Citation Codes

Equivalent Citations

citation codes

Case Number

ITR Nos. 352 & 353 of 1982

Attorney(S)

For the Appellant: K.A. Nayar

Judges

Kochu Thommen
Radhakrishna Menon, JJ.

Acts

S. 4, proviso (c), (Business Profits Tax Act, 1947)
S. 5 of the Agricultural Incometax Act, 1950.
S. 10(30) of the Income-tax Act, 1961

See more information ...

Smart Summary

Summary of the Opinion delivered by Kochu Thommen, J.

Factual and Procedural Background

The Income-tax Appellate Tribunal, Cochin Bench, referred four questions to this Court at the instance of the revenue. The questions arose from assessments and appeals involving an assessee engaged in plantation activity. The four questions referred were:

Whether expenditure on maintenance of bungalows owned by the assessee and depreciation thereon can be considered under S.40A(5) of the Income-tax Act;
Whether only a portion (and not the entirety) of the expenditure and depreciation on a motor car is properly includible for S.40A(5);
Whether there were capital gains involved in the sale of rubber trees;
Whether a subsidy received from the Rubber Board (amounting to Rs. 5,62,196 for assessment year 1975–76) is income of the assessee.

Procedurally, the Income-tax Officer treated the subsidy as income; the Commissioner of Income-tax (Appeals) held it to be a capital receipt (not assessable). The Tribunal confirmed the CIT(A)'s order, and the revenue challenged the matter leading to the reference to this Court.

Legal Issues Presented

Whether the expenditure on maintenance of bungalows owned by the assessee and depreciation thereon can be considered under S.40A(5) of the Income-tax Act.
Whether only a portion of the expenditure and depreciation on a motor car can be considered properly includible for S.40A(5) and not the entire expenses.
Whether there was capital gains involved in the sale of rubber trees.
Whether the subsidy received from the Rubber Board is income of the assessee.

Arguments of the Parties

Counsel for the Revenue

Contended that the subsidy paid by the Rubber Board was not a gift, grant or bounty for beneficial purposes but was compensation to recoup the expenditure incurred by the assessee in replantation, maintenance, upkeep and supervision of rubber trees.
Thus, the subsidy was a reimbursement of revenue expenditure and should be treated as taxable income (assessable in the hands of the assessee).

