BRAEMORE ESTATED LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) These Tax Revision Cases filed under Section 78 of the Agrl. Income Tax Act, 1991 against the appellate order issued by the Agrl. Income Tax Appellate Tribunal pertain to the assessments for the years 1986-87 to 1992-93 except for the year 1987-88. We have heard senior counsel Sri. Joseph Markos appearing for the petitioner and Government Pleader appearing for the respondent.

(2.) The first question raised is against the order of the Tribunal confirming assessment of sale proceeds of Albezia trees (shade trees) as agricultural income. Counsel for the petitioner has relied on the decision of the Supreme Court in STATE OF KERALA V. KARIMTHARUVI TEA ESTATE LTD., 60 I.T.R. 275 and the decision of this Court in TRAVANCORE TEA ESTATES CO. LTD. V. COMMISSIONER OF INCOME TAX, KERALA, 93 ITR 314 and contended that sale proceeds of shade trees are assessable to capital gains under the Central Income tax Act. However, Government Pleader contended that Albezia trees are cut retaining the stem which regenerates and therefore sale proceeds of timber should be treated as agricultural income. We are unable to accept this contention because there is no evidence of periodicity at which the tree regenerates and becomes mature to treat the sale proceeds as agricultural income. Shade trees mature in the course of time and are retained for long periods for providing shade to tea bushes. It is a settled position by the above decisions that sale proceeds of shade trees should be subject to levy of tax under the head "capital gains" under the Central Income tax Act. It is seen from the evidence produced in this case that 10% of the sale proceeds is estimated and assessed to capital gains under the Central Income Tax Act. We therefore set aside the order of the Tribunal pertaining to the years 1998-89 to 1991-92 on this issue and direct the assessing officer to exclude income from sale of shade trees (albezia) in the computation of agricultural income.

(3.) The next issue raised is against disallowance of expenditure incurred in respect of matured rubber plantation which was not tapped for several years ranging from 1989-90 to 1992-93. Counsel for the petitioner has relied on the decision of the Supreme Court in TRAVANCORE RUBBER AND TEA CO. LTD. V. COMMISSIONER OF AGRL. INCOME TAX, KERALA, 41 I.T.R. 751 and contended that entire revenue expenditure incurred for matured areas should be allowed. It is submitted that failure to tap and take yield from matured rubber trees was on account of dispute between the management and employees. We find from the Tribunal's order that details of the expenditure are not available on records. If rubber trees were not tapped on account of labour strike then probably there would not have been any expenditure incurred towards wages as employees were not working. It is not known what are the items of expenditure claimed by the petitioner. In the circumstances, we set aside the findings of the Tribunal on this issue and direct the assessing officer to verify the break-up details of expenditure claimed by the petitioner and allow such of the expenses which are incurred for the purpose of up-keep and maintenance of yielding rubber trees, no matter whether income was received during the relevant year or not.