Allocation of consideration in contract controls tax character, but a latex component cannot be presumed without supporting recital or facts.

Where an agreement expressly apportions consideration between latex and fuel, the stated allocation governs tax treatment, and the amount attributable to latex is treated as revenue receipt. In the absence of any recital splitting consideration in a later agreement, no part of the price can be presumed to relate to latex merely because an earlier contract contained such an allocation; a supporting contractual or factual basis is required. The first agreement was therefore sustained in revenue treatment for the latex component, while the addition under the second agreement was set aside for want of any basis to infer a taxable latex element.

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Issues: (i) Whether the consideration under the first agreement, which expressly apportioned the price between latex and fuel, could be treated as a capital receipt in its entirety; (ii) Whether, in the absence of any recital in the second agreement, a part of the consideration could be presumed to relate to latex and taxed as a revenue receipt.

Issue (i): Whether the consideration under the first agreement, which expressly apportioned the price between latex and fuel, could be treated as a capital receipt in its entirety.

Analysis: The agreement specifically split the consideration between latex and fuel. In the face of that express recital, the contention that the whole amount related only to fuel value and was therefore a capital receipt could not be accepted.

Conclusion: The amount attributable to latex under the first agreement was rightly treated as revenue receipt and the finding stood against the assessee.

Issue (ii): Whether, in the absence of any recital in the second agreement, a part of the consideration could be presumed to relate to latex and taxed as a revenue receipt.

Analysis: The second agreement contained no split in consideration and no recital indicating any allocation to latex. A presumption based only on the earlier agreement was held to be unjustified in the absence of any contractual or factual basis showing that latex was present and recoverable from the trees covered by the second agreement.

Conclusion: The presumption was rejected and the addition relating to the second agreement was not sustainable; this part was in favour of the assessee.

Final Conclusion: The decision upheld the revenue character of the amount covered by the first agreement, but set aside the presumption and taxation in relation to the second agreement, resulting in a partial success for the assessee.

Ratio Decidendi: Where an agreement expressly apportions consideration, the stated allocation governs tax treatment, but in the absence of any recital or supporting factual basis, a revenue character cannot be presumed merely by reference to an earlier contract.

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