Counsel for the Assessee

Contended that the subsidy was payment for replantation and, since replantation expenditure is capital expenditure, the subsidy was a capital receipt and not assessable as income.
Relied on authorities (for example, Poona Electric Supply Co. Ltd.) and other decisions argued to support the non-taxable character of such receipts in certain factual contexts.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
CIT v. Forbes, Ewart & Figgis (P) Ltd. (1982) 138 ITR 1 (Ker.) : 1981 KLT 483	Authority relied on by this Court in answering questions (used to resolve Q.1 and Q.2).	The Court relied on reasons stated in this decision to answer Question No. (1) in the negative (for revenue) and Question No. (2) in the affirmative (for the assessee).
V.S.S.V. Meenakshi Achi v. Commissioner of Income-tax (1966) 60 ITR 253 (SC)	Held that replantation cess paid to encourage planting/replanting which reimbursed expenditure for maintaining plantations were revenue receipts (taxable).	The Court applied this principle to hold that the subsidy paid to recoup maintenance/replantation expenditure is a revenue receipt and thus assessable.
Higgs v. Wrightson (H.M. Inspector of Taxes) (1944) 26 T.C. 73 (K.B.)	Ploughing grant paid to a farmer to reimburse expenses was a revenue receipt (not a capital receipt).	Cited and applied by analogy (via V.S.S.V. Meenakshi Achi) to support that subsidies reimbursing revenue expenditure are revenue receipts.
Bengal Textiles Association v. Commissioner of Income-tax (1960) 39 ITR 723 (SC)	Money received as subsidy, other than as a gift or for a beneficial purpose, is a revenue receipt; grants for beneficial purposes (e.g., relief of unemployment) may be non-taxable.	Used to distinguish between beneficial grants (non-taxable) and subsidies intended to be used in the business (taxable). The Court applied this distinction and found the present subsidy was not for a beneficial purpose.
The Seaham Harbour Dock Co. v. Crook (H.M. Inspector of Taxes) (1931) 16 T.C. 333 (K.B.)	Grant made to keep men in employment (beneficial object) was not a trade receipt and therefore not taxable.	Cited as an example of a beneficial grant; the Court observed it was distinguishable and not applicable to the present facts.
Karimtharuvi Tea Estate Ltd. v. State of Kerala (1963) 48 ITR 83 (SC)	Expenditure for upkeep and maintenance of immature plants is running (revenue) expenditure and not capital expenditure.	Applied to support the proposition that money spent on immature plants is revenue expenditure, and reimbursements for such expenditure are revenue receipts.
Travancore Rubber and Tea Co. v. Commissioner of Agricultural I.T. (1961) 41 ITR 751	Expenditure on superintendence, weeding, etc., of the whole estate is deductible against profits; such costs are revenue expenditure even if they produce no return in that year.	Relied upon to show maintenance/upkeep costs are revenue in nature and that reimbursements for such costs are revenue receipts.
Vallambrosa Rubber Co. Ltd. v. Farmer (1910) 5 T.C. 529	Deduction entitlement for expenditure on superintendence and upkeep across the whole estate (trees become productive only after several years).	Cited to support the treatment of upkeep/superintendence as revenue expenditure allowable against profits.
Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax (1955) 27 ITR 34 (SC)	Distinction between acquisition of an income-earning asset (capital expenditure) and expenditure in the process of earning income (revenue expenditure).	Used to reinforce the legal distinction applied to the facts: upkeep/replantation expenses relate to the process of earning and are revenue in nature.
Lincolnshire Sugar Co. v. Smart (1937) A.C. 697	Subsidies paid out of public funds to assist an undertaker in carrying on trade/business are trading receipts and brought into account in computing profits.	Cited to support the view that subsidies assisting trade are trading receipts and taxable; the Court referenced this as consistent with its conclusion.
Pentypridd and Rhondda Water Board v. Ostime (1946) 14 ITR 45 (Supp.)	Authority related to treatment of certain grants/subsidies (referenced alongside Lincolnshire decision).	Mentioned as corroborative authority for the proposition that subsidies to assist trade are trading receipts.
Commissioner of Income-tax v. Poona Electric Supply Co. Ltd. (1946) 14 ITR 622 (Bom.)	Non-refundable contribution paid by Government as part of cost of constructing new electric supply lines (which the undertaking would not have undertaken without it) was not a trading receipt (treated as not assessable).	Relied on by the assessee, but the Court held that decision had no application to the present facts (different factual matrix; here the subsidy was not a non-refundable capital contribution to enable an otherwise unviable project).
C.I.T. v. State Trading Corporation of India Ltd. (1973) 92 ITR 294 (Del.)	Found that a sum received prior to the commencement of business was not a business receipt.	The Court observed this authority was not applicable to the present case where the business/industry existed at all material times and the subsidy related to areas being replanted to produce higher yield.
Ratna Sugar Mills Co. Ltd. v. Commissioner of Income-tax (1958) 33 ITR 644	Referenced as authority that payment to recoup revenue expenses is a revenue receipt.	Used in the general line of authorities showing that reimbursements of revenue expenditure are taxable as income.
ITR No. 111 of 1981 (this Court)	This Court's reasons used to answer Question No. (3) on whether capital gains arose on sale of rubber trees.	The Court, referring to its reasoning in ITR No. 111 of 1981, answered Question No. (3) in the negative (in favour of the revenue).

Court's Reasoning and Analysis

The Court proceeded in the following analytical steps (as recorded in the opinion):

