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TMI Blog2012 (6) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... ers process or manufacture agricultural produce converting it into intermediary or final products for sale in the market, the income attributable to processing or manufacture becomes business income that attracts tax under the Central Income Tax Act (hereinafter referred to as the Central Act for short). From the very beginning income from Tea was assessable partly as agricultural income and partly as business income and specific provision is provided in Rule 8 of the Central Income Tax Rules (hereinafter referred to as the Rules) for assessment of income from Tea and for bifurcation of the same in the ratio given thereunder for the purpose of assessment under the Agricultural Income Tax Act (hereinafter referred to as the AIT Act for short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that arises for consideration in this batch appeals filed by the appellant for the assessment years 2004-05, 2005-06 and 2006-07 is whether the appellant is entitled under Rule 7A of the Income Tax Rules for deduction of expenditure incurred on replantation of rubber. Admittedly, expenditure for new planting and for up keep until the plants start yielding which in the case of rubber is 6 to 7 years from the year of planting is to be capitalized as there is no income from the new immature plantation against which expenditure can be set off. Until the Central Income Tax Department started assessment under Rule 7A of the Income Tax Rules from 2002-03 onwards, the appellant was being assessed under the State AIT Act treating the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 7A(2) of the Income Tax Rules in the computation of agricultural income as well as income assessable as "business income" under the Central Act by the Central Income Tax Officer. The claim made by the assessee for all the above years was disallowed in the assessment by the Income Tax officer, which is confirmed by the CIT (Appeals) and also by the Tribunal, against which these appeals are filed under Section 260A of the Income Tax Act. 4. We have heard learned Senior counsel Shri.A.K.Jayasankar Nambiar appearing for the appellant- assessee and also learned Standing Counsel appearing for the respondent. 5. Before proceeding to consider the claim made specifically under Rule 7A(2) of the Rules, we have to consider the nature of the rubbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Rules. "7A(2) In computing such income, an allowance shall be made in respect of the cost of planting rubber plants in replacement of plants that have died or becomes permanently useless in an area already plated, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in total income. 7B(2) In computing the incomes referred to in sub- rule (1) and (1A), an allowance shall be made in respect of the cost of planting coffee plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or replacement of dead or useless plants as contemplated under Rule 7A(2) of the Rules and on the other hand, the replanting expenditure claimed is for replantation of certain areas after cutting and removal of old trees therein, the expenditure claimed for replanting such area cannot be allowed as a deduction under Rule 7A(2), which provides deduction of expenditure only for infilling by way of replacement in existing yielding plantation, which is not the case here. 8. Learned Senior counsel appearing for the assessee contended that after the introduction of Rule 7A, income from processed rubber has to be assessed by the Central Income Tax Officer and 65% of the income so determined by the Central Income Tax Officer is to be assessed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n one reason. In the first place, expenditure covered by Rule 7A(2) does not cover expenditure incurred for replantation of an area. On the other hand, Rule 7A(2) only provides for deduction of expenditure for infilling through replacement of dead trees or other trees that have become useless, which is not the case here. As already stated by us, Rule 7A(2) is in the same line as Rule 7B (2), which provides for replacement of dead or old or unyielding coffee plants in yielding coffee plantation, and Rule 8(2) which provides for replacement of dead or useless tea bushes in tea plantation. Yielding healthy rubber plantation does not admit replacement of dead plants within such area as new saplings cannot grow under shade and is never done by a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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