Full Judgment Text & Judicial Ruling

1964 P T D 254

1964 P T D 254.

[Kerala (India)]

Before M. S. Menon, C. J. and M. Madhayan Nair, J

STATE OF KERALA

Versus

KARIMTHARUVI TEA ESTATE LTD.

Income‑tax Referred Case No. 10 of 1962 (Agri.), decided on 25th July 1963.

Income or capital‑Sale as firewood of old gravelia trees grown for shade in tea estates‑Whether capital receipt or income‑Change of law‑Law applicable to assessment‑Law of accounting year or law of assessment year.

Amount realised from the sale as firewood of old and useless gravelia trees grown and maintained in tea gardens for the purpose of affording shade to tea plants‑ is capital receipt and not revenue receipt.

The law to be applied in income‑tax matters is the law in force in the assessment year unless it is otherwise stated or implied. Consequently, where a law is passed after the expiry of the accounting period but during the assessment year, the law applicable to assessment of income earned during the accounting period is the law in force during .the assessment year and not the law in force during the accounting period.

Commissioner of Income-tax v. Isthmian Steamship Lines (1951) 20 I T R 572 (S C) applied.

Government Pleader for the State.

K. P. Abraham, George Kurien, Joseph Vithayathil and E. M. Jacob for the Assessee.

JUDGMENT

This is a reference under section 60 (1) of the Agricultural Income‑tax Act, 1950, by the Kerala Agricultural Income‑tax Appellate Tribunal, Trivandrum. The accounting period with which we are concerned is the year ended December 31, 1956 and the assessment year is the financial year 1957‑58.

Two questions have been referred to this Court for decision. They are:

"(i) Whether the amount realised‑ by the sale of graveha firewood is a revenue receipt liable to tax under the Kerala Agricultural Income‑tax Act?

(ii) Whether any surcharge can be levied on the agricul tural income‑tax payable for the assessment year 1957‑58 ?"

The gravelia trees were grown and maintained for the sole purpose of providing shade to the tea bushes in the tea estates of the assessee. That such shade is essential for the proper cultivation of tea cannot be disputed; and the trees should hence be considered to be as much a part of the capital assets of the company as the tea bushes themselves or the equipment in its factories. Some of the gravelia trees became old and useless with the efflux of time and they naturally had to be cut down and sold. The sale proceeds of such trees cannot possibly amount to a revenue receipt and we must answer the first question referred in the negative and against the Department.

The Kerala Surcharge on Taxes Act, 1957 came into force after the expiry of the accounting period, but before the expiry of the assessment year. The contention of counsel for the assessee is that the fact that the Act came into force only after the expiry of the accounting period precludes its application to the case before us.

It is true that the subject of the charge is the income of the previous year. But, as pointed out by the Supreme Court in Commissirner of Income‑tax v. Isthmian Steamship Lines ((1951) 20 1 T R 572 (S C)), the lave to be applied in income‑tax matters is the law in force in the assessment year unless otherwise stated or implied. There is no such statement or implication available and it must follow that the second question referred has to be answered in the affirmative and against the assessee.

The reference is answered as above. No costs.

A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Appel late Tribunal as required by subsection (6) of section 60 of the Agricultural Income‑tax Act, 1950.

Related Legal Research & Directories

• Browse all judgments from KERALA-HIGH-COURT-INDIA
• Search Pakistani statutes: Constitution of Pakistan 1973, PPC, CrPC, CPC & Family Laws
• Analyze this case with Al Wakeelo AI Legal Assistant