Identification of issues and answers to Q.1–Q.3:
- Question (1) was answered in the negative (in favour of the revenue and against the assessee) relying on this Court's reasoning in CIT v. Forbes, Ewart & Figgis.
- Question (2) was answered in the affirmative (in favour of the assessee and against the revenue) also referencing the same authority.
- Question (3) was answered in the negative (in favour of the revenue and against the assessee) for reasons stated in ITR No. 111 of 1981.
On Question (4) (treatment of the Rubber Board subsidy): the Court examined the Replanting Subsidy Scheme, 1972, noting that subsidy was granted for replanting low-yielding rubber planted in or prior to 1962 and that replacement had to be by better-yielding trees; subsidy was granted in seven yearly instalments.
The Court observed that it was common ground that the subsidy was paid for replantation, upkeep and maintenance until trees became mature.
The Court reviewed a line of authorities (both Indian and English) which establish these relevant principles:
- If a payment is a gift or a grant for a beneficial purpose (e.g., to keep men in employment or to develop backward areas), it may not be a trading receipt and may be non-taxable.
- If a payment is intended to recoup revenue expenses or to be used in the business (i.e., not benevolent in nature), it is a revenue receipt and assessable as income.
- Expenditure on upkeep and maintenance of immature plants has repeatedly been held to be running/revenue expenditure (not capital expenditure), hence reimbursement of such expenditure is a revenue receipt.
Statutory and administrative context considered:
- The Court noted S.10(30) of the Income-tax Act, 1961, which specifically excludes subsidies for replantation of tea from total income, showing that the legislature knew how to create special exemptions; the absence of such an exclusion for rubber was significant.
- The Court also referred to Explanation (2) to S.5 of the Agricultural Income-tax Act, 1950 (which treats expenditure on immature plants as not deductible for agricultural income purposes) and to a Central Board circular (No. 142, Aug. 1974) describing certain central grants as being for beneficial purposes and thus not revenue receipts for income-tax purposes — again demonstrating that beneficial-purpose grants are treated differently when so intended.
Application of principles to the facts:
- The Court found no material to show the subsidy in the present case was paid for any beneficial purpose (such as relief of unemployment or to enable a project which would not otherwise be undertaken).
- On the contrary, the facts found indicated the subsidy was paid to swell the profits of the assessee — consistent with a reimbursement of revenue expenditure.
- Authorities relied upon by the assessee (e.g., Poona Electric Supply Co. Ltd., Seaham Harbour) were examined and held not to apply to the present factual matrix because those cases involved grants with a clearly beneficial character or non-refundable capital contributions enabling otherwise unviable projects.
Conclusion of analysis:
- Applying the precedents and statutory context, the Court concluded that the subsidy received by the assessee for replantation, development, maintenance and upkeep of rubber trees constituted a revenue receipt and was assessable as income.

Holding and Implications

Holding:

Question No. (1): Answered in the negative — in favour of the revenue and against the assessee (relying on this Court's reasons in CIT v. Forbes, Ewart & Figgis).
Question No. (2): Answered in the affirmative — in favour of the assessee and against the revenue (also referencing CIT v. Forbes, Ewart & Figgis).
Question No. (3): Answered in the negative — in favour of the revenue and against the assessee (for reasons stated in ITR No. 111 of 1981).
Question No. (4): Answered in the affirmative — in favour of the revenue and against the assessee. The subsidy received from the Rubber Board (Rs. 5,62,196 for AY 1975–76) was held to be a revenue receipt assessable as income.

Implications:

The direct legal consequence is that the subsidy in question must be treated as income in the hands of the assessee for the assessment year in question and is therefore assessable to tax.
The Court directed that the parties bear their respective costs in these Tax Referred Cases.
The Court ordered that a copy of the judgment, under the High Court seal and the Registrar's signature, be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.
No novel legal principle was announced; the decision applies and synthesises existing authorities and statutory context to the facts before the Court rather than creating a new rule of law.

This summary is limited to and based exclusively upon the content of the provided opinion. No information beyond the opinion has been included.

Show full summary ...

Commissioner Of Income Tax v. Malayalam Plantations

The Judgment of the Court was delivered by

Kochu Thommen, J.:— The following questions have been, at the instaoce of the revenue, referred to us by the Income-tax Appellate Tribunal. Cochin Bench:

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right In law in holding that the expenditure on maintenance of bungalows owned by the assessee and depreciation thereon cannot be considered under S. 40A(5) of the Income-tax Act?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that only a portion of the expenditure and depreciation on motor car can be considered properly includible for S. 40A(5) and not the entire expenses?

(3) Whether on the facts and in the circumstances of the case, the Tribunal's decision that there was no capital gains involved in the sale of rubber trees is legally and factually correct?

(4) Whether, on the facts and in the circumstances of the case, the subsidy received from the Rubber Board is income of the assessee?”

2. For the reasoos stated by this Court in CIT. v. Forbes, Ewart & Figgis (P) Ltd., (1982) 138 ITR., 1 (Ker.) (F.B) : 1981 KLT. 483 we answer question No. (1) in the negative, that is, in favour of the revenue and against the assessee. For the reasons stated by this Court in CIT. v. Forbes, Ewart & Figgis (P) Ltd., (1982) 138 ITR. 1 (Ker.) : 1981 K.L.T 483 (F.B). question No. (2) is answered in the affirmative, that is, in favour of the assessee and against the revenue.

3. For the reasons stated by us in ITR. No. 111 of 1981, we answer question No. (3) in the negative, that is, in favour of the revenue and against the assessee.

