. Forbes Ewart & Figgis (P.) Ltd. [1982] 138 ITR 1 (Ker) [FB], answered this question in the negative, in favor of the Revenue and against the assessee.

Issue 2: Expenditure and depreciation on motor car u/s 40A(5)
The Tribunal held that only a portion of the expenditure and depreciation on the motor car can be considered properly includible u/s 40A(5) and not the entire expenses. The High Court, again referencing CIT v. Forbes Ewart & Figgis (P.) Ltd. [1982] 138 ITR 1 (Ker) [FB], answered this question in the affirmative, in favor of the assessee and against the Revenue.

Issue 3: Capital gains on the sale of rubber trees
The Tribunal decided that there were no capital gains involved in the sale of rubber trees. The High Court, referencing CIT v. Kalpetta Estates Ltd. [1987] 167 ITR 666, answered this question in the negative, in favor of the Revenue and against the assessee.

Issue 4: Subsidy received from the Rubber Board as income
The assessee received a subsidy from the Rubber Board amounting to Rs. 5,62,196, which was treated by the Income-tax Officer as income. The Commissioner of Income-tax (Appeals) held that the amount was a capital receipt and not assessable as income, a decision confirmed by the Tribunal. The High Court, however, analyzed various precedents, including V. S. S. V. Meenakshi Achi v. CIT [1966] 60 ITR 253 (SC) and Bengal Textiles Association v. CIT [1960] 39 ITR 723 (SC), and concluded that the subsidy was a reimbursement of the assessee's revenue expenditure in running and maintaining the plantation. Thus, the High Court answered this question in the affirmative, in favor of the Revenue and against the assessee.

Conclusion:
The High Court directed the parties to bear their respective costs and ordered a copy of the judgment to be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.