PETITIONER:
THE TRAVANCORE RUBBER AND TEACO., LTD.
Vs.
RESPONDENT:
THE COMMISSIONER OF AGRICULTURALINCOME-TAX, KERALA
DATE OF JUDGMENT:
15/12/1960
BENCH:
KAPUR, J.L.
BENCH:
KAPUR, J.L.
HIDAYATULLAH, M.
SHAH, J.C.
CITATION:
1961 AIR 604 1961 SCR (3) 279
CITATOR INFO :
RF 1964 SC 572 (2,6)
ACT:
Agricultural Income Tax-Rubber Plantation-Expenditure on
immature trees–Whether Permissible deduction-Travancore-
Cochin Agricultural Income-tax Act, 1950 (Tr. Co. XXII of
1950), s. 5.
HEADNOTE:
In computing the agricultural income of a person s. 5(f) of
the Travancore-Cochin Agricultural Income-tax Act, 1950,
allowed deductions of any expenditure “laid out wholly and
exclusively for purpose of deriving the agricultural
income”. The assessee who had rubber plantations claimed
that the amount expended on the maintenance and tending of
immature rubber trees should be deducted in computing its
agricultural income but this was disallowed on the ground
that the use of the article “the” before the words
agricultural income implied deduction
(1) [1955] 1 S.C.R. 313
280
from the income of the year in which the trees on which the
amount was expended bore income.
Held, that the assessee was entitled to the deduction claim-
ed. It was no answer to the claim for the deduction that
these expenses produced no return in the year in question as
the trees were not yielding rubber in that year.
Vallambrosa Rubber Co. Ltd. v. Farmer, (1910) 5 T. C. 529,
followed.
Assam Bengal Cement Co. Ltd. v. The Commissioner of Income-
tax, West Bengal, [1955] 1 S.C.R. 972, not applicable.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 290 to 292
of 1959.
Appeals by special leave from the judgment and order dated
December 6, 1957, of the Kerala High Court in Agricultural
Income-tax Referred Cases Nos. 15, 18 and 19 of 1955.
C.K. Daphtary, Solicitor-General of India, Thomas
Vellapally and M. R. K. Pillai, for the appellants (in all
the appeals)
Sardar Bahadur, for the respondents.
1960. December 15. The Judgment of the Court was delivered
by
KAPUR, J.-These three appeals are brought by special leave
against the judgment and order of the High Court of Kerala
and arise out of a common judgment of that court given in
three Agricultural Income-tax References Nos. 15, 18 and 19
of 1955. In the first reference the question raised was:
“Whether under the Travancore-Cochin Agricul-
tural Income Tax Act, 1950 in calculating the
assessable agricultural income of a rubber
estate already planted and containing both
mature yielding rubber trees and also immature
rubber plants which have not come into
bearing, the annual expenses incurred for the
upkeep and maintenance of such rubber plants,
are not a permissible deduction, and if so,
whether the sum of Rs. 42,660-4-1 expended by
the assessee in the relevant accounting year
1952, under this head may be deducted.”
and in the other two the question referred
was:
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“Whether the expenses incurred for the mainte-
nance and upkeep of immature rubber trees
constitute a permissible deduction within the
meaning of s. 5(j) of Act XXII of 1950?”
In all the references the questions were answered in the
negative and against the appellant.
The appeals relate to three accounting years 1950, 1951 and
1952 (assessment years 1951-52, 1952-53 and 1953-54). The
appellants have rubber plantations and in the accounting
year 1950, corresponding to the assessment year 1951-52, the
appellants had under cultivation 3558-84 acres out of which
334-64 acres had immature rubber trees growing and the rest
i.e. 3224-20 acres mature rubber yielding trees under
cultivation. In that year a sum of Rs. 19,056-0-9, which
was expended for the upkeep and maintenance of immature
portion of the rubber plantation, was allowed by the
Agricultural Income tax Tribunal and at the instance of the
respondent a reference was made to the High Court under s.
60(1) of the Agricultural Income tax Act (Act XXII of 1950)
hereinafter termed the ‘Act’ and that was reference No. 18
of 1955.
During the accounting year 1951 corresponding to the
assessment year 1952-53 the appellant had under cultivation.
a total area of 3426,55 acres of which 3091.91acres were
mature rubber yielding trees and 334.64 acres had immature
rubber trees. In that year a sum of Rs. 59,271.9-5 was the
expenditure incurred for the upkeep and maintenance of
immature portion of the rubber estate. That sum was allowed
by the Agricultural Income-tax Tribunal and at the instance
of the respondent a reference was made under s. 60(1) of the
Act to the High Court and that was reference No. 19 of 1955.
