THE PLANTATION CORPORATION OF KERALA LTD V. THE DEPUTY COMMISSIONER OF INCOME TAX

ITA/71/2020

AI Insights

The case involves The Plantation Corporation of Kerala Ltd., the appellant, contesting the disallowance of deductions related to the replanting of rubber trees and the maintenance of rubber saplings for the assessment year 2012-13. The primary legal contention revolves around the interpretation and application of Rule 7A(2) of the Income Tax Rules, 1962, which pertains to the allowances and deductions for expenses incurred in the upkeep of rubber plantations. The Income Tax Appellate Tribunal, Cochin Bench, had earlier upheld the disallowance by the Assessing Officer, which was contested in the High Court of Kerala. The Full Bench of the High Court provided clarity on the applicability of Rule 7A(2), leading to a partial allowance of the appeal.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 760124 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 04-08-2022
• Assessment Year: misc
• Other Referred Cases: Rehabilitation Plantations Ltd. v. Commissioner of Income Tax
• Laws Referred To: Income Tax Act 1961, Income Tax Rules 1962
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: NAVNEETH NATH; P K MENON; JOSE JOSEPH
• Assessee Lawyers: RAMESH JOHN
• Keywords: Assessment Year 2012-13; Income tax appeal; Replantation of Rubber Plants; Maintenance of Rubber Saplings
• 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 THURSDAY, THE 4TH DAY OF AUGUST 2022 / 13TH SRAVANA, 1944 ITA NO. 71 OF 2020 AGAINST THE ORDER ITA 1/2020 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: THE PLANTATION CORPORATION OF KERALA LTD MUTTAMBALAM P.O. KOTTAYAM 686 004. BY ADV RAMESH CHERIAN JOHN RESPONDENT/S: 1 THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE I, O/O THE ASSISTANT COMMISSIONER OF INCOME TAX, PUBLIC LIBRARY BUILDING, SHASTHRI ROAD, KOTTAYAM 66 001. 2 THE COMMISSIONER OF INCOME TAX, O/O THE COMMISSIONER OF INCOME TA, PUBLIC LIBRARY, BUILDING, SHASTHRI ROAD, KOTTAYAM 686 001. BY ADVS.NAVNEETH N NATH HOLDING FOR SRI.P.K.RAVINDRANATHA MENON (SR.) JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 04.08.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T.A. No.71/2020 -2- J U D G M E N T S.V. Bhatti, J. Heard Mr Ramesh Cherian John, learned counsel for the appellant and Mr Navneet holding for Mr Jose Joseph, learned Standing Counsel for the respondent. 2. The Plantation Corporation of Kerala Ltd. is the appellant. The Deputy Commissioner of Income Tax, Circle 1/Revenue and another are the respondents. The present appeal arises from the order dated 02.03.2020 in ITA No.1/COCH/2020 before the Income Tax Appellate Tribunal, Cochin Bench. The subject matter of appeal relates to Assessment Year 2012-13 and the controversies relate to the allowance claimed by the assessee towards the replantation of rubber plants in an area where rubber trees were planted and have become unproductive and are not in an abandoned area I.T.A. No.71/2020 -3- under Rule 7A(2) of the Income Tax Rules 1962 and also the deduction of expenditure incurred towards upkeep and maintenance of rubber saplings till maturity or the trees yield. 3. The Assessing Officer disallowed both the claims. The assessee has been unsuccessful before the first and the second appellate authorities/Tribunal. The Tribunal followed the Division Bench judgment of this Court in Rehabilitation Plantations Ltd. v. Commissioner of Income Tax1 case. A Division Bench of this Court referred the issues arising under Rule 7A(2) of the Income Tax Rules and also the deduction towards the upkeep and maintenance expenses by the assessee. The question referred to 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 1 (2012) 251 CTR 343 (Ker.) I.T.A. No.71/2020 -4- 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 referred to it by order dated 01.08.2022 and the operative portion is excerpted for ready reference. “The answers to the two facets of the question referred to the Full Bench are that: “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.” 4. The assessee raises the following substantial I.T.A. No.71/2020 -5- questions of law: “i. Whether on the facts and circumstances of the case the Tribunal was justified in confirming the orders of the authorities below disallowing the deduction/allowance of Rs. 98,62,206/- claimed under rule 7A (2) of the Income Tax Rules 1962 for the relevant assessment year. ii. Whether on the facts and circumstances of the case the Tribunal was justified in confirming the orders of the authorities below by merely relying on the judgment of this Hon'ble Court in the case of M/s. Rehabilitation Plantations Ltd. Vs. CIT reported in 251 CTR 343 without application of mind and adjudicating on the contentions raised by the appellant. iii. Whether on the facts and circumstances