The Plantation Corporation of Kerala Ltd v Assistant Commissioner of Income Tax Circle 1; Commissioner of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI THURSDAY, THE 4[TH] DAY OF AUGUST 2022 / 13TH SRAVANA, 1944 ## ITA NO. 37 OF 2020 AGAINST THE ORDER ITA 239/2018 OF I.T.A.TRIBUNAL,COCHIN BENCH ## APPELLANT/S: THE PLANTATION CORPORATION OF KERALA LTD MUTTAMBALAM P.O, KOTTAYAM 686 004 BY ADV RAMESH CHERIAN JOHN ## RESPONDENT/S: - 1 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1, O/O THE ASSISTANT COMMISSIONER OF INCOME TAX PUBLIC LIBRARY BUILDING, SHASTHRI ROAD, KOTTAYAM 686 001 - 2 THE COMMISSIONER OF INCOME TAX, O/O THE COMMISSIONER OF INCOME TAX PUBLIC LIBRARY BUILDING, SHASTHRI ROAD, KOTTAYAM 686 001 BY ADVS. JOSE JOSEPH, SC, INCOME TAX DEPARTMENT, KERALA NAVNEET N NATH, P.K.RAVINDRANATHA MENON (SR.) THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 04.08.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **I.T.A. No. 37/2020** **-2-** ## J U D G M E N T S.V. Bhatti, J. Heard Adv Ramesh Cherian John, learned counsel for the appellant and Adv Navneet holding for Adv Jose Joseph, learned Standing Counsel for the respondent. 2. The Plantation Corporation of Kerala Ltd. is the appellant. The Assistant Commissioner of Income Tax, Circle 1/Revenue and another are the respondents. The present appeal arises from the order dated 01.08.2019 in ITA No.239/COCH/2018 before the Income Tax Appellate Tribunal, Cochin Bench. The subject matter of appeal relates to Assessment Year 2014-15 and the controversies relate to the allowance claimed by the assessee towards the replantation of rubber plants in an area where rubber trees were planted and have become unproductive and are not in an abandoned area as **I.T.A. No. 37/2020** **-3-** required under Rule 7A(2) of the Income Tax Rules 1962 and also the deduction of expenditure incurred towards upkeep and maintenance of rubber saplings till maturity or the trees yield. 3. The Assessing Officer disallowed both the claims. The assessee has been unsuccessful before the first and the second appellate authorities/Tribunal. The Tribunal followed the Division Bench judgment of this Court in _Rehabilitation Plantations Ltd. v. Commissioner of Income Tax_[1] case. A Division Bench of this Court referred to a Full Bench, the issues arising under Rule 7A(2) of the Income Tax Rules and also the deduction towards the upkeep and maintenance expenses by the assessee. The question referred to the Full Bench reads thus: “ Whether the assessee/Plantation Companies under Rule 7A(2) of the Rules are entitled to an allowance > 1 (2012) 251 CTR 343 (Ker.) **I.T.A. No. 37/2020** **-4-** towards replanting expenses and a further deduction towards upkeep and maintenance expenses incurred by the assessee for the immature plants till the age of maturity in the computation of income under the Act and Rules.” The Full Bench answered the question referred to it by order dated 01.08.2022 and the operative portion is excerpted for ready reference. “The answers to the two facets of the question referred to the Full Bench are that: “In the computation of business income under Rule 7A of the Rule 1962, the assessee under Rule 7A(2) is entitled to an allowance in respect of the cost of replacement of dead and useless rubber trees in the rubber plantation in an area not abandoned, subject to Section 10(31) of Act 1961. The upkeep and maintenance expenses incurred by the assessee till the maturity of rubber trees are revenue expenditures eligible for deduction under Section 37 of Act 1961.” **I.T.A. No. 37/2020** **-5-** ## 4. The assessee raises the following substantial questions of law: “i. Whether on the facts and circumstances of the case the Tribunal was justified in confirming the orders of the authorities below disallowing the deduction/allowance of Rs. 6,75,49,321/- claimed under rule 7A (2) of the Income Tax Rules 1962 for the relevant assessment year. ii. Whether on the facts and circumstances of the case the Tribunal was justified in confirming the orders of the authorities below by merely relying on the judgment of this Hon'ble Court in the case of M/s. Rehabilitation Plantations Ltd. Vs. CIT reported in 251 CTR 343 without application of mind and adjudicating on the contentions raised by the appellant. iii. Whether on the facts and circumstances of the case the Tribunal was justified in coming to an incorrect finding that it is an admitted position that the re-planting expenses and maintenance expenses are incurred for planting new area of rubber and not an area already planted with yielding rubber and whether the said finding is contrary to the undisputed finding of the assessing authority in the order of assessment **I.T.A. No. 37/2020** **-6-** that the expenditure incurred is for planting in an area which had been cleared off an existing plantation that had become unproductive and hence is not the said finding contrary to facts, incorrect and perverse. iv. Whether on the facts and circumstances of