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TMI Blog1997 (4) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... gible to tax under the Act, as held by the Tribunal, or is to be treated as capital receipt and, as such, not liable to be taxed. The Agricultural Income-tax Officer in the assessment order passed for the assessment years 1976-77 and 1977-78 held that the subsidy received by the assessee from the Rubber Board was a revenue receipt on the ground that the subsidy was made not only for planting of rubber, but also to cover the expenditure such as weeding, manuring, spraying and dusting to prevent pests. The Agricultural Income-tax Officer also held that the immature area expenses of rubber were allowed as deduction, and, therefore, the subsidy received for rubber is assessable as revenue receipt. The Assistant Commissioner of Agricultural In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the permit holders manure for replanting free of cost or at concessional rate and subsidy for digging of sit pites, construction of kayhalas, etc. The contention of learned counsel for the assessee is that a similar question whether the subsidy received can be treated as revenue receipt or capital receipt was considered by this court in Velimalai Rubber Co. Ltd. v. Agrl. ITO [1991] 188 ITR 262, wherein this court has held that subsidy received from the Rubber Board under the Development Replanting Subsidy Scheme was not a revenue receipt and could not be subjected to tax. He also placed reliance on a decision of the Supreme Court in the case of Kalpetta Estates Ltd. v. CIT [1996] 221 ITR 601. He, therefore, submitted that the subsidy amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion purposes. Secondly, the mere fact that a certain portion of subsidy was utilised by the assessee to meet the expenditure for maintenance of the plantation would not lead to the conclusion that the entire amount of subsidy was received for maintaining the rubber plantation. The object of the scheme is the replantation of rubber trees, and it is only with that object in view that the Rubber Board paid the subsidy. It is reasonable to expect that the Rubber Board would continue to make the yearly payments after effecting the initial payment in the first year or at the inception when the planting is done as soon as the plants are planted, and would also monitor the situation to see that the moneys paid are properly utilised for the plantati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Kerala High Court had an occasion to consider the nature of the subsidy received by the assessee from the Rubber Board and the Kerala High Court [FB], after considering the earlier decisions, held that the subsidy was given to encourage rubber growers to undertake replantation of rubber plantation and the economic assistance offered by the Board was subject to certain stringent conditions in implementing the scheme designed to achieve development of the rubber plantation. Hence, the Kerala High Court held that the replanting subsidy scheme cannot be regarded as revenue receipt. The Supreme Court in Kalpetta Estates Ltd. v. CIT [1996] 221 ITR 601, after noticing the decision of the Full Bench of the Kerala High Court In the case of Ruby R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for the Agricultural Income-tax Officer to hold that the subsidy was received by the assessee to reimburse the expenditure incurred by the assessee. The main object of the scheme is the replantation of rubber. A portion of the amount used for maintenance of the rubber would not make the amount received a revenue receipt. The maintenance of the rubber plantation is incidental, necessary and auxiliary to the main object of replantation of rubber trees. Hence, we are of the view, the Tribunal was not correct holding that the subsidy was given for maintaining the rubber plantation. The order of the Tribunal in both the tax cases holding that the subsidy received is a revenue receipt, is not in conformity with the judgment of this court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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