Kerala High Court
Kanthimathy Plantations Pvt. Ltd. vs Commissioner Of Income-Tax on 22 August, 1989
Equivalent citations: [1990]184ITR1(KER)
Author: K.S. Paripoornan
Bench: K.S. Paripoornan
JUDGMENT K.S. Paripoornan, J.
1. This batch of 10 cases are connected. They arise out of the common order passed by the Appellate Tribunal dated September 20, 1984. The matter relates to the assessment years 1975-76 to 1978-79. The assessee had filed three appeals (I. T. A. Nos. 390, 391 and 392 (Coch)/1984) relating to the assessment years 1975-76 to 1977-78. R. A. Nos. 477, 478 and 479 (Coch)/1984 are applications filed by the assessee, aggrieved by the common order of the Appellate Tribunal. The Revenue had filed three appeals (I. T. A. Nos. 540, 541 and 542 of 1984) for the assessment years 1975-76 to 1977-78. R. A. Nos. 486, 487 and 488 (Coch)/1984 are filed by the Revenue against that portion of the order wherein it felt aggrieved, in the appeals filed by the assessee. R. A. Nos. 489, 490 and 491 (Coch)/1984 are applications filed by the Revenue aggrieved by the orders passed by the Appellate Tribunal in the appeals filed by it. R. A. No. 493 (Coch)/1984 relates to the assessment year 1978-79 with reference to the appeal filed for the assessment year 1978-79 before the Appellate Tribunal (I. T. A. No. 343/Coch/1984.). The three appeals filed by the assessee (I. T. A. Nos. 390, 391 and 392 (Coch)/1984) relating to the assessment years 1975-76 to 1977-78 and the four appeals filed by the Revenue (I. T. A. Nos. 540, 541 and 542 (Coch)/1984) relating to the assessment years 1975-76 to 1977-78 and I.T.A. No. 343/Coch/l984 relating to the assessment year 1978-79 were disposed of by the common order dated September 20, 1984, by the Income-tax Appellate Tribunal. The assessee as well as the Revenue filed applications before the Appellate Tribunal for referring certain questions of law which they alleged arose out of the appellate order of the Tribunal for the decision of this court. Totally 10 applications were filed. R. A. Nos. 477, 478 and 479 (Coch)/84 were filed by the assessee in their appeals in I. T. A. Nos. 390, 391 and 392 (Coch)/1984. R. A. Nos. 486, 487 and 488/Coch/1984 were filed by the Revenue, aggrieved by that portion of the appellate order in the appeals filed by the assessee. R. A. Nos. 489, 490 and 491/Coch/1984 were filed by the Revenue, aggrieved by the order passed by the Tribunal in their appeals. Similarly, R. A. No. 493/Coch/1984 was filed by the Revenue, for the year 1978-79, in the order passed by the Appellate Tribunal, in the appeal filed by the Revenue.
2. Though the assessee as well as the Revenue sought reference of many questions, the Income-tax Appellate Tribunal has referred one common question for all the four years (1975-76 to 1978-79), at the instance of the Revenue. The said question is as follows :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the fair market value of the yielding rubber trees as on January 1, 1954, or as on January 1, 1964, as the case may be, was much more than the value obtained by the sale of the trees at its timber value during the accounting periods relevant to the assessment years 1975-76 to 1978-79 and, consequently, no capital gains arose out of the sale of the trees ?"
3. At the instance of the assessee, the following questions (numbered as questions Nos. 2 to 5) for the assessment years 1975-76 to 1977-78 have been referred by the Appellate Tribunal for the decision of this court :
"(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the old and unyielding rubber trees cut and sold from the rubber estates belonging to the assessee constituted capital assets so as to attract Section 45 of the Income-tax Act, 1961 ?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the capital gains, if any, arising out of the sale of the old and unyielding rubber trees from the rubber estate of the assessee is not agricultural income as defined in the Income-tax Act, 1961 ?
(4) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the cost of the rubber trees which were sold by the assessee as old and unyielding trees at timber value was ascertainable for the purpose of computing capital gains under Section 48 of the Income-tax Act, 1961 ?