In Agricultural Income-tax Reference No. 15 of 1955 which
related to, accounting year 1952 and the assessment year
1953-54, the area under cultivation was 3453,65 out of which
2967,91 acres had mature rubber yielding trees and 485,74
acres had immature rubber growing trees. In that year the
amount expended on the maintenance and tending of the imma-
ture rubber trees was Rs. 42,660,4-1. In that case,
36
282
however, the Agricultural Income tax Tribunal rejected the
appellant’s claim and disallowed the expenditure. At the
instance of the appellant a case was stated to the High
Court under s. 60(1) of the Act and was answered in the
negative and against the appellant. In all the cases the
assessee company is the appellant and the main question for
decision is whether the amount expended for the upkeep and
maintenance of the immature, rubber trees is a permissible
deduction under s. 5(j) of the Act.
The charging section under the Act is s. 3 and s. 5 relates
to computation of agricultural income. It
provides:-
S.5 “The agricultural income of a person
shall be computed after making the following
deductions, namely:-
expenditure (not being in the nature of
capital expenditure or personal expenses of
the assessee) laid out or expended wholly and
exclusively for the purpose of deriving the
agricultural income;”.
In regard to this income the High Court held:
“We find it impossible to say that the
‘amounts spent on the upkeep and maintenance
of the immature rubber plants were laid out or
expended ”for the purpose of deriving the
agricultural income”, much less that they were
laid out or expended “wholly and exclusively
for that purpose”.
“The agricultural income”, in the context, can
only mean the agricultural income obtained in
the accounting year concerned and not the
agricultural income of any other period.”
In our opinion the High Court has taken an erroneous view of
the relevant provision. It is not denied that the
expenditure claimed as a deduction was wholly and
exclusively laid out for the purpose of deriving income but
the use of the definite article “the” before agricultural
income has given rise to the interpretation that the
deduction is to be from the income of the year in which the
trees on which the amount claimed
283
was expended bore any income. In a somewhat similar case
Vallambrosa Rubber Co. Ltd. v. Farmer (1) the expenditure of
the kind now claimed was allowed under the corresponding
provision of the English Income-tax Act. In that case a
rubber company had an estate in which in the year of
assessment only 1/7 produced rubber and the other 6/7 was in
process of cultivation for the production of rubber. It may
be added that rubber trees do not yield any rubber until
they are about six years old. The expenditure for the
superintendence, weeding etc. incurred by the company in
respect of the whole estate including the nonbearing rubber
estate was allowed on the ground that in arriving at the
assessable profits the assessee was entitled to deduct the
expenditure for superintendence, weeding etc. on the whole
estate and not only on the 1/7 of such expenditure. Lord
President said at page 534:
“Well that is for the case quite correct, but
it must be taken, as you must always take a
Judge’s dicta, secundum materiam subjectum of
the case that is decided. But to say that the
expression of Lord Esher’s lays down that you
must take each year absolutely by itself and
allow no expense except the expense which can
be put against the profit which is reaped for
the year is in my judgment to press it much
further than it will go.”
Counsel for the respondent relied upon a judgment of this
Court in Assam Bengal Cement Co. Ltd. v. The Commissioner of
Income-tax, West Bengal (2) and particularly on a passage at
page 983 where Bhagwati 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.”
But that case has no relevancy to the facts of the present
case nor has that passage any applicability to the facts of
the present case. The question there was
(1) (1910) 5 T.C. 529.
(2) [1955] 1 S.C.R. 972.
284
whether certain payments made were by way of capital
expenditure or revenue expenditure. The assessee acquired a
lease from Government for twenty years and in addition to
paying the rent and royalties for the lease the assessee had
to pay two further sums as ‘protection fees’ under the terms
of the lease. Those sums were held to be capital
expenditure inasmuch as they were incurred for the
acquisition of an asset or an advantage of enduring nature
and were no part of the working or operational expenses for
carrying on the business of the assessee.
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.
We therefore allow these appeals, set aside the judgments
and orders of the High Court and answer the questions in
favour of the appellant in all the three agricultural
Income-tax References. The appellant will have its costs in
this Court and the High Court. One hearing fee in this
Court.
Appeals allowed.
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