REHABILITATION PLANTATIONS LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AGRICULTURAL income is not liable to be assessed under the Central Income Tax Act by virtue of the exemption specifically provided under Section 10 of the Act. However when planters process or manufacture agricultural produce converting it in to intermediary or final products for sale in the market, the income attributable to processing or manufacture becomes business income that attracts tax under the Central Income Tax Act (hereinafter referred to as the Central Act for short).From the very beginning income from Tea was assessable partly as agricultural income and partly as business income and specific provision is provided in Rule 8 of the Central Income Tax Rules (hereinafter referred to as the Rules) for assessment of income from Tea and for bifurcation of the same in the ratio given thereunder for the purpose of assessment under the Agricultural Income Tax Act (hereinafter referred to as the AIT Act for short) and under the Central Act. In fact Rule 7 of the Rules makes a general provision for assessment of income, partly agricultural and partly from business. Even though rubber planters were also engaged in processing of the crop derived from rubber plants, namely field latex into centrifugal latex and other allied products, which are value added products, there was no specific provision in the Rules until the assessment year 2002-2003for assessment and bifurcation of income from processing of rubber for assessment under the State AIT Act as well as under the Central Act. However, from the assessment year 2002-03, Rule 7A was introduced specifically providing for assessment of income from processed rubber and bifurcation of the same in the ratio of 65:35 for assessment under the State AIT Act and under the Central Act respectively. When Rule 7A was introduced, it was specifically provided therein that already concluded assessments for past years will not be reopened for the purpose of levying tax on income from processed rubber under the Central Act.

(2.) THE appellant is a Plantation Company jointly set up by the State and Central Governments and is engaged in rubber cultivation in Kerala. Since the appellant is engaged in processing of rubber latex into centrifugal latex, the appellant is liable to be assessed under the Central Act under Rule 7A of the Rules, which provides for assessment of 35% of the income from processed rubber under the Central Act.

(3.) WE have heard learned Senior counsel Shri. A. K. Jayasankar Nambiar appearing for the appellant- assessee and also learned Standing Counsel appearing for the respondent.