Kerala High Court
Commissioner Of Agricultural ... vs Midland Rubber And Produce Co. Ltd. on 16 October, 1989
Equivalent citations: [1990]182ITR493(KER)
Author: K.S. Paripoornan
Bench: K.S. Paripoornan
JUDGMENT K.S. Paripoornan, J.
1. This original petition is filed by the Revenue under Section 60(3) of the Kerala Agricultural Income-tax Act, 1950. The respondent is a plantation company. The Revenue prays that the following six questions of law may be directed to be referred to this court for decision by the Agricultural Income-tax Appellate Tribunal (for short "the Tribunal") :
"(1) Whether the Tribunal is justified in allowing the expenditure for advertisement in magazines and souvenirs in the nature and circumstances of the case ?
(2) Whether, the Tribunal is justified in allowing the expenditure incurred for new year compliments as an expenditure incurred during the course of the activity of the company in the nature and circumstances of the case ?
(3) Whether the Tribunal is justified in allowing the claim for loss on revaluation of loose tools treating the same as an accountancy practice when there are no expenses incurred by the assessee ?
(4) Whether the Tribunal is justified in allowing the claim for expenditure on stamp and stamp paper treating the same as a routine revenue item ?
(5) Whether the Tribunal is justified in allowing for interplanting of cardamom treating the same as capital expenditure in view of the specific provision contained in Explanation 2 to Section 5 of the Kerala Agricultural Income-tax Act ?
(6) Whether the Tribunal is justified in allowing the claim which is not contemplated under Section 5 of the Kerala Agricultural Income-tax Act ?"
2. We heard counsel. Question No. 6, aforesaid, was not even formulated before the Tribunal as a question to be referred to this court by the Appellate Tribunal. Counsel for the Revenue placed the files before us and it is evident therefrom that question No. 6 never formed the subject of the application. On that short ground, question No. 6 cannot be referred.
3. We shall now deal with the other five questions seriatim. This court, in more than one decision, has taken the view that Section 5(j) of the Kerala Agricultural Income-tax Act is akin to Section 10(2)(xv) of the Indian Income-tax Act, 1922, and Section 37(2) of the Income-tax Act, 1961. The latest of the decisions in the series is reported in Commr. of Agrl. I T. v. Kartikulam and Alathur Estates [1988] 169 ITR 386 (Ker). The matter has been discussed in detail in Malayalam Plantations Ltd. 's case [1978] 115 ITR 624 (Ker). In the light of the above decisions which have only given effect to the dictum laid down by the Supreme Court in Travan-core Rubber and Tea Co, Ltd. v. Commr. of Agrl. 1. T [1961] 41 ITR 751, we are of the view that the Appellate Tribunal was justified in allowing the expenditure for advertisement in magazines and souvenirs and also in allowing the expenditure for new year compliments. The broad guidelines in this regard have been laid down by the Supreme Court in Travancore Rubber and Tea Co. Ltd.'s case [1961] 41 ITR 751 which was given effect to by this court in Malayalam Plantations Ltd.'s case [1978] 115 ITR 624 and in Kartikulam and Alathur Estates' case [1988] 169 ITR 386 (Ker). Therefore, questions Nos. 1 and 2 are largely academic in nature and we do not find our way to direct the Tribunal to refer the questions to this court. In deciding the matter against the Revenue, the Tribunal has only given effect to the decision of the Supreme Court as also the decisions of this court.
4. Question No. 3 relates to the claim for loss on revaluation of loose tools. The Appellate Tribunal has categorically stated that it was so done only as a matter of accountancy procedure or practice and that it has nothing to do with the actual expenditure incurred. The assessee did not claim any depreciation on this item as well. It is only a periodical write-off as per the accountancy method. The order of the Tribunal shows that the allowance of the claim largely turned on questions of fact. We are of the view that no question of law arises as formulated in question No. 3.
5. With regard to the expenditure on stamp and stamp paper, the Tribunal held that the smallness of the expenditure showed that it is not related to any capital item and is only a revenue item. This was so stated on the facts. There can be no absolutes in the realm of variables, since the question as to whether an expenditure is revenue or capital in nature depends upon the facts and circumstances of each case. The Tribunal has held that the smallness of the expenditure showed that it is not related to capital item, but is only a routine revenue item. No question of law arises as formulated in question No. 4. The decision of the Tribunal turned on the peculiar facts of the case.
6. Lastly, we deal with question No. 5. The Tribunal allowed expenses relating to replacement of plants in the cardamom area. The plea put forward by the Revenue was that it related to immature plants and so expenditure on new plants, though in the mature area, and should be capitalised. The Tribunal found that the assessee has only interplanted new cardamom plants in the place of the ones which got dried up and decayed and in order to keep the estate well-kept, a uniform planted area should be kept as a matter of routine. It also held that no new planting was done in the process and what was done was only in the nature of filling up of vacancy and not in the form of "new plantation". On this finding, it is evident that no question of allowing an expenditure, much less a capital expenditure, is involved calling in aid Explanation (2) to Section 5 of the Act. In the light of the finding of the Tribunal that what was done is only the filling up of the vacancy as a matter of routine and for keeping a uniform planted area, the expenditure incurred was rightly held to be revenue expenditure. No question of law, formulated as question No. 5, arises on the facts of the case. Therefore, we decline to refer the question.
7. In the result, we decline to refer the five questions, numbered as questions Nos. 1 to 5 extracted above. Question No. 6 was not even formulated before the Appellate Tribunal. The original petition is dismissed.
8. The Registrar shall send a copy of this judgment to the Agricultural Income-tax Appellate Tribunal, Trivandrum, forthwith.