(5) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the aggregate consideration fixed under the agreements dated March 30, 1974 and February 17, 1975 for the sale of the rubber trees accrued to the assessee during the previous year relevant to the assessment year 1975-76 and could be taken into account for computing the capital gains during that year ?"
4. As correctly stated by the Appellate Tribunal, the questions referred by the Income-tax Appellate Tribunal, at the instance of the assessee, will not strictly arise for consideration, if the common question referred, at the instance of the Revenue, is decided in favour of the assessee. Therefore, in the first instance, we propose to deal with the sole question, referred for the decision of this court at the instance of the Revenue, for all the four years.
5. The assessee is a plantation company. During the previous years relevant to the assessment years 1975-76 to 1978-79, the assessee-company sold unyielding rubber trees. During the previous year relevant to the assessment year 1975-76, the assessee sold 19,790 old and unyielding rubber trees. 6,150 rubber trees were sold at the rate of Rs. 50 per tree and 13,640 trees were sold at the rate of Rs. 119 per tree. The Income-tax Officer determined the fair market value of the trees as on January 1, 1954, at Rs. 38 per tree and worked out the capital gains arising out of the sale of the trees on that basis. The Commissioner of Income-tax (Appeals) fixed the fair market value of a tree as on January 1, 1954, at Rs. 50. On that basis, capital gains was directed to be computed. During the previous year relevant to the assessment year 1976-77, the assessee sold 2,500 rubber trees at the rate of Rs. 96 per tree. In working out the capital gains, the Income-tax Officer determined the fair market value of the trees as on January 1, 1954, at Rs. 38 per tree. In appeal, the Commissioner of Income-tax (Appeals) enhanced this value to Rs. 50 per tree. During the previous year relevant to the assessment year 1977-78, 2,109 trees were sold at an average price of Rs. 100 per tree. In working out the capital gains, the Income-tax Officer determined the fair market value as on January 1, 1954, at Rs. 38 per tree and the Commissioner of Income-tax (Appeals) enhanced the same to Rs. 50 per tree. During the previous year relevant to the assessment year 1978-79, the assessee sold 4,677 trees at an average price of Rs. 49 per tree. The Income-tax Officer determined the fair market value of the trees as on January 1, 1964, at Rs. 20 per tree and computed the capital gains on that basis. The Commissioner of Income-tax (Appeals) held that no capital gains accrued to the assessee for this year. The assessee filed appeals before the Appellate Tribunal against the capital gains sustained by the Commissioner of Income-tax (Appeals) for the assessment years 1975-76 to 1977-78. The Revenue went up in appeals before the Tribunal against the reduction in the quantum of capital gains effected by the Commissioner of Income-tax (Appeals) for the assessment years 1975-76 to 1977-78. Similarly, for the assessment year 1978-79, the Revenue filed an appeal before the Tribunal against the total deletion of the capital gains by the Commissioner of Income-tax (Appeals). This is how the seven appeals so filed by the assessee and the Revenue (3 + 4) were disposed of by the common order dated September 20, 1984.
6. Many aspects were posed before the Appellate Tribunal for consideration and decided by it. One of the important questions highlighted by the assessee before the Appellate Tribunal was that no capital gains really arose out of the sale of the old and unyielding rubber trees. It was stated that, considering the true nature of the assets sold, neither the cost nor the date of acquisition thereof could be ascertained. It was further pleaded that the value of the assets as on January 1, 1954, or as on January 1, 1964--the fair market value of the rubber trees sold--would have been much more than the timber value obtained by the sale of the trees during the accounting periods relevant to the assessment years under appeal, since the trees sold were old and unyielding and there could really be no capital gains. The plea was that, on January 1, 1954, or on January 1, 1964, as the case may be, the trees would have been really yielding trees and their value would be very substantial than the timber value obtained at the time of the sale of the trees. The Revenue pleaded that the trees were sold for timber value and so the value of the rubber tree which could be sold as timber on January 1, 1954, or January 1, 1964, as the case may be, should be taken into account. This aspect was rejected by the Appellate Tribunal. The Appellate Tribunal held that the capital asset sold was rubber trees and the value of this capital asset as on January 1, 1954, or January 1, 1964, as the case may be, should be ascertained. On the basis of the evidence available in the case, the Tribunal held that the cost of a tree as on January 1, 1954, or as on January 1, 1964, as the case may be, would have been much more than the timber value obtained by the sale of the tree during the relevant accounting periods. On this basis, the Appellate Tribunal held that no capital gains arose out of the sale of the old and unyielding rubber trees. It is this aspect of the question that has been referred as a common question arising for all the four years, at the instance of the Revenue.
