1. The Ouchterlony Valley Estates (1938), Limited, Kozhikode, the petitioner in T.C. No. 95 of 1959 owns coffee and tea plantations in Gudalur. In computing the agricultural income-tax payable by them under Madras Act (V of 1955) for the assessment year 1957-58 they claimed the following, among other reliefs. (1) the sum of Rs. 5,849 representing sale-proceeds of the coffee crop relating to the year 1951-52 and received during the year ended 31st March, 1957, ought not to be included as part of the agricultural income of the accounting year (1st April, 1956 to 31st March, 1957), (2) the sum of Rs. 58,132 described as replanting expenses ought to be allowed as deduction in computing the total income, (3) depreciation allowance of the coffee machinery for the whole year.
2. The Agricultural Income-tax Officer, Gudalur, held that the sum of Rs. 5,849 representing sale-proceeds of crop relating to the season 1951-52 was properly included in the income of the accounting year, that towards replanting expenses,, an expenditure of Rs. 15,923 can be properly allowed but the balance amounting to Rs. 42,199-51 nP. cannot be allowed and that depreciation on the coffee machinery can be allowed only for six months a year. On this basis the assessee's income was computed by the Officer. The assessee preferred an appeal to the Assistant Commissioner of Agricultural Income-tax, Ootcacamund and reiterated the grounds urged by them before the Agricultural Income-tax Officer. The Appellate Authority agreed with the Agricultural Income-tax Officer in holding that the sum of Rs. 5,849 was includable in the years income. On the question of deduction of replanting expenses, the Appellate Authority took the view that the Income-tax Officer granted greater relief to the assessee than what they were entitled to. He issued notice to the assessee to show cause why the order of the Income-tax Officer should not be varied in this behalf and after hearing the assessee reached the conclusion that only a sum of Rs. 400 spent by the assessee for replanting 5 acres during the year in question can be allowed and the balance of Rs. 57,732-3-7 cannot be allowed. The Appellate Authority also granted depreciation allowance restricted to a period-of six months for the year. The assessee preferred a further appeal before the Madras Plantations Agricultural Income-tax Appellate Tribunal and urged for the granting of the reliefs pressed for by them before the Agricultural Income-tax Officer and the Assistant Commissioner of Agricultural Income-tax. The Tribunal following the decision of this Court in W.P. No. 749 of 1956 confirmed the inclusion of the receipts of the crop of the year 1951-52 in the years income. In regard to-replanting expenses, the Tribunal held that the assessee was entitled to expenses, for replanting an extent of 21/2 per cent, of the total area of plantation, namely, 74 acres, that the normal replanting expenses would amount to Rs. 700 per acre and on this basis allowed an expenditure of Rs. 51,800 and disallowed the balance claimed by the assessee. The Tribunal however held that the assessee was entitled to full depreciation allowance on the coffee machinery and granted that relief to. the assessee.
3. T.C. No. 95 of 1959 has been preferred by the assessee against the order of the-Tribunal in so far as it is against them and T.C. No. 127 of 1959 has been preferred by the State against the same order in so far as it is adverse to the revenue.
4. We have heard the Revision Petitions together as they raise common questions-of fact and law. The decision of this Court in W.P. No. 749 of 1956, which is, referred to and followed by the Tribunal, has been set aside on appeal in W.A. Nos. 121 and 122 of 1957. The question whether the sale-proceeds of the crop of the year 1951-52 can be included in the income of the accounting year of the assessee will depend upon the system of accounting followed by the assessee, mercantile or cash basis and other circumstances pointed out in the judgment in the said Writ Appeals. The matter will have to be remitted to the Tribunal for a fresh disposal of the matter.
