KARIMTHARUVI TEA ESTATES LTD. Vs. COMMISSIONER OF INCOME TAX, KERALA
LAWS(KER)-1963-3-37
HIGH COURT OF KERALA
Decided on March 29,1963

KARIMTHARUVI TEA ESTATES LTD. Appellant
VERSUS
COMMISSIONER OF INCOME TAX, KERALA Respondents

JUDGEMENT

- (1.)THIS is a reference by the Income Tax Appellate Tribunal, Madras Bench, under section 66(1) of the Indian Income Tax Act, 1922. The assessment year with which we are concerned is 1958 -59 and the accounting period is the 12 months ended December 31, 1957.
(2.)THE assessee, Karimtharuvi Tea Estates Limited, purchased the Penshurst Tea Estate from the Penshurst Tea Estates Limited. The purchase came into effect on January 1, 1957, in pursuance of an agreement dated December 17, 1956.
(3.)THE agreement forms annexure "F" to the statement of the case. Clause 1 of the agreement provided for a price or consideration of Rs. 4,50,000 and clause 8 stipulated that: .... all dues determined upto the time the sale takes effect, as legally due to labour, staff and superintendent in respect of service until then (including bonus for 1956 (1) in the case of labour as recommended by the A.P.T. before the end of February, 1957, and (2) in the case of staff and the superintendent three months basic salary) shall be borne by the vendor; and all dues (including any extra bonus or other benefits or additional benefits) that may be determined after the time the sale takes effect to be payable to labour staff and the superintendent whether in respect of service under the vendor or in respect of service under the purchaser shall be paid by the purchaser.
A sum of Rs. 11,621.77 was paid by the assessee during the accounting period to the labourers of the estate as bonus for their services under the vendor in pursuance of the undertaking embodied in the latter portion of the extract given above. The question for consideration is whether the said sum represents a "capital expenditure" as contended by the department and held by the Tribunal.

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