COMMISSIONER OF INCOME TAX Vs. KALPETTA ESTATES LIMITED

JUDGEMENT

(1.) THE following question has been, at the instance of the Revenue, referred to us, in each of these two cases, by the Income-tax Appellate Tribunal, Cochin Bench :

(2.) THE assessment year in question in either case is 1973-74. THE assessee, in either case, sold rubber trees in the relevant accounting year. THE question arose whether capital gains had been attracted as a result of the sale. In ITR No. 111 of 1981, the Income-tax Officer determined the market value of a fully grown yielding rubber tree as on January 1, 1954, at Rs. 14. This sum he arrived at on the basis of the market value of an acre of rubber estate which he determined at Rs. 1,900 on January 1, 1954. Excluding the value of land, Rs. 1,400 was determined as the cost of the standing trees. Taking into account that 100 trees were normally planted in one acre, as per the Rubber Board standard, he estimated the value of each tree at Rs. 14. In ITR No. 49 of 1981, the Officer determined the value per tree at Rs. 11.5 as on January 1, 1954. However, counsel for the Revenue agrees that the higher value per tree, determined by the assessing authority, namely, Rs. 14, be accepted, for the purpose of this case, as the correct value. This value was confirmed in appeal by the Appellate Assistant Commissioner. On further appeal by the assessee, the Tribunal did not find fault with the market value determined by the Income-tax Officer. Accepting the finding of market value as correct, the Tribunal held that each tree, nevertheless, had to be valued at Rs. 18 in ITR No. 111 of 1981 and at Rs. 22 in ITR No. 49 of 1981, in view of the fact that the assessee was entitled to take into account the future yield in respect of each tree. In other words, the Tribunal added what it estimated to be the future yield per tree to what the Officer had computed as the market value of each tree. It was accepted by all the parties that what was determined by the Officer as the market value included whatever was the cost of improvements to the trees. In the circumstances, the Tribunal was not justified in adding to the market value any other ingredients. Future yield was not an ingredient which could have been added to what was already determined as the market value. In so far as the Tribunal did not find fault with the determination of the market value, the Tribunal misdirected itself in adding any other amount to the market value. We do not say that future yield would not be one of the elements which might go into the consideration of the market value. But the Tribunal accepted the market value, as found by the Officer, and, therefore, having accepted that finding, the Tribunal exceeded its jurisdiction in improving upon it by adding to it.