4. We shall now deal with question No. (4). That relates to the assessment year 1975-76. During the relevant period, the assessee received as subsidy from the Rubber Board a sum of Rs. 5,62,196/-. This amount was treated by the Income-tax Officer as income assessable in the hands of the assessee. On appeal, the Commissioner of Income-tax (Appeals) held that the said amount was capital receipt and was, therefore, not assessable as income. This order, although challenged by the revenue, was confirmed by the Tribunal.

5. Counsel for the revenue, relying upon certain decisions of the Supreme Court, submits that what was paid to the assessee by the Rubber Board as subsidy was neither a gift nor a grant nor bounty for any beneficial purposes, but compensation to recopue itself the expenditure incurred by it in the replantation, maintenance, upkeep and supervision of rubber trees. The subsidy received was, therefore, a reimbursement of the assessee's revenue expenditure in running and maintaining the plantation. Counsel for the assessee on the other hand submits that the subsidy, being payment for replantation, is a capital receipt, because replantation expenditure is according to him, a capital expenditure.

6. The question for consideration, therefore, is whether the amounts received as subsidy constituted capital or revenue receipts. The Replanting Subsidy Scheme, 1972 which is the scheme under which the subsidy in question was granted is quoted by the Commissioner of Income-tax (Appeals) at pages 21 to 22 of the paper book:

“…Subsidy will be granted for replanting low yielding uneconomic rubber planted in or prior to 1962, and registered with the Board.”

7. Referring to the scheme, the Commissioner says.

“…The replacement has to be by better yielding rubber trees, in place of older and low-yielding trees planted prior to 1962. The subsidy is granted in seven yearly instalments….”

8. It is in fact the common case that subsidy was paid to and received by the assessee for replantation, upkeep and maintenance of the rubber trees until they became mature.

9. In V.S.S.V Meenakshi Achi v. Commr. of Inc.-Tax, (1966) 60 ITR. 253 (SC), an identical question arose. Amounts were paid to the assessee as replantation cess to encourage them to plant or replant rubber trees because during the war rubber estates were destroyed or denued. The question arose whether such amounts constituted income in the hands of the recipients. Counsel for the revenue in that case submitted in the Supreme Court that the payments were made to enable the assessee to recoupe the revenue expenditure incurred by them in running and maintaining the plantations and such payments were revenue receipts. Accepting this argu ment, the Suoreme Court cited with approval the decision of Macnaghton, 3. in Higgs v. Wrightson, (H.M Inspector of Taxes), (1944) 26 T.C 73 (K.B) where he stated that “ploughing grant” paid to a farmer to reimburse for his expenses in the ploughing up of grassland and bringing of the land into a state of cleanliness and fertility was not a capital receipt, but a revenue receipt. Applying that principle to the replantation cess paid to the asses sees, the Supreme Court stated:

“…amounts from the fund earmarked for the appellants on the basis of the rubber produced by them were paid against the expenditure incurred by them for maintaining the rubber plantation and producing the rubber. If so, it follows that the receipts by the assessees during the accounting year were revenue receipts and, therefore, liable to be included in their assessable income…” (V.S.S.V Meenakshi Achi v. Commr. of Inc.-Tax, (1966) 60 ITR. 253, 260 (SC)).

10. In Bengal Textiles Association v. Commr. of Inc.-Tax, (1960) 39 ITR. 723 (SC), the Supreme Court pointed out that money received as subsidy, otherwise than as a gift or for a beneficial purpose, such as relief of unemployment, etc, was a revenue receipt. The Court pointed out:

“…………What is, decisive in this case is that these payments were made to the association in order that they be used in the business of the association and for services rendered and they have to be viewed from that point of view. So viewed the payments caonot be said to be of a benevolent nature. Their very quality and nature make it im possible to treat them as a bounty, or subsidy because the use of the word bonus or subsidy in S. 4, proviso (c), (Business Profits Tax Act, 1947) connotes that the payment is in the nature of a gift which in the instant case it is not……………”

11. The Supreme Court then cited with approval the decision of the House of Lords in The Seaham Harbour Dock Co. v. Crook (H.M Inspector of Taxes), (1931) 16 T.C 333, (K.B) where payment made for relief of unemployment was held to be not taxable because of the beneficial nature of the payment in that case. Lord Buchmaster, referring to the nature of the receipt, observed:

“………it was a grant which was made by a Government department with the idea that by its use men might be kept in employment. I find myself quite unable to see that it was a trade receipt, or that it bore any resemblance to a trade receipt. It appears to me to have been simply a grant made by the Government for the purpose which I have mentioned, and in those circumstances cannot be included in revenue for the purposes of tax.”

