SRINIVASAN J. - The question that stands referred to us in these two references is substantially the same though the references relate to different assessees. We shall deal with the facts in T. C. No. 115 of 1959.
The assessee had some rubber estates in Malaya. During the accounting year relevant to the assessment year 1955-56, certain sums were received by the assessee from a Board constituted under the Rubber Industry (Replanting) Fund Ordinance, 1952, of the Federation of Malaya. The Income-tax Officer brought this amount to assessment as a revenue receipt liable to be taxed. An appeal was taken to the Appellate Assistant Commissioner objecting to the assessment of this amount on the ground that the amount received from the Government was with the object of helping the running of the rubber estate and its payment was also conditioned by the requirement that a certain area of rubber estate should be replanted with high-yielding rubber trees. It was accordingly claimed that this was a capital receipt not liable to be taxed. This contention was not accepted by the Appellate Assistant Commissioner. In the further appeal to the Tribunal, identical contentions, though in a different form, were pressed, but the Tribunal, after examining the provisions of the Ordinance referred to, observed :
'One thing is clear that the payments now received by the assessee are not in a recoupment of an earlier outlay. But, at the same time, there is no proof that the recoupment of expenses was made under the Second Schedule, as contended for by the assessee. There is no denying that the payments have been made on the basis of production and for a number of years too. So the question of the receipt being a windfall, casual and non-recurring under section 4(3)(vii), cannot arise. Neither can it be a capital receipt. The payment has come to the assessee as a result of his carrying on a business in agriculture in foreign parts. There is no room for thinking that it is any refund of excess duty paid. So, in the circumstances, we have to hold it is a revenue receipt and, therefore, liable to be taxed.'
On the application of the assessees, the question, 'Whether, on the facts and in the circumstances of the case, the sum of 10,336 dollars constitutes income assessable to tax ?' in T. C. No. 115 of 1959, and the question, 'Whether, on the facts and in the circumstances of the case, replantation cess receipt of 5,962 dollars is income assessable to tax ?' in T. C. No. 36 of 1959 have been referred to us.
The principal argument of the learned counsel was that these amounts were paid to the rubber planters of Malaya for the purpose of enabling them to plant high-yielding rubber trees. In the event of the rubber estates in question being already planted with such high-yielding trees, the payment as provided in the Ordinance was made without any attendant conditions. It was contended by the learned counsel that having regard to the fact that the amount was to be expended for the purpose of a capital nature, it should be inferred that the receipt was of a capital nature. We fail to appreciate the soundness of this argument. To accept the argument would constitute a reversal of the normal procedure of ascertainment of the nature of a receipt. What we have to discover is the source of the receipt. If the source from which the receipt is obtained is of a revenue nature, it should necessarily follow that the receipt would also bear that character. The manner in which the money was utilised, though it might indicate the nature of the expenditure, whether capital or revenue, cannot possibly affect the character of the receipt itself. It is from this perspective that the nature of the receipt has to be examined.
Under the Ordinance referred to, which is styled 'An Ordinance to provide for the collection of a cess on the production and export of rubber, for the establishment of a Fund into which money collected as cess is to be paid and for the constitution of a Board to administer the Fund', the Government of the Federation of Malaya constituted a Board. Under clause 7 of the Ordinance, power was conferred on the High Commissioner in Council to make orders providing for the imposition and collection of a cess or cesses on rubber production in Penang or rubber exported from the Federation other than Penang. Such cesses were to be collected in the same manner as duties imposed under the law relating to customs or excise. According to the assessees, the cesses recovered in their cases related to rubber exported from the Federation, as they did not produce any rubber in Penang. It is not clear whether this cess was collected from the assessees or from the persons who purchased rubber from them for export. The Income-tax Officer, in his order in the assessment relevant to T. C. No. 115 of 1959, records the nature of the amount as below :
'Replanting cess received written back in the adjustment statement - 10,336 dollars. These are payments by the Government to cover replanting expenses of the assessee firm. So long as replanting expenses are allowed as payments of revenue nature, replanting cess refund also is a receipt revenue in nature and will have to be taxed.'
The suggestion contained herein seems to be that this receipt had been written back in the adjustment statement, that is to say, that an amount of expenditure relating to replanting having been allowed, this receipt is now brought to tax. We are unable to gather from the arguments before us whether in any previous year any expenses on this head were in fact allowed in the assessment. But the absence of any information on this head does not however affect the decision in the present case.
