Appeals Nos 290 to 292 of 1959
Appeals by special leave from the judgment and order dated December 6 1957 of the Kerala High Court in Agricultural Income tax Referred Cases Nos 15 18 and 19 of 1955
CK Daphtary Solicitor General of India Thomas Vellapally and M R K Pillai for the appellants in all the appeals Sardar Bahadur for the respondents
December 15
The Judgment of the Court was delivered by KAPUR J
These three appeals are brought by special leave against the judgment and order of the High Court of Kerala and arise out of a common judgment of that court given in three Agricultural Income tax References Nos 15 18 and 19 of 1955
In the first reference the question raised was Whether under the Travancore Cochin Agricul tural Income Tax Act 1950 in calculating the assessable agricultural income of a rubber estate already planted and containing both mature yielding rubber trees and also immature rubber plants which have not come into bearing the annual expenses incurred for the upkeep and maintenance of such rubber plants are not a permissible deduction and if so whether the sum of Rs 42660 4 1 expended by the assessee in the relevant accounting year 1952 under this head may be deducted and in the other two the question referred was 281 Whether the expenses incurred for the mainte nance and upkeep of immature rubber trees constitute a permissible deduction within the meaning of section 5j of Act XXII of 1950 In all the references the questions were answered in the negative and against the appellant
The appeals relate to three accounting years 1950 1951 and 1952 assessment years 1951 52 1952 53 and 1953 54
The appellants have rubber plantations and in the accounting year 1950 corresponding to the assessment year 1951 52 the appellants had under cultivation 3558 84 acres out of which 334 64 acres had immature rubber trees growing and the rest ie 3224 20 acres mature rubber yielding trees under cultivation
In that year a sum of Rs 19056 0 9 which was expended for the upkeep and maintenance of immature portion of the rubber plantation was allowed by the Agricultural Income tax Tribunal and at the instance of the respondent a reference was made to the High Court under section 601 of the Agricultural Income tax Act Act XXII of 1950 hereinafter termed the Act  and that was reference No 18 of 1955
During the accounting year 1951 corresponding to the assessment year 1952 53 the appellant had under cultivation
a total area of 342655 acres of which 309191acres were mature rubber yielding trees and 33464 acres had immature rubber trees
In that year a sum of Rs 592719 5 was the expenditure incurred for the upkeep and maintenance of immature portion of the rubber estate
That sum was allowed by the Agricultural Income tax Tribunal and at the instance of the respondent a reference was made under section 601 of the Act to the High Court and that was reference No 19 of 1955
In Agricultural Income tax Reference No 15 of 1955 which related to accounting year 1952 and the assessment year 1953 54 the area under cultivation was 345365 out of which 296791 acres had mature rubber yielding trees and 48574 acres had immature rubber growing trees
In that year the amount expended on the maintenance and tending of the imma ture rubber trees was Rs 426604 1
In that case 36 282 however the Agricultural Income tax Tribunal rejected the appellant s claim and disallowed the expenditure
At the instance of the appellant a case was stated to the High Court under section 601 of the Act and was answered in the negative and against the appellant
In all the cases the assessee company is the appellant and the main question for decision is whether the amount expended for the upkeep and maintenance of the immature rubber trees is a permissible deduction under section 5j of the Act
The charging section under the Act is section 3 and section 5 relates to computation of agricultural income
It provides S5 The agricultural income of a person shall be computed after making the following deductions namely expenditure 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 deriving the agricultural income
In regard to this income the High Court held We find it impossible to say that the amounts spent on the upkeep and maintenance of the immature rubber plants were laid out or expended for the purpose of deriving the agricultural income much less that they were laid out or expended wholly and exclusively for that purpose The agricultural income in the context can only mean the agricultural income obtained in the accounting year concerned and not the agricultural income of any other period In our opinion the High Court has taken an erroneous view of the relevant provision
It is not denied that the expenditure claimed as a deduction was wholly and exclusively laid out for the purpose of deriving income but the use of the definite article the before agricultural income has given rise to the interpretation that the deduction is to be from the income of the year in which the trees on which the amount claimed 283 was expended bore any income
In a somewhat similar case Vallambrosa Rubber Co Ltd vs Farmer 1 the expenditure of the kind now claimed was allowed under the corresponding provision of the English Income tax Act
In that case a rubber company had an estate in which in the year of assessment only 17 produced rubber and the other 67 was in process of cultivation for the production of rubber
It may be added that rubber trees do not yield any rubber until they are about six years old
The expenditure for the superintendence weeding etc
incurred by the company in respect of the whole estate including the nonbearing rubber estate was allowed on the ground that in arriving at the assessable profits the assessee was entitled to deduct the expenditure for superintendence weeding etc
on the whole estate and not only on the 17 of such expenditure
Lord President said at page 534 Well that is for the case quite correct but it must be taken as you must always take a Judge s dicta secundum materiam subjectum of the case that is decided
But to say that the expression of Lord Esher s lays down that you must take each year absolutely by itself and allow no expense except the expense which can be put against the profit which is reaped for the year is in my judgment to press it much further than it will go Counsel for the respondent relied upon a judgment of this Court in Assam Bengal Cement Co Ltd vs The Commissioner of Income tax West Bengal 2 and particularly on a passage at page 983 where Bhagwati J observed The distinction was thus made between the acquisition of an income earning asset and the process of the earning of the income
Expenditure in the acquisition of that asset was capital expenditure and expenditure in the process of the earning of the profits was revenue expenditure
 But that case has no relevancy to the facts of the present case nor has that passage any applicability to the facts of the present case
The question there was 1 2 284 whether certain payments made were by way of capital expenditure or revenue expenditure
The assessee acquired a lease from Government for twenty years and in addition to paying the rent and royalties for the lease the assessee had to pay two further sums as protection fees  under the terms of the lease
Those sums were held to be capital expenditure inasmuch as they were incurred for the acquisition of an asset or an advantage of enduring nature and were no part of the working or operational expenses for carrying on the business of the assessee
In our opinion the amount expended on the superintendence weeding etc
of the whole estate should have been allowed against the profits earned and it is no answer to the claim for a deduction that part of those expenses produced no return in that year because all the trees were not yielding rubber in that year
We therefore allow these appeals set aside the judgments and orders of the High Court and answer the questions in favour of the appellant in all the three agricultural Income tax References
The appellant will have its costs in this Court and the High Court
One hearing fee in this Court
Appeals allowed


Summary:
In computing the agricultural income of a person section 5f of the Travancore Cochin Agricultural Income tax Act 1950 allowed deductions of any expenditure laid out wholly and exclusively for purpose of deriving the agricultural income
The assessee who had rubber plantations claimed that the amount expended on the maintenance and tending of immature rubber trees should be deducted in computing its agricultural income but this was disallowed on the ground that the use of the article the before the words agricultural income implied deduction 1  280 from the income of the year in which the trees on which the amount was expended bore income
Held that the assessee was entitled to the deduction claim ed
It was no answer to the claim for the deduction that these expenses produced no return in the year in question as the trees were not yielding rubber in that year
Vallambrosa Rubber Co Ltd vs Farmer  followed
Assam Bengal Cement Co Ltd vs The Commissioner of Income tax West Bengal  not applicable