MALANKARA RUBBER PRODUCE CO LTD Vs. COMMISSIONER OF AGRL I T

JUDGEMENT

(1.) THE assessee in all these four references is the Malankara Rubber & Produce co. Ltd. , Kottayam and the common contention as stated in the orders of reference is that the Tribunal "failed to note the fundamental differences in character between the first year's expenditure in planting which is capital expenditure and subsequent years' expenditure on the maintenance of rubber already planted but which is revenue expenditure and has wrongly held that the latter is also not allowable in calculating the assessable income".

(2.) REFERENCE No. 4 relates to the assessment year 1119 (accounting year ending 31st March 1943), reference No. 1 to the assessment year 1120 (accounting year ending 31st March 1944), reference No. 3 to the assessment year 1121 (accounting year ending 31st March 1945) and reference No. 2 to the assessment year 1122 (accounting year ending 31st March 1946 ). The enactment concerning the assessment years 1119 to 1121 inclusive, is the Travancore Agricultural Income-Tax Act, 1119 (Act I of 1119), and that concerning the assessment year 1122 is the Travancore Income-Tax Act 1121 (Act XXIII of 1121 ). Consequently the question referred in reference Nos. 4 ,1 and 3 is: "whether under the Travancore Agricultural Income-Tax Act I of 1119 in calculating the assessable income of an estate containing both mature yielding rubber plantations and also immature rubber plantations which have not come into bearing the annual expenses incurred for upkeep or maintenance of such immature rubber plantations (i. e. , expenses incurred after completion of planting) are allowable"; and in reference No. 2: "whether under the Travancore Income-Tax Act XXIII of 1121 in calculating the assessable income of an estate containing both mature yielding rubber plantations and also immature rubber plantations which have not come into bearing, the annual expenses incurred for upkeep or maintenance of such immature rubber plantations (i. e. , expenses incurred after completion of planting) are allowable". The answer to the questions depends entirely on whether the deduction claimed will come within the ambit of S. 7 (2) (c)of Act I of 1119 and S. 14 (3) (c) of Act XXIII of 1121: " the expenses of cultivating the crop from which such agricultural income is derived, of transporting such crop to market, including the maintenance of agricultural implements and cattle required for the purpose of such cultivation and for transporting the crop to market". In The Malayan Plantations Ltd. , Quilon v. The Commissioner of Income-Tax, Trivandrum, 1952 K. L. T. 453, it was held: "expenses for cultivating the crop will not include the expenditure for replantation of a defined portion as is the case here". and the judgment went on to state: "we may add that in our view the case is one that falls to be decided under the terms of the statute and our answers are based thereon. We had not to consider nor have we considered the question untrammeled by statutory provisions and on general principles appertaining to the method of computation of income or the permissible deductions from a business point of view which would have been necessary had there been no detailed statutory provisions governing the case". Earlier in the judgment the provisions of the two enactments were dealt with as follows: "act I/1119 ( Travancore )imposed tax on agricultural income which had thereto before been exempt therefrom. It was an Act appertaining exclusively to agricultural income. Subsequently a consolidated Act XXIII of 1121 was passed making separate provisions for tax on agricultural as also on non-agricultural income. The provisions relating to agricultural income are materially different from those relating to non-agricultural income. Whereas in the case of non-agricultural income the method of computation of income, profits and gains mentioned in the charging section is is not statutorily laid down, in the case of agricultural income, Act I/1119 as also that part of Act XXIII/1121 appertaining to agricultural income contain detailed provisions as to how agricultural income subject to the impost of tax is to be ascertained".

(3.) THE provision we have to deal with is entirely different. For a deduction to be permissible as far as agricultural income in this State is concerned it is not enough if the expenditure was not in the nature of capital expenditure and was in respect of the agricultural operations of the assessee during the accounting year. It must be far more intimately related - so related as to form a link in the chain of causation - to the crop that earned the profits or gains which form the basis of the assessment. It follows that we have to hold that the assessee's claim is unsustainable and answer the question referred in the negative.