TaxTMI 
TaxTMI 
2014 (1) TMI 237
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.... 2. The solitary issue urged in these appeals is whether the Ld CIT(A) was justified in confirming the action of the assessing officer in treating the sale value of old Rubber trees as agricultural income and consequently assessing 35% of the same as taxable income in terms of Rule 7A of Income tax Rules. 3. The facts relating to the issue are stated in brief. The assessee company derives its income from Rubber plantations. During the years under consideration, the assessee received money on sale of old rubber trees. The assessee claimed the same as Capital receipt and did not offer it for taxation. However, the AO took the view that, after introduction of Rule 7A in the Income tax Rules, entire income of Rubber estate is to be bifurcated ....
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....he next issue relates to the addition of amount realised on sale of old and unyielding rubber trees amounting to Rs. 5,12,84,878/- as revenue receipt under Rule 7A of the Income tax Rules. The assessee claimed the amount realised on sale of old and unyielding rubber trees as not taxable by following the decision of Hon'ble Supreme Court in the case of Kalpetta Estates Ltd (221 ITR 601). However, the AO took the view that the taxable position of amount realised on such sale has undergone a change after the introduction of Rule 7A of the Income tax Rules. According to Rule 7A, the income from rubber estate has to be apportioned in the ratio of 65 : 35 and the 35% of the income is to be assessed as business income. Accordingly he took the ....
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.... derived from business, and thirty-five per cent of such income shall be deemed to be income liable to tax". On a careful perusal of Rule 7A, we notice that the said rule talks about computation of income derived from sale of centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes etc. The said rule does not talk about the taxability of income from sale of old rubber trees. According to Ld A.R, the Rule 7A provides for ascertainment of business income obtained on sale of centrifuged latex etc. when manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India, i.e., when there is a combined activity of growing rubber trees and also manufacturing or proces....
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....Rule 7A of Income tax Rules has no application to the income derived on sale of old rubber trees. No material change has been brought about by introduction of Rule 7A because Rule 7A is applicable only when the grower of rubber trees himself carries on manufacturing activity on latex or coagulum sourced from rubber trees grown by him. The judicial principles laid down by the Supreme Court in the earlier decisions continue to hold good even after introduction of Rule 7A. In tune with the Supreme Court decisions in the case of Kalpetta Estates Ltd Vs. CIT reported in 221 ITR 601 and in the case of Kailas Rubber & Co. Ltd reported in 60 ITR 435, I hold that no income chargeable to tax accrued on sale of old and unyielding rubber trees." 15. W....