1990 (10) TMI 13 - HC - Income Tax

Court rules on valuation of rubber trees, taxability of replantation subsidy, no capital gains, subsidy not taxable

Commissioner Of Income-Tax Versus Trophical Plantations Limited

Commissioner Of Income-Tax Versus Trophical Plantations Limited - [1992] 196 ITR 755 Issues:1. Valuation of rubber trees for capital gains assessment2. Taxability of rubber replantation subsidy3. Deductibility of bonus paymentValuation of Rubber Trees for Capital Gains Assessment:The case involved the sale of rubber trees by the assessee, with the primary issue being whether any capital gains accrued from the sale of old and unyielding rubber trees. The Income-tax Appellate Tribunal held that no capital gains arose as the value obtained from the sale of old trees was significantly lower than their value when young and yielding. The Tribunal's decision was based on previous judgments and common knowledge that old trees are less valuable. The High Court declined to answer the question regarding the valuation method, as the main issue was the absence of capital gains due to the nature of the trees sold.Taxability of Rubber Replantation Subsidy:For the assessment year 1979-80, the assessee received a rubber replantation subsidy which the assessing authority brought to tax. However, the Income-tax Appellate Tribunal, following a previous decision, held that such subsidies are not income assessable to tax. The High Court, in line with a Full Bench decision, affirmed that the subsidy is not a revenue receipt and therefore not subject to income tax, answering the question in favor of the assessee.Deductibility of Bonus Payment:Regarding the deduction claim for bonus payment amounting to Rs. 55,071 for the assessment year 1980-81, the Appellate Tribunal allowed the deduction on a payment basis. However, the High Court found that the Tribunal did not effectively consider the matter. While the assessee maintained accounts on a mercantile basis, the bonus payment related to a prior year and the Tribunal failed to establish if the claim for deduction on a payment basis was consistently followed. The Court directed the Tribunal to reexamine the matter to determine the proper method of deduction, emphasizing the need for consistency in accounting practices.In conclusion, the High Court declined to answer certain questions referred by the Revenue, while ruling in favor of the assessee on the issues of valuation of rubber trees and taxability of the replantation subsidy. The matter of bonus payment deduction was remanded to the Tribunal for further examination to ensure consistency in accounting practices.