9911796707
TMI Blog1997 (9) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 had been disallowed. (iii) Income from rubber, by way of subsidy---Rs. 38,694. The claim under this head had been entirely disallowed. The assessee aggrieved by the disallowances as abovestated, preferred an appeal before the Assistant Commissioner of Agricultural Income-tax, Grade-I, Nagercoil. Before the said Assistant Commissioner, the disallowance relatable to rubber subsidy had not been agitated. The disallowance relatable to accident insurance premium amounting to Rs. 1,000, though agitated, had faced dismal failure, in the sense of the order of the Agricultural Income-tax Officer having been confirmed. So far as the repairs to vehicles are concerned, the said Assistant Commissioner granted a further relief at 25 per cent. over and above the relief granted by the Agricultural Income-tax Officer. The assessee further agitated the matter before the Tamil Nadu Agricultural Income-tax Appellate Tribunal, Madras-104 (for short "the Tribunal"). The assessee, apart from agitating the disallowance to the extent of 25 per cent. relatable to the repair of the vehicles, also agitated the disallowance of rubber susbidy, though it had not, as already stated, been agitated befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid, is usually granted for two purposes, namely, (i) for maintaining the existing rubber plantations ; and (ii) for replanting rubber plants. Very often, a question is raised, as to whether the rubber subsidy is in the nature of "capital" or "revenue" expenditure. Superior courts of jurisdiction happened to consider such questions. Axiomatic a proposition laid down by the said court is that if the subsidy granted is relatable to maintaining the existing rubber plantations, the receipt is of "revenue" nature. But, on the other hand, if the subsidy is granted for replanting rubber plants, the receipt is of "capital" nature. A catena of decisions had been cited before us. We rather feel that it is not necessary to refer to all those decisions, except to refer to a decision emerging from the apex court of this country, in the case of V.S.S.V. Meenakshi Achi v. CIT [1966] 60 ITR 253 (SC). (a) That case arose under the Income-tax Act, 1961. The question posed for decision was whether replantation cess receipt of 5,962 dollars is income assessable to tax. (b) The assessee owned rubber plantations in the Federated Malay States outside Penang. Out of a fund, into which cesses c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it to be taken to market, or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process had been performed other than a process of the nature described in sub-clause (ii) ; Explanation.---Agricultural income derived from such land by the cultivation of any crop means that portion of the income derived from the cultivation, manufacture, and sale of the produce of that crop as is defined to be agricultural income for the purposes of the enactments relating to Indian income-tax and if it has not been so defined, the whole of the income; (3) any income derived from any building owned and occupied by the receiver of the rent or revenue of 'any such land or occupied by the cultivator or the receiver of rent-in-kind of any land with respect to which or the produce of which any operation mentioned in sub-clauses (ii) and (iii) of clause (2) is carried on : Provided that the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator or the receiver of the rent-in-kind, by reason of his connection with the land, requires as a dwelling-ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effective source is rent, which has suffered the accident of non-payment. And rent is not land within the meaning of the definition. There is no commercial connection between the interest and the rented land and an effective source---not land---has become apparent." The case of Kamakhaya Narayan Singh [1948] 16 ITR 325 (PC), had been quoted with approval by the Supreme Court in the case of CIT v. Kunwar Trivikram Narain Singh [1965] 57 ITR 29. (a) In the said case, the Supreme Court also referred to the observations made by it in Mrs. Bacha F. Guzdar v. CIT [1955] 27 ITR 1, 4, which are as below : 'Agricultural income' as defined in the Act is obviously intended to refer to the revenue received by direct association with the land which is used for agricultural purposes and not by indirectly extending it to cases where that revenue or part thereof changes hands either by way of distribution of dividends or otherwise." (b) The Supreme Court would further say that the same test was adopted in Maharajadhiraja Sir Kameshwar Singh v. CIT [1961] 41 ITR 169, 172 (SC) and the court again looked into the source of the right in order to determine whether the income was agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsidy granted to the assessee-company was not at all used or utilised for the purpose for which it was granted. To put it precisely, he had clearly stated in his statement that there was no new plantation or replantation of the rubber plantation during the relevant assessment years in question. If the assessee, though had not used the subsidy for the purpose for which it was granted it is for the Rubber Board to take action against the assessee. It is not out of place, we rather feel to air our opinion that even assuming for argument's sake that this rubber subsidy so granted to the assessee-company had been utilised for the purpose for which it was granted, the said subsidy may be construed as a "capital" or as a "revenue" receipt depending upon its utilisation. If it is to be construed as a "revenue receipt", then such a receipt has to be construed as an income of the assessee, which would fall as an assessable income under the Indian Income-tax Act, if the said company is liable to tax under the said Act. In this view of the matter, it is pretty certain that the subsidy granted can, never, in the eye of law, be construed as an "agricultural income" under section 2(a), in the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld take in not only those expenditure incurred for the purpose of earning the agricultural income but also very many expenses involved in carrying on the agricultural activity as an occupation. The expression 'for the purpose of the land' is much wider in scope than the expression 'for the purpose of deriving the agricultural income from the land'. It covers a wide range of expenses taking in not only the expenses incurred actually for deriving agricultural income but also expenses which are not directly incurred for deriving agricultural income but have been expended in connection with the lands'." which do not have any relationship to the agricultural income derived in the previous year. If the expenses are reasonably connected with the holding of the land and using it for the purpose of agriculture, those expenses will come under the expression 'for the purpose of the land'." In Purtabpore Company Ltd. v. State of U. P., AIR 1970 SC 1578, what their Lordships of the Supreme Court said in paragraph 11 is relevant, which is reflected, as below : "It is well known that modern agricultural farming which has become mechanised involves a high degree of organisation, technical ski ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factors as below : (1) No tangible materials had been produced before the assessing authorities, in the shape of certificate of registration and other relevant documents, such as payment of motor vehicles tax, insurance premium, etc., in connection with the owning of the motor vehicles ; (2) No tangible material is available as to whether the motor vehicles were purchased for the personal use of the managing director or for the purpose of the staff to effectively supervise the estate ; (3) No material is available as to whether the motor vehicles had, in fact, been retained in the estate for the purpose of effective supervision of the estate ; (4) Even assuming for argument's sake that the said motor vehicles were used by the managing director to supervise the farming operations, even then, the trip-sheets, log books relatable to those vehicles had not been placed on record ; (5) No tangible materials, in the shape of voucher or accounts had been placed on record for consumption of fuel to those vehicles ; and (6) No material had been placed on record, in the shape of a policy relatable to personal accident insurance of whichever officer connected with the estate. ..... 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