COMMISSIONER OF INCOME TAX Vs. TROPHICAL PLANTATIONS LIMITED

JUDGEMENT

(1.) AT the instance of the Revenue, certain questions of law are referred for the decision of this court by the Income-tax Appellate Tribunal.

(2.) THE respondent-assessee is common in all the cases. THE matter relates to the assessment years 1979-80 and 1980-81. THE assessee is a company owning tea, rubber and coffee estates. During the relevant accounting period relating to the assessment year 1979-80, the assessee sold 6,514 rubber trees for a consideration of Rs. 4,99,500. THE Income-tax Officer estimated the cost of rubber trees as on January 1, 1964, at Rs. 20 per tree and computed the capital gains that accrued on the sale of the above rubber trees. In appeal, the Commissioner of Income-tax (Appeals) enhanced the cost of a rubber tree as on January 1, 1964 to Rs. 50 and computed the capital gains at Rs. 1,95,420 as against Rs. 3,69,220 arrived at by the assessing authority. In the accounting year relevant to the assessment year 1980-81, the assessee sold 5,250 rubber trees for a consideration of Rs. 3,76,900. Estimating the cost of a rubber tree as on January 1, 1964 at Rs. 20, the Income-tax Officer computed capital gains at Rs. 2,71,905. In appeal, the Commissioner of Income-tax (Appeals) enhanced the cost of a rubber tree to Rs. 50 and reduced the capital gains to Rs. 1,14,400. From the said orders, the assessee filed appeals before the Income-tax Appellate Tribunal. THE Appellate Tribunal negatived the plea of the assessee that the income arising from the sale of trees is agricultural income. It further held that capital gains is exigible on the sale of rubber trees--capital asset in the instant case. THE Tribunal concluded that the value of a yielding rubber tree as on January 1, 1964, would be much more than the value obtained by the sale of trees during the relevant accounting periods when the said rubber trees had become old and unyielding and, in this view, no capital gains assessable to tax accrued to the assessee. In this connection, the Appellate Tribunal followed its earlier decision in I. T. A. No. 344/(Coch) of 1982 dated May 10, 1984 and also in I. T. A. No. 278/(Coch) of 1982, dated June 21, 1984. THE Tribunal was of the view that the fair market value of a rubber tree as on January 1, 1964, could not have been less than the timber value of the said tree when it was old and unyielding and sold during the relevant accounting periods in question.

(3.) ON motion by the assessee, the following three questions of law have also been referred by the Income-tax Appellate Tribunal for the decision of this court :