12. Lord Atkin in that case observed:

“…………It appears to me that when these sums were granted and when they were received, they were received by the appropriate body not as part of their profits or gains or as a sum which went to make up the profits or gains or their trade. It is a receipt which is given for the express purpose which is named, and it has nothing to do with their trade in the sense in which you are considering the profits or gains of the trade. It appears to me, with respect, to be quite irrelevant whether the money, when received, is applied for capital purposes or is applied for revenue purposes; in neither case is the money properly said to be brought into a computation of the profits or gains of the trade”.

13. Karimtharuvi Tea Estate Ltd. v. State Of Kerala, (1963) 48 ITR. 83 (SC.) a Bench of five Judges of the Supreme Court observed:

“The contention that the amount spent for the upkeep and maintenance of the immature plants till they become mature is in the nature of a capital exenditure is also not sound. It is a running expenditure and not of the nature of capital expenditure”.

14. This pirinciple bad already been adopted by the Supreme Court in Tranvan-core Rubber and Tea Co. v. Commr. of Ag. I.T, (1961) 41 ITR. 751 where the Court stated:

‘In our opinion the amount expended on the superintendence, weeding, etc., of the whole estate should have been allowed against the profits earned and it is no answer to the claim for a deduction that part of those expenses produced no return in that year because all the trees were not yielding rubber in that year.”

15. The Supreme Court in that case cited with approval the following observation of Lord President in Vallambrosa Rubber Co. Ltd. v. Farmer, (1910) 5 TC. 529:

“that in arriving at their assessable profits the Company are entitled to deduct the expenditure for superintendence, weeding, etc., on the whole estate and not one-seventh of such expenditure only.”

16. The Lord President pointed out that rubber trees did not yield rubber until they were about six years old. Expenditure for superintendence, weeding, etc., was incurred by the Company in respect of the whole estate including the non-bearing rubber estates, and such expenditure was an allowable deduction in the computation of the assessable profits.

17. In Assam Bengal Cement Co: Ltd. v. Commr. of Inc.-Tax, (1955) 27 ITR. 34 (SC), Bhagawati, J. observed:

“The distinction was thus made between the acquisition of an income-earning asset and the process of the earning of the income. Expenditure in the acquisition of that asset was capital expenditure and expenditure in the process of the earning of the profits was revenue expenditure.”

18. In Lincolnshire Sugar Co. v. Smart, (1937) A.C 697 : (1937) 20 Tax Cases 643, the House of Lords held that amounts paid out of public funds in the nature of subsidy to an undertaker to assist him in carrying on the undertaker's trade or business were trading receipts and were to be brought into account in arriving at the balance of profits or gains. (See also the decision of the House of Lords in Pentypridd and Rhondda Water Board v. Ostime, (1946) 14 ITR. 45 (Supp).

19. The principles to be deduced from these cases are: If the money paid is paid as a gift, it is not income in the hands of the recipient. If a grant is paid for a beneficial purpose, such as keeping men in employment, or starting an industry in a backward area or electrifying a remote area which could not be undertaken but for the grant, such payment, being of a beneficial character, is not taxed as income: Bengal Textiles Association v. Commr. of Inc.-Tax, (1960) 39 ITR. 723; The Seaham Harbour Dock Co. v. Crook (H.M Inspector of Taxes), (1931) 16 T.C 333 (K.B); Commr. of Inc.-Tax Poona Electric Supply Co. Ltd., (1946) 14 ITR. 622 (Bom.). On the other hand, if what is paid is to recoupe revenue expenses, it is a revenue receipt and is, therefore, assessable as income: V.S.S.V Meenakshi Achi v. Commr. of Inc-Tax, (1966) 60 ITR. 253 (SC); Ratna Sugar Mills Co. Ltd. v. Commr. of Inc-Tax, (1958) 33 ITR. 644 (AIL). Amounts spent for the maintenance of immature plants do not partake of the character of capital expenditure. They are a running expenditure. Money received to recoupe such revenue expenses is a revenue receipt. Karimtharuvi Tea Estate Ltd. v. State Of Kerala, (1963) 48 ITR. 83; Travancore Rubber and Tea Co. v. Commr. of Ag. I.T, (1961) 41 ITR. 751 : Vellambresa Rubber Co. Ltd. v. Farmer, (1910) 5 T.C 529, V.S.S.V Meenakshi Achi v. Commr. of Inc. Tax, (1966) 60 ITR. 253 (SC); Higgss. Wrightson (H.M Inspector of Taxes), (1944) 26 T.C 73 (K.B).