the case the Tribunal was justified in coming to a finding that Rule 7A (2) of the Income Tax Rules deals with infilling expenses and not replanting expenses and is not the finding of the Tribunal contrary to the object and purport of Rule 7A (2) of Income Tax Rules 1962. v. Whether on the facts and circumstances of the case the Tribunal was justified in merely relying on the judgment of this Hon'ble Court in the case of Rehabilitation plantation Ltd. and coming to the illegal and incorrect finding that the expenditure incurred for planting and development of plantation up to maturity has to be necessarily capitalized and it cannot be allowed as Revenue Expenditure and is not the said finding against the purport and object of Rule 7 A (2) of Income Tax Rules, which grants an allowance/deduction towards expenses incurred for replanting of rubber plants. vi. Whether on the facts and circumstances of the case the Tribunal was justified in sustaining the orders of the **I.T.A. No. 37/2020** **-7-** authorities below disallowing the deduction claimed under Rule 7A (2) of the Rules when deduction of replanting expenses is allowed to assessees deriving income from manufacture of coffee and tea under Rule 7B and Rule 8 of the Income Tax Rules 1962 respectively. vii. Whether on the facts and circumstances of the case the Tribunal erred in not considering and adjudicating on the additional grounds of appeal filed by the appellant wherein it was claimed that re-planting expenses claimed also included maintenance expenses of immature area and the same is also an allowable expenditure. viii. Whether on the facts and circumstances of the case the Tribunal was justified in not allowing the claim of maintenance expenses incurred on immature area which is allowable in the light of the decisions of the Hon'ble Supreme Court. 5. Learned counsel appearing for the parties state that question nos.(i), (ii), and (iv), are covered by the order of Full Bench dated 01.08.2022. Hence questions are answered in favour of the assessee for statistical purposes and remitted to **I.T.A. No. 37/2020** **-8-** Assessing Officer for consideration and disposal in accordance with law. 6. Question no.(iii) deals with whether the replanting expenses claimed by the assessee are in an area already planted and yielding rubber and over years had become unproductive or is the replanting expenses claimed in a new area brought under rubber plantation. In the Full Bench, the aspect on the entitlement of replantation allowance was considered and it was made clear that subject to satisfying the conditions, namely that the replantation of rubber saplings takes place in an area where already rubber trees were planted and have become unproductive and the area is not abandoned, the assessee is entitled to deduction of the upkeep expenses. We notice that the findings recorded in this behalf are not consistent and also not in line with the material brought on record by the assessee. 6.1 We have answered question nos. (i), (ii) & (iv) in **I.T.A. No. 37/2020** **-9-** favour of the assessee and remitted the matter to the Assessing Officer for consideration and making fresh assessment order. Having regard to the view already taken on the question nos. (i), (ii) & (iv), we are of the view that for comprehensive consideration and claim covered by question no.(iii) is reexamined by the Assessing Officer along with other issues. Question no.(iii) accordingly is answered in favour of the assessee and against the Revenue. 7. In view of answers to question nos (i), (ii) and (iv) above, Questions nos. (v) and (vi) do not warrant consideration. 8. Question nos.(vii) and (viii) deals with claim of maintenance expenses incurred on the immature area. The assessee failed to make out a case under Section 260A of the Act. Having regard to the findings recorded by the authorities and the Tribunal, we are of the view that question nos.(vii) and (viii) do not warrant interference of this Court and hence answered **I.T.A. No. 37/2020** **-10-** in favour of the Revenue and against the assessee. The I T Appeal is allowed for statistical purpose as indicated above and remitted to assessing officer. S.V.BHATTI JUDGE BASANT BALAJI JUDGE jjj **I.T.A. No. 37/2020** **-11-** ## APPENDIX OF ITA 37/2020 PETITIONER ANNEXURES ANNEXURE A ANNEXURE B ANNEXURE C ANNEXURE D ANNEXURE E ANNEXURE F TRUE COPY OF THE ORDER OF ASSESSMENT DT. 08-122016 DISALLOWING THE CLAIM OF REPLANTING EXPENSE UNDER RULE 7A TRUE COPY OF THE ORDER OF CIT (A) DT. 28-03-2018 TRUE COPY OF THE FORM OF APPEAL AND GROUNDS OF APPEAL FILED BEFORE THE TRIBUNAL DT 14-05-2018 TRUE COPY OF THE COVERING LETTER DT 02-04-2019 OF THE CHARTERED ACCOUNTANT OF THE APPELLANT AND ADDITIONAL GROUNDS OF APPEAL TRUE COPY OF THE SUMMARY OF ARGUMENTS ALONG WITH ANNEXURES FILED BEFORE THE TRIBUNAL TRUE COPY OF THE ORDER OF THE TRIBUNAL DT. 01-082019 IN ITA NO. 239/COCH/2018 WHICH IS A COMMON ORDER INCLUDING ANOTHER ASSESSEE NAMELY M/S. VELIMALAI RUBBER COMPANY LTD, KOTTAYAM.