5. The assessee has undoubtedly made a confusion between expenses of replanting and expenses for maintenance of upkeep of immature crop in the plantation. They claimed only a sum of Rs. 400 as expenses for replanting 5 acres during the year in question. It is quite obvious that the Assistant Commissioner of Agricultural Income-tax treated the sum of Rs. 57,732-3-7 as expenses claimed by the assessee for the upkeep of immature area. No doubt his view was that such expenses would be in the nature of capital expenditure and not therefore a permissible deduction in computing the revenue. But the Appellate Tribunal seems to have dealt with the entire claim of Rs. 58,132 as relating to expenses for replanting operations of the plantation area. In dealing with the claim of the assessee in this behalf, the Tribunal observed thus:
It is seen that the exprenditure of Rs. 58,000 and odd claimed by the appellant related to replanting expenditure. Even if the expenditure was incurred in respect of seedlings, etc., planted in the earlier years the process of replanting cannot be deemed as complete in the year in which the seedlings are transplanted, but is continued for some more subsequent years, to cover tending the seedlings. Hence we are of opinion that restricting the expenditure to the area transplated in a given year may not give an accurate idea of replanting expenditure. We are therefore of the opinion that the fairest method in such circumstances is to allow the expenditure subject to the restriction prescribed under Proviso to Section 5(g), 21/2 per cent, on the total acreage under coffee amounts to about 74 acres. We have held in other cases that replanting expenditure would amount to about Rs. 700 per acre. On this basis we allow the expenditure of Rs. 51,800 under this head.
We are unable to follow and appreciate the soundness of this reasoning. Section 5 of Madras Act V of 1955 permits the following deductions in computing the agricultural income of a person. Section 5(g) is a general provision which is in these-terms:
Any expenditure incurred in the previous year (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose-of the land.
Section 5(g) stated:
Expenses other than capital expenditure incurred in the previous year of cultivating the crop from which the agricultural income is derived and of transporting such crop to market, including the maintenance of agricultural implements required for such cultivation and transport or both:
Provided that in any particular year the total replanting expenditure shall not exceed the amount necessary for replanting 21/2% of the acreage if the crop in rubber or coffee, 1 2/3% if the crop is arecanut or tea and 8 1/3% if the crop is cardamon and 10 % if the crop is cinchona:
Provided further that if the replanting expenditure allowance under this section is not incurred in one year, the allowance for the year or years may be carried forward for a period of three years in the case of arecanut, tea, rubber and coffee and one year in the case of cinchona and cardamon beyond the assessment year.
The maintenance expenses of crop in the immature area of any plantation constitute permissible deduction as they are expenses of a non-capital nature incurred in the previous year of cultivating the crop falling within the first portion of Section 5(g). The First Proviso to Section 5(g) will enable the assessee to claim expenditure incurred for replanting part of the area of plantation upto a ceiling of 21/2 per cent, of the total acreage if the crop is rubber or coffee. The Second Proviso will enable the assessee to carry forward for a period of three years replanting expenditure allowance not incurred in one year in case of arecanut, tea, rubber and coffee. But in every case where the assessee claims a deduction as a proper deduction under Section 5 of the Act, he should prove under what head the expenses fall so as to warrant the deduction claimed. If expenses are incurred by an assessee for replanting more than 21/2 per cent, of the total acreage, he cannot split it up and claim replanting expenses upto the maximum permitted under Section 5(g) and claim the balance as maintenance expenses of immature crop. In other words, the assessee cannot incur expenses of particular kind and failing to obtain a deduction of the whole of such expenses under the proper head provided for under the Act shift the ground and claim it under another head permissible in law, but under which head he had not incurred any expenses at all. We however feel in this matter that despite the wrong nomenclature used by the assessee in claiming the entire sum of Rs. 58,000 and odd as replanting expenses, it was understood that part of the expenses were incurred by the assessee for the maintenance and upkeep of immature crop. There are however no materials before us to decide the question as to what extent the assessee will be entitled to relief under the claim of expenses for maintaining immature crop. The relief negatived to the assessee by the subordinate authorities was not a little due to the fact that till recently the view that prevailed with them was that maintenance and upkeep expenses of immature crop cannot be claimed as proper deduction in computing the income under the Act. But it has now been held that such expenses are permissible deduction Ouchterlony Valley Estates (1938) Ltd. v. Government of Madras (1961) 1 M.L.J. 133. We are therefore of opinion that even in this respect the matter will have to be remitted to the Tribunal for a fresh determination in the light of the observations contained in this judgment.
6. The learned Government Pleader concedes before us that the Tribunal acted rightly in allowing the full depreciation on the coffee machinery and plant in view of the decision of this Court in State of Madras v. Glenburn Estates, Coonoor : (1960)2MLJ211 . The Revision Petitions are partly allowed. The order of the Tribunal is set aside and the proceedings are remitted to the file of the Tribunal to be disposed of afresh. There will be no orders as to costs in these two Revision Petitions.