The main legal point established in the judgment is that amounts spent for the maintenance of immature plants constitute revenue expenditure, and money received to recoup such revenue expenses is a revenue receipt. The court also emphasized the specific exclusion of subsidy for tea plantation from the computation of total income under S.10(30) of the Income-tax Act.

1. The following questions have been, at the instance of the revenue, referred to us by the Income-tax Appellate Tribunal, Cochin Bench:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the expenditure on maintenance of bungalows owned by the assessee and depreciation thereon cannot be considered under S.40A(5) of the Income-tax Act?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that only a portion of the expenditure and depreciation on motor car can be considered properly includible for S.40A(5) and not the entire expenses?

(3) Whether on the facts and in the circumstances of the case, the Tribunal's decision that there was no capital gains involved in the sale of rubber trees is legally and factually correct?

(4) Whether, on the facts and in the circumstances of the case, the subsidy received from the Rubber Board is income of the assessee?"

For the reasons stated by this Court in CIT. v. Forbes, Ewart and Figgis (P) Ltd., (1982) 138 ITR 1 (Ker.) (FB):1981 KLT 483 we answer question No. (1) in the negative, that is, in favour of the revenue and against the assessee.

2. For the reasons stated by this Court in CIT. v. Forbes, Ewart & Figgis (P) Ltd., (1982) 138 ITR 1, (Ker.): 1981 KLT. 483 (FB), question No. (2) is answered in the affirmative, that is, in favour of the assessee and against the revenue.

3. For the reasons stated by us in ITR. No. 111 of 1981, we answer question No. (3) in the negative, that is, in favour of the revenue and against the assessee.

4. We shall now deal with question No. (4). That relates to the assessment year 1975-76. During the relevant period, the assessee received as subsidy from the Rubber Board a sum of Rs. 5,62,196/-. This amount was treated by the Income-tax Officer as income assessable in the hands of the assessee. On appeal, the Commissioner of Income-tax (Appeals) held that the said amount was capital receipt and was, therefore not assessable as income. This order, although challenged by the revenue, was confirmed by the Tribunal.

5. Counsel for the revenue, relying upon certain decisions of the Supreme Court, submits that what was paid to the assessee by the Rubber Board as subsidy was neither a gift nor a grant nor bounty for any beneficial purposes, but compensation to recopue itself the expenditure incurred by it in the replantation, maintenance, upkeep and supervision of rubber trees. The subsidy received was, therefore, a reimbursement of the assessee's revenue expenditure in running and maintaining the plantation. Counsel for the assessee on the other hand submits that the subsidy, being payment for replantation, is a capital receipt, because replantation expenditure is according to him, a capital expenditure.

6. The question for consideration, therefore, is whether the amounts received as subsidy constituted capital or revenue receipts. The Replanting Subsidy Scheme, 1972 which is the scheme under which the subsidy in question was granted is quoted by the Commissioner of Income-tax (Appeals) at pages 21 to 22 of the paper book:

"...Subsidy will be granted for replanting low yielding uneconomic rubber planted in or prior to 1962, and registered with the Board."

Referring to the scheme, the Commissioner says.

The replacement has to be by better yielding rubber trees, in place of older and low-yielding trees planted prior to 1962. The subsidy is granted in seven yearly instalments...."

It is in fact the common case that subsidy was paid to and received by the assessee for replantation, upkeep and maintenance of the rubber trees until they became mature.

7. In V.S.S.V. Meenakshi Achi v. Commr, of Inc.-Tax, (1966) 60 ITR. 253 (SC). an identical question arose. Amounts were paid to the assessee as replantation cess to encourage them to plant or replant rubber trees because during the war rubber estates were destroyed or denued. The question arose whether such amo