1996 (7) TMI 4 - SC - Income Tax

Held that Rubber replantation subsidy received by the planters cannot be held to be a revenue receipt

Summary

Issues:
1. Exigibility to capital gains tax when old and unyielding rubber trees were sold.
2. Whether the rubber replantation subsidy received by the assessees is a revenue receipt or not.

Analysis:

Exigibility to Capital Gains Tax:
The case involved 32 appeals filed in 20 different sets by assessees who owned rubber estates and sold old, unyielding, and uneconomic rubber trees during specific accounting years. The Income-tax Officer taxed the difference between the sale price of the trees and the price notionally fixed for rubber trees on specific valuation dates, claiming capital gains accrued to the assessees. The assessees argued that the trees were uneconomic and unyielding when sold but were fully yielding on the valuation dates, thus no capital gains arose. The Income-tax Appellate Tribunal mostly accepted the assessees' plea, but the High Court upheld the capital gains levy, supporting the valuation principle adopted by the officer. The Supreme Court held that no capital gains accrued when old and unyielding rubber trees were sold, overturning the High Court's decision.

Rubber Replantation Subsidy as Revenue Receipt:
The assessees also received rubber replantation subsidy treated by the Revenue as a revenue receipt and taxed as income. The High Court upheld this view. The Supreme Court, considering subsequent events and previous decisions, concluded that the replantation subsidy cannot be treated as a revenue receipt and taxed as income. The Court dismissed appeals where this issue was involved.

Conclusion:
The Supreme Court allowed the appeals related to the capital gains tax and the treatment of rubber replantation subsidy, holding that no capital gains arose when old rubber trees were sold, and the subsidy cannot be taxed as income. The Court dismissed appeals where the valuation method of rubber trees and other additional points were raised, as they did not require interference. No costs were awarded in the matter.