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TMI Blog1961 (3) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... between April 13, 1946, and November 30, 1946. The Income-tax Officer disallowed these expenses; the only reason that is found in the order of assessment is that the estate had to begun to yield. The expenditure will, therefore, be treated as of a capital nature. The disallowance of this expenditure was canvassed in appeal before the Appellate Assistant Commissioner, who stated: This estate began to yield rubber from 1947. First sales of rubber took place in January, 1947. I, therefore, hold that the expense incurred up to the end of December, 1946, should be considered as of a preliminary nature not allowable under the Act, while the expenses incurred thereafter should be considered as of a revenue nature. The Income-tax Officer is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the Tribunal appears to be that any expenditure incurred before the actual working of the estate for profit must be regarded as adding to the cost of the estate, and consequently should be treated of a capital nature. This view is entirely opposed to the line of cases commencing from Vallambrosa Rubber Co. Ltd. v. Farmer [1910] 5 Tax Cas. 529. That case also dealt with a rubber estate of which only one-seventh of the trees produced rubber, the other six-sevenths being in the process of cultivation for the production of rubber. It is undisputed that rubber trees do not yield until they are about six years old. The company incurred expenditure for superintendence, weeding, etc., similar to the items of expenditure incurred in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to me to be income expenditure? Lord Johnston also said in that case [1910] 5 Tax Cas. 529, 536: It appears to me that, as at present worked, the trade, manufacture, adventure or concern of the company is the cultivation and production for sale at profit of rubber and other tropical products. For this purpose, land had to be acquired, clear, and drained, roads made, and buildings erected, before the cultivation began. What was expended for these purposes was I think capital expenditure, and not, in the sense of the Income-tax Act, money laid out and expended for the purposes of the trade, c. But once the cultivation began with the planting, expenditure on cultivation, production, and marketing was I think revenue expenditure for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the above decision. The principle of this decision was followed by a bench of this court in Ouchterlony Valley Estates Ltd. v. Government of Madras [1962] 44 I.T.R. 770 (Mad.). That was a case which arose under the Agricultural Income-tax Act. There too the Agricultural Income-tax Appellate Tribunal agreed in the view taken by the department that all expenditure on new clearings till they come to bearing is capital expenditure. That view was held to be erroneous in the light of the Vallambrosa Rubber Co. Ltd. Case [1910] 5 Tax Cas. 529. We find further support of the view that we have expressed in a recent decision of the Supreme Court in Travancore Rubber and Tea Co. Ltd. v. Commissioner of Agricultural Income-tax [1961] 41 I.T.R. 75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon it establishment and had claimed that it was entitled to set off the amount of expenditure against the interest earned from the securities. The learned judges found that in the earlier stages the; plea of the assessee was that the expenditure was of a capital nature. There was no assessment under section 10 of the Act as the business itself had not come into being land an expenditure of this kind, in order to be allowable as a revenue expenditure must have relation to the business. It was under these circumstances that the High Court had to deal with that question. This decision to out minds gives no support to the contention of the department. The further contention of the department that in the absence of any profit derived furrin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department that this amount of 14,237 dollars is made up of items which cannot properly come within the scope of revenue expenditure. It seems to us that this contention is not open to the department. All the departmental officers and the Tribunal have proceeded on the footing that these items of expenditure were in fact incurred for purposes of superintendence, wedding, etc., that is to say, which would normally be regarded as revenue expenditure. It is not open to the department to ask us to investigate at this stage the nature of the various items going to make up this total. We must proceed on the footing that no part of this sum represented any expenditure on a capital head of account. We answer the question referred to us in the af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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