of the case the Tribunal was justified in coming to an incorrect finding that it is an admitted position that the re-planting expenses and maintenance expenses are incurred for planting new area of rubber and not an area already planted with yielding rubber and whether the said finding is contrary to the undisputed finding of the assessing authority in the order of assessment that the expenditure incurred is for planting in an area which had been cleared off an existing plantation that had become I.T.A. No.71/2020 -6- unproductive and hence is not the said finding contrary to facts, incorrect and perverse. iv. Whether on the facts and circumstances of the case the Tribunal was justified in coming to a finding that Rule 7A (2) of the Income Tax Rules deals with infilling expenses and not replanting expenses and is not the finding of the Tribunal contrary to the object and purport of Rule 7A (2) of Income Tax Rules 1962. v. Whether on the facts and circumstances of the case the Tribunal was justified in merely relying on the judgment of this Hon'ble Court in the case of Rehabilitation plantation Ltd. and coming to the illegal and incorrect finding that the expenditure incurred for planting and development of plantation up to maturity has to be necessarily capitalized and it cannot be allowed as Revenue Expenditure and is not the said finding against the purport and object of Rule 7 A (2) of Income Tax Rules, which grants an allowance/deduction towards expenses incurred for replanting of rubber plants. vi. Whether on the facts and circumstances of the case the Tribunal was justified in sustaining the orders of the authorities below disallowing the deduction claimed under Rule 7A (2) of the Rules when deduction of replanting expenses I.T.A. No.71/2020 -7- is allowed to assessees deriving income from manufacture of coffee and tea under Rule 7B and Rule 8 of the Income Tax Rules 1962 respectively. vii. Whether on the facts and circumstances of the case the Tribunal was justified in not allowing the claim of maintenance expenses incurred on immature area which is allowable in the light of the decisions of the Hon'ble Supreme Court. 5. Learned counsel appearing for the parties state that question nos.(i), (ii), (iv), (v), (vi) and (viii) are covered by the order of Full Bench dated 01.08.2022. Questions are to be answered in favour of the assessee for statistical purposes and remitted to Assessing Officer for consideration and disposal in accordance with law. 6. Question no.(iii) deals with whether the replanting expenses claimed by the assessee are in an area already planted with yielding rubber and over years became unproductive or is the replanting expenses claimed in a new area brought under rubber plantation. In the Full Bench, the aspect on the I.T.A. No.71/2020 -8- entitlement of replantation allowance was considered and it was made clear that subject to satisfying the conditions, namely that the replantation of rubber saplings takes place in an area where already rubber trees were planted and have become unproductive and the area is not abandoned. The findings recorded in this behalf are not consistent and are not in line with the material brought on record by the assessee. 6.1 We have answered question no (iii) in favour of the assessee and remitted the matter to the Assessing Officer for consideration and making fresh assessment order. Having regard to the view already taken on the questions referred to above, we are of the view that for comprehensive consideration and claim covered by question no.(iii) is also reexamined by the Assessing Officer along with other issues. Question no.(iii) accordingly is answered in favour of the assessee and against the Revenue. I.T.A. No.71/2020 -9- 7. Question no.(vii) deals with claim of maintenance expenses incurred on the immature area. The assessee failed to make out a case under Section 260A of the Act. Having regard to the findings recorded by the authorities and the Tribunal, we are of the view that question no.(vii) does not warrant interference in the appeal and hence answered in favour of the Revenue and against the assessee. The I T Appeal is allowed as indicated above. S.V.BHATTI JUDGE BASANT BALAJI JUDGE jjj I.T.A. No.71/2020 -10- APPENDIX OF ITA 71/2020 PETITIONER ANNEXURES ANNEXURE A TRUE COPY OF THE ORDER OF ASSESSMENT DATED 27.03.2015. ANNEXURE B TRUE COPY OF THE ORDER OF CIT (A) DT. 30.10.2019. ANNEXURE C TRUE COPY OF THE FORM OF APPEAL AND GROUNDS OF APPEAL FILED BEFORE THE TRIBUNAL DATED. 27.12.2019. ANNEXURE D TRUE COPY OF THE SUMMARY OF ARGUMENTS WITHOUT ANNEXURES MENTIONED THERE IN FIELD BEFORE THE TRIBUNAL BY THE AUTHORISED REPRESENTATIVE CHARTERED ACCOUNTANT OF THE APPELLANT. ANNEXURE E TRUE COPY OF THE ORDER OF THE TRIBUNAL DATED. 01.08.2019 WHICH IS A COMMON ORDER FOR THE AY 2012-13 DATED 2013-14. "