20. It is significant that S. 10(30) of the Income-tax Act, 1961 speci fically provides:

“10. Income not included in total income. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

xxxxxxxxx

(30). in the case of an assessee who carries on the business of growing and manufacturing tea in India, the amount of any subsidy received from or through the Tea Board under any such scheme for replantation or replacement of tea bushes or for rejuvenation or consolidation of areas used for cultivation of tea as the Central Government may, by notification in the Official Gazette spefify.

xxxxxxxxx”

21. This exclusion of subsidy for tea plantation from the computation of total income shows that what was otherwise includible in such computation was specifically excluded by the legislature. The object of the legislature in so excluding the subsidy for tea plantation was to confer a special benefit in view of the peculiar predicament of that industry. What is significant, however, is that, but for the exemption, subsidy of the nature is part of the includible items in the computation of income. In this context we may refer to Explanation (2) to S. 5 of the Agricultural Incometax Act, 1950. It reads:

“Explanation 2.—Nothing contained in this section shall be deemed to entitle a person deriving agricultural income to deduction of any expenditure laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income has been derived during the previous year.”

22. The object of this statutory Explanation is to overcome the decisions of the Supreme Court in Travancore Rubber & Tea Co. v. Commr. of Ag. I.T, (1961) 41 ITR. 751 and Karimtharuvt Tea Estates Ltd. v. State of Kerala, (1963) 48 ITR. 83 where the Court stated that such expenditure was revenue expenditure. Significantly, the State legislature acted on the principle that, but for the statutory Explanation, money expended for cultivation, upkeep or maintenance of immature plants would be revenue expenditure.

23. We may also in this context refer to a circular No. 142 dated August, 1974 issued by the Central Board of Direct Taxes. By this circular, the Board stated that 10 per cent Central outright grant of subsidy scheme, 1971 was given for helping the growth of industries in selected backward districts/areas and not for supplimenting the profits of the receipient. The subsidy was accordingly not treated by the Board as a revenue receipt for the purpose of income-tax. In so deciding the Board acted on the principle that amounts paid specifically for benefical purposes are not to be treated for the Durpose of income-tax as a revenue receipt.

24. In the present case there is nothing to show that the subsidy was paid for any benefical purpose. On the other band,- the facts found indicate that the subsidy was paid to swell the profits of the assessee. The principle stated by Changla, J. (as he then was) in Commr. of Inc-Tax v. Poona Electric Supply Co Ltd., (1946) 14 ITR. 622 (Bom.), on which counsel for the assessee relies, has no application to the facts of this case. In that case a non-refundable contribution was paid by the Government as part of the cost of constructing new electric supply lines which the assessee would not have undertaken without the contribution. The Court held that the contribution was not a trading receipt and was not assessable to tax in the hands of the assessee. That decision falls within the principle stated by the Supreme Court in Bengal Textiles Association v. Commr. of Inc.-Tax, (1960) 39 ITR. 723 (SC). Reliance by the assessee's counsel on The Seaham Harbour Dock Co. v. Crook, (1931) 16 T.C 333 is equally misplaced, for, as we have already stated, that was a case where money was paid to keep men in employment. That, as the Supreme Court stated in Bengal Textiles Association v. Commr. of Inc-Tax, (1960) 39 ITR. 723, was a beneficial object. Counsel also relies upon the decision of the Delhi High Court in C.I.T v. State Trading Corpn. of India Ltd., (1973) 92 ITR. 294 where the Court found that a sum received prior to the commencement of the business was not a business receipt. That decision is not applicable to the facts of this case where the industry or the business of plantation has been in existence at all material times and money was received for plantation or replantation of certain areas with a view to producing higher yield.

25. In the light of the principles laid down in the decisions cited above, we see no substance in the contention of the assessee that the subsidy received by it during the relevant period towards reimbursement of the expenditure incurred in replantation, development, maintenance and upkeep of the rubber trees is not revenue receipt. Accordingly, we answer question No. (4) in the affirmative, that is, in favour of the revenue and against the assessee. We direct the parties to bear their respective costs in these Tax Referred Casess.

26. A copy of this judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.

Commissioner Of Income Tax v. Malayalam Plantations

Summary of the Opinion delivered by Kochu Thommen, J.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Counsel for the Revenue

Counsel for the Assessee

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Commissioner Of Income Tax v. Malayalam Plantations

Comments