Law: Income Tax Act, 1922

Section:

Income-tax ---Capital or revenue receipt---Agricultural income-tax---Subsidy received by asses see from Rubber Board under Replanting Subsidy Scheme, 1970-- Amount paid with the object to encourage reclamation of rubber trees--Amount of subsidy quantified in first year but paid at graduated rate during the course of seven years, so that amount not frittered away---Portion of subsidy utilised to meet expenditure for maintenance of plantation---Would not lead to conclusion that entire amount of subsidy was received for maintaining rubber plantation---Subsidy is not revenue receipt liable to tax--Tamil Nadu Agricultural Income Tax Act, 1955. The Agricultural Income-tax officer in his assessment order for the assessment years 1976-77 and 1977-78 held that the subsidy received by the assessee from the Rubber Board was a revenue receipt on the ground that the subsidy was made not only for planting of rubber but also to cover the expenditure such as weeding, manuring, spraying and dusting to prevent pests. The Agricultural Income-tax Officer also held that the immature area expenses of rubber were allowed as deduction and, therefore, the subsidy received for rubber was assessable as a revenue receipt. The Assistant Commissioner of Agricultural Income-tax confirmed the order of the Agricultural Income-tax Officer. The Appellate Tribunal held that the subsidy was paid by the Rubber Board as an inducement to develop rubber plantation and to recoup the assessee for the expenditure incurred for maintaining the plantation and that, therefore, the subsidy was a revenue receipt. On revision petitions filed by the assessee in the High Court: " Held, that the amount of the subsidy was paid to the assessee under the Replanting Subsidy Scheme, 1970. The object of the Scheme is to encourage replantation of rubber trees in order to increase replantation in the country. The amount is quantified at Rs.2,471 per hectare, and it is payable in seven yearly instalments. Hence, the scheme clearly shows that the amount was paid for replantation of rubber trees and it cannot be regarded that the subsidy was paid for maintaining the plantation. The mere fact that a certain portion of the…

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