M/S. KALPETTA ESTATES LTD. ETC. ETC. versus THE COMMISSIONER OF INCOME-TAX, COCHIN

Citation: [1996] SUPP. 3 S.C.R. 620 · Decided: 16-07-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
MIS. KALPETTA ESTATES LTD. ETC. ETC. 
v. 
THE COMMISSIONER OF INCOME-TAX, COCHIN 
JULY 16, 1996 
B 
[B.P . .IEEVAN REDDY AND KS. PARIPOORNAN, JJ.] 
Income Tax Act, 1961. 
Ss.45 and 55(2}-Capital gaini-Sa/e of old and uneconomic mbber 
C trees-Held, no capital gain arose or accnted on such transactions--Co111-
putatio11 of income-Replantation subsid)-Held, cannot be treated as 
revenue receipt and taxed as incon1e. 
The appellants, being owners of rubber estates, sold old and unyield-
ing rubber trees on various dates during the accounting years relevant to 
D assessment years 1968-69 to 1978-79. The income tax Officer held that 
capital gains accrued to the assessee on such transactions and he brought 
to tax the difference in amount between the sale price of the old rubber 
trees sold and the price notionally fixed for the said trees as on 1.1.1954 
or l.1.1964 as the case may be. The assessees challenged the order on the 
E ground that when the rubber trees were sold they were uneconomic and 
unyielding and were useless but they were fully yielding on 1.1.1954 or 
1.1:1964, and therefore, no capital gains arose or accrued to the assessees 
when they sold the old and unyielding trees. The Income Tax Appellate 
Tribunal accepted the case of the assessees, but the High Court took the 
F 
view that capital gains accrued when old rubber trees were sold by the 
assessees. The High Court also upheld the view of the Revenue tliat the 
rubber plantation subsidy received by the assessees from the Rubber 
Board was revenue receipt and was subject to tax as income of the 
assessees. Aggrieved the assessees filed the appeals. 
G 
Disposing of the appeals, this Court 
HELD : 1. When old and unyielding rubber trees were sold by the 
various assessees during the relevant accounting year, no capital gain 
arose or accrued on such transactions. [626-A] 
H 
Commissioner of Income Tax v. Ma/ankara Rubber and Products, 203 
620 
1 
KALPETIAESTATES LTD. v. C.l.T. [PARIPOORNAN,J.] 
621 
!TR Statutes p.2, relied on. 
Kanthimathy Plantations Pvt. Ltd. v. C.l. T, 184 !TR 1, referred to. 
2. The Replautation subsidy received by the planters from the Rubber 
Board cannot be treated as revenue receipt and taxed as income. [626-B] 
Commissioner of Income-tax v.Ruby Rubber Works Ltd., 178 !TR 181, 
referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 9188-90 
of 1996 Etc. Etc. 
From the Judgment and Order dated 12.2.87 of the Kerala High 
Court in I.T.R. Nos. 164 and 165/82. 
G.B. Pai, K.N. Shukla, C.N. Sreekumar, Ms. Ritin Rai, Ms. Meera 
Mathur, for JBD & Co. and S.N. Terdol for the appearing parties. 
The Judgment of the Court was delivered by 
PARIPOORNAN, J. Special leave granted in all the cases. In a few 
cases there is delay in filing the special leave petitions. The said delay is 
A 
B 
c 
D 
condoned. 
E 
2. This batch contains 32 appeals. They are filed in 20 different sets. 
The same assessee has filed more tlian one set of S.L.P. Broadly speaking 
two questions were posed for consideration in this batch of appeals. They 
are (i) exigibility to capital gains (tax) when old and unyielding nibber trees 
were sold by the assessees; (ii) whether the rubber replantation subsidy F 
received by the assessee is a revenue receipt or not. Only in a few cases 
both the questions arise for consideration. In some other cases, one or the 
other of the above questions arise for decision. 
3. The appellants are assessees to income tax. They owned rubber G 
estates. Dnring the accounting years relevant to the assessment years in 
question fQr which they were assessed (1968-69, 1969-70, 1971-72, 1972-73, 
1973-74, 1974-75, 1975-76, 1976-77, 1977-78 and 1978-79, as the case may 
be), the assessees sold old, unyielding and uneconomic rubber trees. The 
Income Tax Officer, brought to tax the difference in amount between the 
sale price of the uneconomic rubber trees sold and the price notionally H 
622 
SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R. 
A fixed for rubber trees as on 1.1.1954 and 1.1.1964, as the case may be 
. [S.55(2) ]. It was on the basis that capital gains accrued to the assessees 
when old and uneconomic rubber trees were sold by them. He worked out 
. "the capital gains' on the basis of a principle stated in his order. The plea 
put forward by the assessees was that the rubber trees when sold were 
B uneconomic and unyielding and were useless, but on the other hand, they 
were fully yielding on the respective valuation date

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