The moneys collected as cesses under clause 7 of the Ordinance are paid into a fund created under clause 3 of the Ordinance. After deducting the charges and expenses of administering the fund, the Board constituted under the Ordinance divides the moneys in the fund into two portions. One part, known as Fund A, is declared by clause 10(1)(a) of the Ordinance to be 'established on behalf of owners of properties of which an area of not less than one hundred acres is planted with or set apart for the planting of rubber....' Similarly, Fund B is established on behalf of owners of properties of which an area of less than one hundred acres is planted with or set apart for the planting of rubber. It is the case of the assessee here that the payments that were made to them were out of Fund A referred to, Persons who were entitled to receive any moneys from Fund A are admitted by the Board as participants in the said fund. Under the First Schedule to the Ordinance, the balance in the fund, after setting apart the amount required for the cost of administration thereof, 'Will be credited to the accounts of the respective participants in the fund in such proportions as in the opinion of the Board correspond to the amount of rubber produced by each such participant in the period during which the moneys being credited were collected.' The amount so credited could further depend on the quantity of rubber on which cess had been paid. Rule 5 of the First Schedule lays down that the administrators will repay to the participants in the fund the sums credited to them individually in the fund against the expenditure actually incurred since the 1st of January, 1946, by the participants concerned on the replanting or new planting of high yielding rubber tress.... Similar conditions are found in the Second Schedule which relate to moneys collected under clause 7(5) of the Ordinance by way of customs duties and deposited in Fund A.
It is obvious from the provisions of the Ordinance that the fund has been created out of moneys collected either as cesses or as export duty which under clause 7(5) of the Ordinance have been declared to be utilisable as part of the fund created under that Ordinance.
We may also refer to a further Ordinance of the year 1955 which extended the scope of the original Ordinance. Under this Ordinance, certain new provisions were added covering planting and replanting schemes. The object of this further Ordinance was to make financial provision from public funds for approved schemes for the replanting of existing rubber, the planting of new rubber and the planting, in the interest of rubber industry, of other crops, and for purposes incidental thereto. While the earlier Ordinance related to the creation of a fund out of cesses on the production of rubber and excise duties on rubber exported or produced in the Federated Malay States, the amended provisions provided for the payment out of public funds of certain moneys to rubber planters in general in accordance with the scheme outlined in the Third Schedule to that Ordinance. We are not at present concerned with this later Ordinance. The case of the assessee may well be different if the payments made to them came out of any public funds for purposes set out in the Third Schedule, in which event it might be possible to argue that the receipt itself was of a capital nature.
Except for the contention that this amount paid to the assessee in respect of expenditure incurred in the replanting of rubber estates must, from a consideration of the use to which the moneys had been put, be regarded as in recoupment of a capital expenses, learned counsel is unable to explain the precise source from which these moneys were collected. The provisions of the Ordinance make it perfectly clear, however, that the amounts were realised either from the assessees or from the exporters of rubber and depended upon the quantity of rubber exported by each of the estates in question. It was this amount of cess or duty that was carried into Fund A and placed to the credit of the estate owner. After deducting a portion towards the cost of administration of the fund, the balance was earmarked for payment to the owner of the plantation to the extent to which he complied with certain conditions imposed upon him. That the money was intended to be utilised or to be set off against sums expended by the plantation owners in the replanting of the estates has no relevance to our minds in the determination of the nature of the receipts. It is perfectly clear that the source of the amount was the production or the export of the rubber itself by the owners of the plantations. If the money had been paid over as a deduction or an abatement of duty at the stage of production or export, it would not be possible to urge, as the assessee purport to do, that it was anything other than a trading receipt. The mere fact that the statute intervened, collected all of these amounts together in the shape of a fund, in which the sums were undeniably earmarked to each and every one of the plantation owners and made payable on the fulfilment of certain conditions does not affect the character of the source of the receipt. It would still remain a trading receipt and the condition that the sums should be utilised or were to be paid against the sums expended for replanting would not be affect the nature of the receipt itself.
A somewhat close parallel on facts is found in the decision in Higgs v. Inspector of Taxes  26 Tax Cas. 73.. There the assessee, the owner of agricultural land, was granted a ploughing grant under a statute, dependant upon the extent of pasture land which he brought under the plough. The contention that it was a capital receipt was repelled, relying on the provisions of the statute, which in their essence are no different from the Ordinance in the present case.
We are accordingly of the opinion that the circumstances surrounding payment of these amounts clearly establish them to be of a revenue nature and were rightly treated by the department as income assessable to tax. The questions are answered against the assessees. The assessee will pay the costs of the department in Tax Case No. 115 of 1959. Counsels fee Rs. 250. There will be no order as to costs in Tax Case No. 36 of 1959.