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TMI Blog2002 (6) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed the expenditure for maintenance of immature rubber trees. The assessee had claimed this as it was his case that firstly he had spent some amounts for replanting the rubber trees and later on he incurred certain expenditure for those immature trees in the subsequent year. Though the figures differ, the plea was common in both the appeals pertaining to the assessment years 1986-87 and 1987-88. The appellate authority by giving a specific finding, disallowed the expenses for maintenance purpose. It found that the authorities below were right in disallowing the expenditure for maintenance of immature rubber trees made in the subsequent year of the replanting. The assessee had specifically raised a ground that the expenditure incurred on the replanted rubber plants for the subsequent years other than the first year had to be allowed as a revenue expenditure as such expenditure was coverable under section 5(e) of the Act. However, the Tribunal took the view that since the expenditure for replanting is provided for under section 5(g) of the Act that expenditure alone would be allowable and only under that provision and no other. In that view, the expenditure "for maintaining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no agricultural income was being derived would also be allowable under section 5(e). For this purpose, learned counsel invites our attention to the definition of the term "land" given in the Act, which reads as follows: " 'land' means agricultural land which is used for the purpose of growing any plantation crop with or without any other crop intermingled with such plantation crop or for purposes subservient thereto and is either assessed to land revenue in the State or is to a local rate assessed and collected by officers of the Government as such and includes any plantation in any forest land." Learned counsel, therefore, argues that in the pre-amendment period, the expenditure made even on the immature rubber trees from which no agricultural income was derived would be allowable. He points out that factually the assessee had replanted the trees and in the subsequent years had made expenditure for maintenance of those immature trees and, therefore, he would be entitled to the expenditure that made under the said provision. What we see from the orders passed by the Tribunal is that the Tribunal has refused to allow the same on the ground that there was a specific provision mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital expenditure but since the Legislature has made an exception by way of the proviso and provided the restriction of the expenditure meant only for 2 1/2 percent of the land, it could be only that expenditure which would be allowable. Carrying the analogy further, the Tribunal holds that if the immature trees are in the nature of a capital asset and the expenditure made for planting them is a capital expenditure, the expenditure made for their maintenance would also be capital expenditure. In our opinion, this analogy and the line of reasoning are not correct. We must at once point out that the expenditure made for plantation of the trees would certainly be the expenditure made for the purpose of the land. Considering the language of the definition of "land", such expenditure would be for the purpose of plantation because "land" includes plantation. Again, both in sections 5(e) and 5(g) the expenditure which is a capital expenditure made in the previous year is specifically excluded. The proviso to section 5(g) only provides the subsequent restriction because in the absence of the proviso all the expenditure for replanting the land would have been allowable but the proviso restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as capital expenditure but as allowable expenditure. The Supreme Court in Travancore Rubber and Tea Co. Ltd. v. CAIT [1961] 41 ITR 751 has taken the same view in respect of the expenses incurred for maintenance and upkeep of immature rubber plants. The Supreme Court, in that case, was considering the provision of section 5(j) of the Travancore-Cochin Agricultural Income-tax Act (Act 22 of 1950). Clause (j) was worded as under: "(j) any 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." There also the plea was raised on behalf of the Revenue that such expenditure would be a capital expenditure. The learned judges relied on an English judgment in Vallambrosa Rubber Co. Ltd. v. Farmer [1910] 5 Tax Cas 529 (C. Sess) and ultimately came to the conclusion: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Supreme Court in Calvary Mount Estates (Pvt.) Ltd.'s case [1961] 41 ITR 755 has specifically included the expenditure for maintenance of immature rubber trees on the basis of the language of section 5(e) which we have extracted above. The only difference would be in the last word of the section because in the aforementioned section the word was "plantation" while in the present section 5(e) the word is "land". We have already shown that the term "land" includes "plantation" also. Therefore, it must be held that the Supreme Court has held the expenditure on the maintenance of immature rubber trees to be covered in section 5(e), the language of which had specifically excluded "capital expenditure" like section 5(j) of the Travancore-Cochin Agricultural Income-tax Act. If that be so, if such expenditure was not a capital expenditure for the purposes of section 5(e), which is exactly like the present section 5(e) then, it cannot become a capital expenditure for the purpose of section 5(g) also. In view of both these decisions, we are of the opinion that the Tribunal has erred in disallowing the expenditure. It is not clear as to how much is the expenditure in the relevant yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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