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TMI Blog1965 (12) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 held that the said amounts were business receipts for the reason that the assessees had a reasonable expectation of receiving the amounts and the said amounts had been paid by the Government in consideration of running the rubber estate business. On further appeals, the Tribunal held that the payments had come to the assessees as a result of their carrying on their business in agriculture in foreign ports and therefore they were revenue receipts. At the instance of Meenakshi Achi, the following question was referred to the High Court : " Whether, on the facts and in the circumstances of the case, the re-plantation cess receipt of 5,962 dollars is income assessable to tax ? At the instance of the firm, the following question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enient 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 plantations : they were not carrying on any business in rubber; the said amounts in their hands were assessed as income derived from plantations. As much of the argument turned upon the provisions of the said Ordinance, it would be convenient to notice its relevant terms. The long title of the Ordinance described it as an Ordinance to provide for the collection of a cess on the production and export of rubber, for the establishment of a fund into which money collected as cess was to be paid and for the constitution of a board to administer the fund. Under section 4 the Rubber Industry (Re-plantation) Board was constituted. Section 7(1) authorised the High Commissioner in Council, on the recommendation of the Board, for the imposition and collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive 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 the fund the sums credited to them individually in the fund against expenditure actually incurred since 1st January, 1946, by the participant concerned on the re-planting or new planting of high-yielding rubber trees or the planting of other crops in substitution for rubber as approved by the Board. Proof of such expenditure must be established to the satisfaction of the Administrators either by the submission of audited and certified statements prepared by accountants approved by the Board or by other evidence of a character approved by the Board. 6. A participant in the fund who can show to the satisfaction of the Administrators that the planted area of his property is planted entirely with high-yielding rubber trees shall be entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 actually incurred since 1st January, 1946, by the appellants on the maintenance of the plantations. On what basis the amounts were paid from the fund to the assessees, there is dearth of material. We have to proceed only on the terms of clauses (4) and (5) of the First Schedule and the admissions recorded by the Tribunal. The Tribunal recorded in its order the concessions made by the assessee to the following effect : "The assessee has conceded before us that it did not have any highyielding rubber trees. So the next position is it is based upon expenditure incurred after 1st January, 1946. It is also admitted that he has claimed such expenses and had them allowed. But these expenses, we find from the records, are based on the production and not on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (Miscellaneous War Provisions) Act, 1940, he received grants in respect of the ploughing and bringing into a state of cleanliness and fertility land previously under grass for a period of seven years or more. The court held that the ploughing grant was a revenue receipt. Macnaghten J. observed : "Since the amount of the grant depends on the area ploughed, it would seem to be a grant towards the expense of the ploughing . . ." So too, in the instant case, the payments to the planters were made against the expenditure incurred for maintaining the rubber plantations. Having regard to the aforesaid facts, we must hold that the amounts from the fund earmarked for the appellants on the basis of the rubber produced by them were paid against the expenditure incurred b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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