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TMI Blog2002 (6) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... rubber trees in Aramannallur village in Thovala Taluk as also some promboke lands. He filed returns for three assessment years, viz., 1985-86, 1986-87 and 1987-88 under the provisions of the Act. We are not concerned presently with the assessment year 1985-86 because we have already disposed of T.C. No. 143 of 1998 relating to that assessment year. The assessment of both the years was made and two separate appeals came to be filed. During the assessment, the Assessing Officer added certain income and disallowed certain expenditure. He had disallowed the expenditure for maintenance of immature rubber trees. The assessee had claimed this as it was his case that firstly he had spent some amounts for replanting the rubber trees and later on he incurred certain expenditure for those immature trees in the subsequent year. Though the figures differ, the plea was common in both the appeals pertaining to the assessment years 1986-87 and 1987-88. The appellate authority by giving a specific finding, disallowed the expenses for maintenance purpose. It found that the authorities below were right in disallowing the expenditure for maintenance of immature rubber trees made in the subsequent y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s "from which the agricultural income is derived" came to be added. According to learned counsel, therefore, after the amendment, the expenditure spent on such portion of the land from which no agricultural income was derived could not be allowed and that would mean that the expenditure on the immature trees would not be allowable after the amendment. However, considering that we have to deal with only the unamended provision, learned counsel argues that the expenditure made even on the portion of the land which had only immature trees from which no agricultural income was being derived would also be allowable under section 5(e). For this purpose, learned counsel invites our attention to the definition of the term "land" given in the Act, which reads as follows: " 'land' means agricultural land which is used for the purpose of growing any plantation crop with or without any other crop intermingled with such plantation crop or for purposes subservient thereto and is either assessed to land revenue in the State or is to a local rate assessed and collected by officers of the Government as such and includes any plantation in any forest land." Learned counsel, therefore, argues that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of those immature trees, such expenditure would not be allowable firstly because it is capital expenditure and secondly because it is not covered by the language of section 5(g). Learned counsel for the Department supported the order on the basis of the reasoning of the Tribunal. It will be, therefore, our task to see whether the expenditure of planting the trees and the expenditure in maintaining those immature trees of rubber in the subsequent year is capital expenditure. The Tribunal has held that the expenditure of planting the trees is a capital expenditure but since the Legislature has made an exception by way of the proviso and provided the restriction of the expenditure meant only for 2 1/2 percent of the land, it could be only that expenditure which would be allowable. Carrying the analogy further, the Tribunal holds that if the immature trees are in the nature of a capital asset and the expenditure made for planting them is a capital expenditure, the expenditure made for their maintenance would also be capital expenditure. In our opinion, this analogy and the line of reasoning are not correct. We must at once point out that the expenditure made for plantation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing though, however, it restricted the limit of the allowable expenditure. That would be the simple way of looking at it. Since the Tribunal has gone wrong on the very basic premise, it has fallen into the further area of treating the expenditure made in the previous year for the immature trees and their maintenance as capital expenditure. In fact, what we are concerned with here in this case is only the expenditure made in the subsequent year of the plantation to maintain the immature trees which were non-yielding. Such expenditure has always been held not as capital expenditure but as allowable expenditure. The Supreme Court in Travancore Rubber and Tea Co. Ltd. v. CAIT [1961] 41 ITR 751 has taken the same view in respect of the expenses incurred for maintenance and upkeep of immature rubber plants. The Supreme Court, in that case, was considering the provision of section 5(j) of the Travancore-Cochin Agricultural Income-tax Act (Act 22 of 1950). Clause (j) was worded as under: "(j) any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of deriving the agricultural inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 5(e) of the Madras Plantations Agricultural Income-tax Act, which is exactly like section 5(e) of the present Act. Section 5(e) of the Madras Plantations Agricultural Income-tax Act was as under: "5. Computation of agricultural income. -The agricultural income of a person shall be computed after making the following deductions, namely: -... (e) any expenditure incurred in the previous year (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of the plantation." The Supreme Court in Calvary Mount Estates (Pvt.) Ltd.'s case [1961] 41 ITR 755 has specifically included the expenditure for maintenance of immature rubber trees on the basis of the language of section 5(e) which we have extracted above. The only difference would be in the last word of the section because in the aforementioned section the word was "plantation" while in the present section 5(e) the word is "land". We have already shown that the term "land" includes "plantation" also. Therefore, it must be held that the Supreme Court has held the expenditure on the maintenance of immature rubber trees to be covered in se ..... 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