9911796707
TMI Blog1990 (8) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... o the full extent or to be restricted with reference to the income derived in a particular accounting year ? The Tribunal, applying the ratio laid down by the Supreme Court in V. S. S. V. Meenakshi Achi v. CIT [1966] 60 ITR 253 and following its own orders in ITA Nos. 106 and 107 of 1980 dated September 9, 1980, held that the subsidies received from the Rubber Board are exigible to tax as revenue receipts. On the second question, the Tribunal held that the expenditure on ammonia gas for conservation of latex for the accounting year in question being far excessive compared to the previous accounting year, and, in the absence of any corresponding increase in the income, the proportionate disallowance by the Agricultural Income-tax Officer was justified. Aggrieved by the above two views taken by the Tribunal, these tax revision cases are filed. We may, at the outset point out that the first question arises for all these years, but the second question arises only in respect of two assessment years, namely, assessments years 1976-77 and 1977-78. Mr. K. C. Rajappa, learned counsel appearing for the petitioner, submitted that the view taken by the Tribunal that the ratio laid down b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government Pleader, in meeting the contentions of learned counsel for the petitioner, while reiterating the views taken by the Revenue, confirmed by the Tribunal, further submitted that the ratio laid down by the Supreme Court in Meenakshi Achi's case [1966] 60 ITR 253, will squarely apply to the facts of this case and that the distinction made on facts is not correct. We have carefully considered the rival submissions. Before actually going to the contentions, it will be useful to make a note of the relevant clauses in the Development Replanting Subsidy Scheme under which subsidies were given by the Rubber Board. They read as follows : "It is well recognised that, for increasing production and productivity of the existing plantations on a long-term basis, the vast areas which are already under old, low-yielding and uneconomic rubber trees should be cleared and replanted systematically with modern high-yielding plant material. As an incentive for this, a subsidy of Rs. 2,471 per hectare is being paid to rubber growers to undertake the replanting work in all earnestness. The subsidy is paid in seven annual instalments, the first instalment being Rs. 1,000 per hectare, the secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him, in respect of which no process has been performed other than a process of the nature prescribed 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 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 house or as a store-house or other outbuilding : " Section 2(nnn) defines " land " as follows : " ' land ' means agricultural l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is not included in the total income for purposes of the Income-tax Act, 1961 (Central Act 43 of 1961) ; (c) any agricultural income derived from property held by any co-operative society registered or deemed to be registered under the Madras Co-operative Societies Act, 1932 (Madras Act VI of 1932). With this background, we will now look into the decisions, in particular the Full Bench decision of the Kerala High Court in CIT v. Ruby Rubber Works Ltd. [1989] 178 ITR 181, and the Division Bench judgment of the Karnataka High Court. In CIT v. Ruby Rubber Works Ltd. [1989] 178 ITR 181, the Full Bench of the Kerala High Court had occasion to consider the nature of the subsidies received by planters from the Rubber Board, and also the correctness of a Division Bench judgment of the same court in CIT v. Malayalam Plantations Ltd. [1987] 168 ITR 63. The Full Bench while considering the applicability of the ratio of the decision of the Supreme Court in Meenakshi Achi v. CIT [1966] 60 ITR 253 to the question whether the subsidy received from the Rubber Board by the assessee is income of the assessee liable to be taxed, held as follows : " Learned counsel for the assessee very frank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng rubber. There is no reference regarding the replantation or plantation of rubber trees. The amounts were paid with reference to the production of rubber and so, the court held that the amounts received by the assessee were revenue receipts. The following observation of Subba Rao J., as he then was, makes this aspect of the matter clear (at page 259) : 'Briefly stated, the basis of the High Court's judgment is that the assessees contributed to the Fund by paying duty on the export of rubber and, therefore, the repayment made to them from out of the Fund must be correlated to the production of rubber. It was clear from the facts narrated above that the assessees were only planters and they were not exporters and, therefore, they did not pay any duty under the Ordinance to the Government. Mr. Sastri, learned counsel for the Revenue, did not support the principle accepted by the High Court that the source of payment was material and not the nature of the expenditure. Indeed, his argument was contrarywise, namely, that the expenditure was revenue expenditure and, therefore, the amounts paid to recoup it partook of that character. Further, the judgment makes it clear on the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred by a rubber plantation owner. It merely provided that in respect of certain work, if they were carried out to the satisfaction of the Board and the prescribed authority, certain sums of money would be paid. The payment is not in any way correlated to the actual expenditure that may be incurred for such work. The scheme does not say that a certain percentage of the expenditure would be reimbursed. It also provides that if certain conditions prescribed in the scheme were violated, the Board Would be entitled to recover the whole or part of the subsidy that had been paid. In view of the contents of the scheme, it is difficult to infer that the payment of the subsidy is in any way related to the expenditure incurred by the assessee in regard to replanting or maintenance of immature plants or that it is a payment by way of reimbursement or recompensation for the expenses. The Income-tax Officer himself did not say that it is direct reimbursement. He was of the opinion that indirectly, to some extent, the assessees would have been reimbursed of the expenses. Therefore, there was no basis to assume and proceed on the basis that the subsidy given was specifically to meet the expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee from which the assessee obtains benefit of the commodity may be deemed to give rise to income. This also, having regard to the provisions of the Act extracted above, supports the contentions advanced by learned counsel for the petitioner. We are in respectful agreement with the view expressed in the Full Bench judgment of the Kerala High Court in CIT v. Ruby Rubber Works Ltd. [1989] 178 ITR 181. Consequently, we are of the opinion that the view taken by the Tribunal, and the contention of the learned Additional Government Pleader applying the ratio laid down by the Supreme Court in Meenakshi Achi's case [1966] 60 ITR 253 that, the subsidies received from the Rubber Board should be treated as revenue receipts, cannot be accepted. On the second question, namely, neither the Agricultural Income-tax Officer nor the Tribunal has given any reason for disallowing the portion of the expenditure on ammonia gas for preservation of latex. It is common ground that the Agricultural Income-tax Officer had accepted the accounts maintained by the assessee regarding expenses incurred for ammonia gas to preserve latex. The only reason given by the Agricultural Income-tax Officer and accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually spent on the existing crop on the land from which income is derived and will not apply to any interest payments on amounts borrowed for maintaining the other areas or plants from which agricultural income is not derived in the assessment year. The distinction made by the statute between lands in general and lands from which agricultural income is derived cannot be overlooked. Consequently, the interest payments made on the amounts borrowed and actually spent on the maintenance of the crop which yielded agricultural income will fall under section 5(k), while the interest paid on the amounts borrowed for maintaining immature plants not yielding any income will fall under section 5(e). There is no question of a restriction in respect of a deduction to be made under section 5(e) as contemplated under section 5(k). The assessee carrying on business, inter alia, in coffee plantation claimed deduction of the interest on borrowings from bank in computing its agricultural income. This claim was allowed in part subject to the limitation provided in section 5(k) of the Tamil Nadu Agricultural Income-tax Act, 1955, by the Agricultural Income-tax Officer. This was confirmed on appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
