REHABILITATION PLANTATIONS LIMITED, PUNALUR V. COMMISSIONER OF INCOME TAX

ITA/208/2013

AI Insights

The case involves Rehabilitation Plantations Limited, the appellant, challenging the orders of the Income Tax Appellate Tribunal, Kochi, regarding the classification of replantation expenses for the assessment year 2007-08. The primary legal contention was whether these expenses should be considered capital expenditures, which are not deductible, or revenue expenditures, which are deductible under Rule 7A(2) of the Income Tax Rules. The Full Bench had previously ruled that such expenses are deductible as revenue expenditures under Section 37 of the Income Tax Act, 1961. The High Court's decision followed this precedent, allowing the appeals and remitting the case for a fresh assessment based on this interpretation.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 771280 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 03-08-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act 1961, Income Tax Rules
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: P K R MENON
• Assessee Lawyers: M GOPIKRISHNAN NAMBIAR; P BENNY THOMAS; K JOHN MATHAI; PREETHA NAIR
• Keywords: Capital expenditure; Income tax appeal; Revenue expenditure; Re-plantation Expenses; Full Bench Order
• Section: 37; 10(31); 7A(2)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 3RD DAY OF AUGUST 2022 / 12TH SRAVANA, 1944 ITA NO. 201 OF 2013 AGAINST THE ORDER IN ITA 303/COCH/2011 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: REHABILITATIPON PLANTATIONS LIMITED PUNALUR, KOLLAM DISTRICT, KOLLAM 691305 BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI SMT.PREETHA S.NAIR RESPONDENT/S: COMMISSIONER OF INCOME TAX AYAKAR BHAWAN, KAWDIAR, THIRUVANANTHAPURAM-695003 SR SC MR. PKR MENON THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 03.08.2022, ALONG WITH ITA.208/2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.201 & 208 2013 -2- IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 3RD DAY OF AUGUST 2022 / 12TH SRAVANA, 1944 ITA NO. 208 OF 2013 AGAINST THE ORDER IN ITA 422/COCH/2011 OF I.T.A.TRIBUNAL, COCHIN BENCH APPELLANT/S: REHABILITATION PLANTATIONS LIMITED, PUNALUR, KOLLAM DISTRICT, KOLLAM - 691 305. BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI SMT.PREETHA S.NAIR RESPONDENT/S: COMMISSIONER OF INCOME TAX AYAKAR BHAWAN, KAWDIAR, THIRUVANANTHAPURAM - 695 003. SR SC MR. PKR MENON THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 03.08.2022, ALONG WITH ITA.201/2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.201 & 208 2013 -3- J U D G M E N T [ITA Nos.201/2013, 208/2013] S.V.Bhatti,J. Heard Mr Kuryan Thomas for the appellant and Mr Navaneeth. N. Nath holding for Mr Jose Joseph, Standing Counsel for parties. 2. Rehabilitation Plantation Limited, Kollam/assessee is the appellant. The Commissioner of Income Tax, Thiruvananthapuram/ Revenue is the respondent. 3. Assessee challenges the order of Income Tax Appellate Tribunal, Kochi in I.T.A Nos.303/Coch/2011 and 422/Coch/2011. The subject matter of the appeals relates to the assessment year 2007-08. The appeals are filed and admitted on the following substantial questions of laws: “i) Whether the Hon’ble Tribunal was right in law and on facts in holding that the re-plantation expenses claimed by the appellants was a capital expenditure not eligible for deduction under Rule 7A(2) of the Income Tax Rules? ii) Ought not the Hon’ble Tribunal to have found that the re-plantation expenses claimed by the appellant ITA Nos.201 & 208 2013 -4- were in the nature of revenue expenses and hence permissible for deduction under the express provisions of Rule 7A(2) of the Income Tax Rules?” 4. The learned counsel appearing for the parties state that the questions of law framed in instant appeals are covered by the Full Bench order dated 01.08.2022 in I.T.A No.201/2013 and batch. The question considered by the Full Bench reads thus: “Whether the assessee/Plantation Companies under Rule 7A(2) of the Rules are entitled to an allowance towards replanting expenses and a further deduction towards upkeep and maintenance expenses incurred by the assessee for the immature plants till the age of maturity in the computation of income under the Act and Rules.” The Full Bench answered the question as follows: “In the computation of business income under Rule 7A of the Rule 1962, the assessee under Rule 7A(2) is entitled to an allowance in respect of the cost of replacement of dead and useless rubber trees in the rubber plantation in an area not abandoned, subject to Section 10(31) of Act 1961. The upkeep and maintenance expenses incurred by the assessee till the maturity of rubber trees are revenue expenditures eligible for deduction under Section 37 of Act 1961.” 5. The questions framed in the instant appeals by following the order of the Full Bench order in I.T.A No.201/2013 and batch are answered in favour of the Assessee and against the Revenue for ITA Nos.201 & 208 2013 -5- statistical purposes. Consequent thereto the orders of: a) the Assessing Officer dated 24.12.2009, b) the Commissioner of Income-tax (Appeals) dated 28.03.2011, and c) the Income Tax Appellate Tribunal dated 22.01.2013 are set aside, d) the case remitted to the Assessing Officer for consideration and making the assessment order afresh by keeping in view the ratio of the Full Bench in I.T.A No.201/2013 and batch. Appeals are allowed as indicated above. S.V.BHATTI JUDGE BASANT BALAJI JUDGE JS ITA Nos.201 & 208 2013 -6- APPENDIX OF ITA 208/2013 PETITIONER ANNEXURES ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 24.12.2009 ISSUED BY THE ASSESSING OFFICER TO THE APPELLANT FOR THE YEAR 2007-08. ANNEXURE B TRUE COPY OF THE ORDER DATED 28.03.2011 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE APPELLANT. ANNEXURE C TRUE COPY OF THE ORDER DATED 22.01.2013 ISSUED BY THE INCOME TAX APPELLATE TRIBUNAL ITA Nos.201 & 208 2013 -7- APPENDIX OF ITA 201/2013 PETITIONER ANNEXURES ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 24.12.2009 ISSUED BY THE ASSESSING OFFICER TO THE APPELLANT FOR THE YEAR 2007-08 ANNEXURE B TRUE COPY OF THE ORDER DATED 28.03.2011 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE APPELLANT ANNEXURE C TRUE COPY OF THE ORDER DATED 22.01.2013 ISSUED BY THE INCOME TAX APPELLATE TRIBUNAL "