TMI Blog1965 (12) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue receipt. The appellant in C.A. No. 157/1965, Meenakshi Achi, owns 5/6ths share in Sungei Chour Estate in Malaya. V.R.K.R.S. Firm, the appellant in C.A. No. 158/1965, owns rubber estates in Kaualakangsar, Malaya. During the Second World War, rubber estates in the Federated Malay States were either destroyed or denuded. In order to encourage planting or re-planting of rubber trees, the Government of the Federated Malay States issued an Ordinance styled, The Rubber Industry (Re-planting) Fund Ordinance, 1952, whereunder a Board was constituted to administer the funds accumulated in terms of the said Ordinance. In the accounting year relevant to the assessment year 1955-56, Meenakshi Achi received $5,962 as re-plantation cess from the said board. So too, the firm received $10,336 in the accounting year corresponding to the assessment year 1955-56. During the assessment proceedings before the Income-tax Officer, the appellants claimed the said amounts as capital receipts. The Income-tax Officer treated them as revenue receipts on the ground that the said payments were made to cover the re-planting expenses of the assessees. On appeals, the Appellate Assistant Commissioner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees and therefore they were "capital receipts". Mr. Viswanatha Sastri, appearing for the revenue, contended that no scheme was framed in accordance with the principles laid down in the First Schedule annexed to the Ordinance, that the disbursements were made in terms of the Second Schedule, that the payments were correlated to rubber produced which was the "trading asset" of the appellants and, therefore, the amounts paid were revenue receipts. Alternatively, he argued that even if the First Schedule applied, the payments were made to the appellants to enable them to recoup the revenue expenditure incurred for running and maintaining the plantations and, therefore, the payments were revenue receipts. At the outset, it would be convenient to clear the ground. Throughout the proceedings, it was assumed that a scheme was framed embodying the principles laid down in the First Schedule to the Ordinance and that the payments were made in terms of the scheme. We cannot, therefore, permit the learned counsel for the revenue to change his ground and base his case on the Second Schedule. It may also be made clear that the assessees were only planters and were maintaining the plantation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neys should, subject to the provisions of sub-section (5) of section 7 of the Ordinance and to paragraph (b) of sub-section (3), be utilised solely for the payment of the whole or part of the cost of replanting or new planting of rubber or the planting of other crops in substitution of rubber as approved by the board. Under clause (b) any scheme or schemes affecting Fund A should, subject to the provisions of sub-section (5) of section 7 of the Ordinance, be made in accordance with the principles set out in the First Schedule to the Ordinance. The material provisions of the First Schedule read thus : " 4. The balance in the fund after setting aside the sum mentioned in the previous paragraph will be credited to the accounts of the respective participants in the fund in such proportions as in the opinion of the Board correspond to the amount of rubber produced by each participant in the period during which the moneys being credited were collected. The Board may however exclude from consideration, for the purposes of this paragraph, any rubber which in the opinion of the Board has not been the subject of payment of cess. 5. The Administrators will repay to the participants in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 10(3) and the second fund was distributed in terms of the Second Schedule. Both the funds were divided again into Fund A and Fund B. Fund A was established on behalf of owners of property of which an area of not less than Ac. 100---00 was planted and Fund B on behalf of owners who owned an area of less than Ac. 100---00. In this case, though Mr. Sastri contended to the contrary, as we have pointed out earlier, the whole proceedings were conducted on the basis that there was a scheme embodying the principles of the First Schedule. It was not disputed that the property of the appellants was not planted entirely with high-yielding rubber trees within the meaning of clause 6. If so, the only question is, what was the nature of the payments made. Adverting to the First Schedule of the Ordinance, under clause (4) the cesses collected on rubber produced in Penang and rubber exported from the Federation other than Penang were credited to the accounts of the appellants in such proportions corresponding to the amount of rubber produced by them in the period during which the said cesses were collected. Thereafter, the said amounts were paid to the appellants against expenditure actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt and the condition that the sums should not be utilised or were to be paid against the sums expended for replanting would not affect the nature of the receipt itself." Briefly stated, the basis of the High Court's judgment is that the assessees contributed to the Fund by paying duty on the export of rubber and therefore the repayment made to them from out of the Fund must be correlated to the production of rubber. It was clear from the facts narrated above that the assessees were only planters and they were not exporters and therefore they did not pay any duty under the Ordinance to the Government. Mr. Sastri, the learned counsel for the revenue, did not support the principle accepted by the High Court that the source of payment was material and not the nature of expenditure. Indeed his argument was contrarywise, namely, that the expenditure was revenue expenditure and therefore the amounts paid to recoup it partook of that character. The decision in Higgs v. Wrightson is rather apposite. There the appellant was a dairy farmer, the greater part of whose land was, before the war, permanent pasture. Under the Agricultural Development Act, 1939, and the Agriculture (Miscellane ..... X X X X Extracts X X X X X X X X Extracts X X X X
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