2021 (10) TMI 1371

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.... REFERENCE ORDER S.V. Bhatti, J Heard learned Senior Advocate Mr Joseph Markos, Advocates Mr Kuryan Thomas, Mr Ramesh Cheiran John for appellants and Standing Counsel Mr Jose Joseph for respondent. 2. The captioned appeals are at the instance of Plantation Companies/assessees. The Commissioner of Income Tax/Revenue is the respondent. The assessees, in respective I.T. Appeals, challenge the individual and separate orders of the Income Tax Appellate Tribunal (for short 'the Tribunal'), Cochin Bench, Cochin. The Tribunal, in the judgment under appeal, referred to and relied on the Division Bench judgment of this Court in Rehabilitation Plantations Ltd. v. Commissioner of Income Tax [(2012) 251 CTR 343 (Kerala)]  and dis....

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....ance expenditure' till the immature rubber plants in the area planted reaches the age of 6/7 years when the plants yield raw rubber. The claim of assessees for allowance towards replanting expense, upkeep and maintenance expenditure by referring to Rule 7A(2) of the Rules. The authorities under the Act have substantially placed reliance on the judgment of this Court in Rehabilitation Plantations Ltd. and rejected the claim of assessees under the head of business expenditure. 3.1 The assessees contend that the re-plantation expenses are considered as capital expenditure and the expenses incurred by the assessee for upkeep and maintenance of newly planted rubber trees are in the nature of revenue expenditure, for mere plantation of rub....

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....ey become mature is in the nature of a capital expenditure is also not sound. It is a running expenditure and not of the nature of capital expenditure. The proviso allows deduction of the cost of replanting bushes in replacement of bushes which died or became permanently useless in an area already planted. It deals with the cost of planting bushes and not the expenses incurred in the upkeep and maintenance of bushes already planted." 3.3 In the above background, the conundrum canvassed by the assessees is that Rehabilitation Plantations Ltd. case was considering the question whether re-plantation expenses of rubber trees area is allowable under Rule 7A(2). But the Division Bench has found that the upkeep and maintenance expendit....

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....eal with the expenses incurred in the upkeep and maintenance of tea bushes or rubber plants. So to say, by referring to any portion of these Rules the deduction towards upkeep and maintenance expenditure could be disallowed. 4.1 For convenience, we excerpt Rule 7A(2) and Rule 8(2) of the Income Tax Act hereunder: Rule 7A(2): In computing such income, an allowance shall be made in respect of the cost of planting rubber plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost; no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of sect....

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.... for deduction of upkeep and maintenance expenses. Rehabilitation Plantations Ltd. has not referred to the dictum in Travancore Rubber & Tea Co. Ltd. and Karimtharuvi Tea Estates Ltd.. The view of the Division Bench in Rehabilitation Plantations Ltd. is incompatible with the language of Rule 7A(2) and precedents on the point. 5. In the above background and for the narrative made so far, we are of the view that the decision of the Division Bench in Rehabilitation Plantations Ltd. is contrary to the decisions of the Supreme Court in Travancore Rubber & Tea Co. Ltd. and Karimtharuvi Tea Estates Ltd.. We are also of the considered view that the scope and extent of the operation of Rule 7A, which is similar to Rule 8(2), with regard to allowa....