7. Counsel for the Revenue very vehemently contended that what was sold was old and unyielding rubber trees. It is such an asset--an unyielding rubber tree--as it could be postulated as on January 1, 1954 or January 1, 1964, that should be taken into account to fix the value or cost on the date of acquisition. The Tribunal rejected this plea. What is exigible to capital gains is the gain that accrued as a result of the sale of the capital asset. The capital asset sold was old and unyielding rubber trees. The Tribunal held, and rightly in our view, that, as on January 1, 1954, the trees would have been yielding trees. The Tribunal also referred to the judgment of the Sub-court, Nagercoil, in O. P. Nos. 90, 91, 92, 94 and 115 of 1956 which related to the acquisition of a portion of the properties under the Land Acquisition Act. The particulars of the compensation awarded by the court were available even before the Income-tax Officer. The Tribunal worked out the approximate valuation of rubber trees as it existed on January 1, 1954, with reference to the compensation awarded by the court and came to the conclusion that it would be a sum of Rs. 154.15 per yielding tree then. The finding of the Commissioner of Income-tax (Appeals) was that there was not much difference between the price of yielding rubber trees as it obtained in 1954 and in 1964. Even so, giving appropriate reduction for determining the value as on January 1, 1954, the Tribunal held that the value of trees in the present case then, was at prices ranging between Rs. 50 and Rs. 119. On that basis, it was held that there would have been no capital gains in the sale of rubber trees. The Tribunal found that the value awarded by the sub-court represented the fair market value and as per the data and details contained in the judgment of the sub-court, the value of the yielding rubber tree as on January 1, 1954, was much more than the value obtained by the safe of the tree for its timber value during the accounting periods relevant to the assessment years which were under appeals before them. On the basis of this finding, it was held that no capital gains arose out of the sale of the unyielding rubber trees.
8. The finding of the Appellate Tribunal that the value of the yielding rubber trees as on January 1, 1954, was much more than the value obtained by the sale of the trees for its timber value during the accounting periods relevant to the assessment years under consideration is a pure finding of fact. The said finding is based on proper and authentic material. The basis for the said finding is the value awarded by the Sub-court Nagercoil, in 0, P. Nos. 90, 91, 92, 94 and 115 of 1956. Those cases dealt with the particulars of compensation awarded by the court for a portion of the properties in question. In the light of the above judgment of the Sub-court, Nagercoil, which was relevant and germane to decide the question in issue before the Tribunal, the Appellate Tribunal was justified in holding that the value of the yielding rubber trees as on January 1, 1954, was much more than the value obtained by the sale of the tree for its timber value during the accounting periods relevant to the assessment years which are under consideration. The finding is legal, valid and reasonable. On the basis of the said finding, the conclusion that no capital gains arose on the sale of old and unyielding rubber trees is justified and proper. We were not invited to any other material which will militate against the materials adverted to by the Appellate Tribunal in fixing the value of the yielding rubber trees as on January 1, 1954.
9. Since the above conclusion of the Appellate Tribunal is valid and justified in law, we answer the common question, referred at the instance of the Revenue, for the four assessment years (1975-76 to 1978-79) in the affirmative, against the Revenue and in favour of the assessee.
10. In the light of the conclusion of the Appellate Tribunal that no capital gains arose out of the sale of the old and unyielding rubber trees for the four years aforesaid, it is unnecessary and academic to consider questions Nos. 2 to 5, referred to by the Income-tax Appellate Tribunal for the decision of this court. Questions Nos. 2 to 5 referred to this court, at the instance of the assessee, do not really arise for consideration. We decline to answer the said questions.
11. A copy of this judgment under the seal of this court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench, as required by law.