TMI Blog1987 (3) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ? " For the reasons stated by this court in CIT v. Forbes Ewart Figgis (P.) Ltd. [1982] 138 ITR 1 (Ker) [FB], we answer question No. 1 in the negative, that is, in favour to 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) [FB], question No. 2 is answered in the affirmative, that is, in favour of the assessee and against the Revenue. For the reasons stated by us in ITR No. 111 of 1981 (CIT v. Kalpetta Estates Ltd. [1987] 167 ITR 666), we answer question NO. 3 in the negative, that is, in favour of the Revenue and against the assessee. 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 a capital receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . in Higgs v. Wrightson [1944] 26 TC 73 (KB), where he stated that " ploughing grant " Paid to a farmer to reimburse 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 assessees, 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. " In Bengal Textiles Association v. CIT [1960] 39 ITR 723, the Supreme Court pointed out that money received as subsidy, otherwise than as gift or for a beneficial purpose, such as relief of unemployment, etc., was a revenue receipt. The court pointed out (at pages 728 729): " What is decisive in this case is that these payments were made to the association in order that they may be used in the business of the association and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opted by the Supreme Court in Travancore Rubber Tea Co. Ltd. v. Commr. of Agrl. LT. [1961] 41 ITR 751, where the court stated (at page 755) : " 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. " 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 (see ([1961] 41 ITR 751 at page 754): ".. ...... 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 one-seventh of such expenditure. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-... (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, specify. " 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 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 section 5 of the Agricultural Income-tax Act, 1950. It reads: " Explanation 2.-Nothing contained in this section shall be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. CIT [1960] 39 ITR 723, was a beneficial object. Counsel also relies upon the decision of the Delhi High Court in CIT v. State of Trading Corporation 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. 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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