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of <h1>Tribunal Upholds Disallowance of Replanting Cost Deductions for 2012-2014, Citing Kerala HC's Rule 7A(2) Interpretation.</h1> <h3>M/s. The Plantation Corporation of Kerala Limited C/o. Cheriyan & Cheriyan, Chartered Accountants Versus The Dy. Commissioner of Income-tax, Circle 1 Kottayam.</h3> M/s. The Plantation Corporation of Kerala Limited C/o. Cheriyan & Cheriyan, Chartered Accountants Versus The Dy. Commissioner of Income-tax, Circle 1 ... Issues Involved:1. Disallowance of the claim of deduction on the cost of replanting under Rule 7A of the Income-tax Rules, 1962.Detailed Analysis:Issue 1: Disallowance of the Claim of Deduction on Cost of Replanting under Rule 7A of the Income-tax Rules, 1962Background:The assessee, a plantation company owned by the Government of Kerala, filed returns for the assessment years 2012-2013 and 2013-2014, claiming deductions under Rule 7A(2) of the Income-tax Rules. The Assessing Officer (A.O.) disallowed these claims, referencing the Kerala High Court judgment in M/s. Rehabilitation Plantations Limited v. CIT.Assessee's Argument:The assessee argued that the disallowance was unjustified, contending that the Kerala High Court's judgment did not consider the ground realities of their claim. They highlighted the provisions of Rule 7A(2), which allows deductions for the cost of planting rubber plants in replacement of plants that have died or become permanently useless in an area already planted, provided the area has not been previously abandoned. The assessee emphasized that the rule does not explicitly mention 'infilling' and argued that the term 'OR' in the rule signifies two separate events: infilling and replantation.CIT(A)'s Decision:The CIT(A) upheld the A.O.'s decision, quoting extensively from the Kerala High Court judgment which held that expenditure for replantation should be capitalized and not allowed as revenue expenditure.Tribunal's Analysis:The Tribunal reviewed the case and the Kerala High Court's judgment, which categorically stated that Rule 7A(2) does not cover expenditure incurred for replantation of an area but only for infilling through replacement of dead or useless trees. The High Court emphasized that yielding healthy rubber plantations do not admit replacement of dead plants within such areas as new saplings cannot grow under shade. The Tribunal found that the assessee's expenses were for planting new areas of rubber, not for infilling in already yielding areas. Consequently, the judgment of the Kerala High Court was binding on the lower authorities.Conclusion:The Tribunal dismissed the appeals filed by the assessee for both assessment years 2012-2013 and 2013-2014, affirming the disallowance of the claim for deduction on the cost of replanting under Rule 7A(2) of the Income-tax Rules, 1962.Order Pronouncement:The appeals filed by the assessee were dismissed, with the order pronounced on the 2nd day of March, 2020.
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