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Thirumbadi Rubber Co. Ltd. Vs. Commissioner of Agricultural Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference Nos. 121 to 124 of 1971 (Agrl.)
Judge
Reported in[1977]110ITR639(Ker)
ActsKerala Agricultural Income-tax Act, 1950 - Sections 2
AppellantThirumbadi Rubber Co. Ltd.
RespondentCommissioner of Agricultural Income-tax
Appellant Advocate T.L. Viswanatha Iyer and; E.R. Venkiteswaran, Advs.
Respondent AdvocateGovt. Pleader
Cases ReferredK. C. Jacob v. Agricultural Income
Excerpt:
- - on a reading of the two agreements there can be no doubt that the amounts that have to be paid by those who entered into agreements with the assessee represent payments for permitting them to take the latex as well as for permitting them to cut and remove the trees. agricultural income-tax officer [1977]110itr402(ker) ] as follows :(i) the consideration paid by the purchaser allowed to 'slaughter-tap 'represents payment for permission to take latex as well as for permission to cut and remove the trees......the trees is to be bifurcated into that pertaining to latex, and that which is attributable to the value of trees. (v) the part pertaining to latex is agricultural income, liable to tax, and the other part which is attributable to the value of the trees is not liable to tax.' 5. in the case in hand the assessee (a company) is the owner of the land on which the rubber trees sold stood. the consideration amount received by the company in respect of the transaction has to be bifurcated, that pertaining to latex and that which is attributable to the value of the trees. the former is to suffer agricultural income-tax and the latter not.6. our answer to the first question is in the affirmative, both as regards the first and second parts of that question, that is, in favour of the revenue and.....
Judgment:

George Vadakkel, J.

1. These four references are at the instance of the assessee and are in respect of four assessment years 1961-62 to 1964-65 (both inclusive). The questions are :

' 1. Whether the sale proceeds of rubber trees sold for being cut and removed with roots for re-plantation for a single consideration can be separated into the value of the trees and the value of the latex that can possibly be extracted therefrom by slaughter-tapping and whether the latter is assessable as agricultural income in the hands of the owner who sold the trees ?

2. Whether the income attributed to the centrifugal process, etc., is assessable as agricultural income ?

3. Whether in the absence of a machinery to harmonise and reconcile the assessment and fixation of the quantum of assessable income and apportioned expenditure under the State and Central enactments, the agricultural income-tax department is Justified in not following or ignoring the basis and assessment of the Central income-tax authorities and disallow legitimate expenditure apportioned to it by adopting different methods, inconsistent with and rejected by the Central income-tax authorities in view of Article 366 of the Constitution and whether the proper basis of apportionment is the one adopted by the Central income-tax authorities or the agricultural, income-tax authorities ?.'

2. Mr. T. L. Viswanatha Iyer, learned counsel for the assessee, at whoseinstance the references were made, at the outset submitted that questionsNos. 2 and 3 have become purely academic, in that it has been held by theincome-tax authorities that the income attributable to centrifugal process,etc., is not assessable to tax under the Indian Income-tax Act. Regardingthe income attributable to centrifugal process the assessee contended thata portion of such income has been held to be business income assessableunder the Indian Income-tax Act, and that, therefore, that much incomeshould be exempted in computing agricultural income. The Tribunal overruled this claim for the reason that the Income-tax Act or Rules do notwarrant the assumption that such income is taxable under the Income-taxAct. Questions Nos. 2 and 3 were referred to this court in these circumstances. In view of the submission made by the learned counsel for theassessee, no answers are called for, and we decline to answer questionsNos. 2 and 3.

3. The point raised in the first question is covered by the decision of this court in E.J.John v. Slats of Kerala (I. T. Rs. Nos. 76 and 77 of 1965). Since we notice that that decision remains unreported we will usefully extract the relevant portions of that judgment here :

' For the relevant accounting period for the year 1962-63, the assessee received Rs. 32,250 pursuant to the agreement, annexures ' D ' and ' D-1 ' and for the assessment year 1963-64 a sum of Rs. 45,750 pursuant to the agreement, annexure ' D '. The Tribunal has assessed for the two years these amounts treating the entirety of these amounts as agricultural income of the assessee. The question is whether the whole of the above amounts can be treated as agricultural income. On a reading of the two agreements there can be no doubt that the amounts that have to be paid by those who entered into agreements with the assessee represent payments for permitting them to take the latex as well as for permitting them to cut and remove the trees. A consolidated amount is provided for the two, though payments are to be made in instalments. There can be no doubt that in every payment pursuant to these agreements, there is an element of payment towards the capital, namely, the value of the trees which were ultimately to be cut down. No doubt there is also a payment towards the latex which on the terms and conditions, according to the two documents, we think, represents agricultural income.

The Tribunal, however, has treated the entirety of the payment as agricultural income. This is not correct. That part of the amounts, Rs. 32,250 and Rs. 45,750, which represents the value of the trees can only be a capital receipt and is not agricultural income. That part of these amounts will have, therefore, to be deducted from these amounts for determining the agricultural income received by the assessee pursuant to the two agreements, annexures 'D' and 'D-1' In the light of the above, we answer the question referred to us in the following manner. The documents are composite ones. The entire amounts received as per the agreements, annexures 'D' and ' D-l ', are not liable to agricultural income-tax. These amounts must be bifurcated, that pertaining to latex and that which is attributable to the Value of the trees. The former will be income liable to tax and the latter cannot be taken into account for the purpose of imposing agricultural incqme-tax.'

4. The principles emerging from the above decision of M. S. Menon C.J. and Govindan Nair J. have been set out in another case decided by us today [I. T. R. No. 16 of 1972--K. C. Jacob v. Agricultural Income-tax Officer : [1977]110ITR402(Ker) ] as follows :

' (i) The consideration paid by the purchaser allowed to ' slaughter-tap ' represents payment for permission to take latex as well as for permission to cut and remove the trees.

(ii) There is an element of payment towards capital, namely, thevalue of the trees which are ultimately to be cut down.

(iii) There is also payment towards latex which represents agricultural income.

(iv) The amount of consideration received by the owner for the permission given by him to ' slaughter-tap ' and to cut and remove the trees is to be bifurcated into that pertaining to latex, and that which is attributable to the value of trees.

(v) The part pertaining to latex is agricultural income, liable to tax, and the other part which is attributable to the value of the trees is not liable to tax.'

5. In the case in hand the assessee (a company) is the owner of the land on which the rubber trees sold stood. The consideration amount received by the company in respect of the transaction has to be bifurcated, that pertaining to latex and that which is attributable to the value of the trees. The former is to suffer agricultural income-tax and the latter not.

6. Our answer to the first question is in the affirmative, both as regards the first and second parts of that question, that is, in favour of the revenue and against the assessee. The assessee will pay the costs of these references including advocate's fee of Rs. 250 in each of the cases.

7. A copy of this judgment shall be sent under the seal of this court and the signature of the Registrar to the Appellate Tribunal.


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