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Facts
The assessee, Rehabilitation Plantations Ltd., engaged in rubber plantation, filed its return for AY 2013-14. The AO completed the assessment at a higher income, disallowing replantation expenses and making additions for miscellaneous income, forfeited earnest money, and security deposits, citing lack of direct nexus with the plantation business. The CIT(A) dismissed the appeal based on a Full Court judgment of the Kerala High Court.
Held
The Tribunal noted that a previous High Court decision relied upon by the lower authorities was overruled by a Full Bench. For replantation expenses, the matter was remanded for fresh assessment. For depreciation on assets used for company management, the AO was directed to allow it. The addition for miscellaneous income, security deposits, and bad debt recovery was upheld as not having a direct nexus with the plantation business.
Key Issues
Whether replantation expenses and miscellaneous income should be computed under Rule 7A, and if depreciation on certain assets is allowable.
Sections Cited
Sec. 143(3), Rule 7A(2), Sec. 10(31)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SHRI SONJOY SARMA, JM ITA Nos. 409 & 410/Coch/2025 Assessment Years: 2013-14 & 2014-15 Rehabilitation Plantations Ltd. .......... Appellant Punalur, Kollam 691305 [PAN: AAACT8105A] vs. The Income Tax Officer,WD-1&TPS, Kollam .......... Respondent Appellant by: Shri Rajakannan, Advocate Respondent by: Smt. Veni Raj, CIT-DR Date of Hearing: 10.06.2025 Date of Pronouncement: 31.07.2025 O R D E R Per: Inturi Rama Rao, AM These appeala filed by the assessee are directed against different orders of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 07.03.2025 for Assessment Years (AY) 2013-14 & 2014-15.
Since identical issues and facts are involved in these appeals, they are heard together and disposed of by this common order.
For the sake of convenience and clarity the facts relevant to the appeal bearing ITA No. 409/Coch/2025 for AY 2013-14 are stated herein.
2 ITA Nos. 409 & 410/Coch/2025 Rehabilitation Plantations Ltd. 4. Brief facts of the case are that the appellant is a company incorporated under the provision of Companies Act, 1956. It is engaged in the business of rubber plantation and allied activities. The return of income for AY 2013-14 was filed on 29.09.2013 declaring total income of Rs. 19,96,430/-. Against the said return of income, the assessment was completed by the ACIT, Circle-1, Kollam (hereinafter called "the AO") vide order dated 28.03.2016 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 6,76,15,750/-. While doing so, the AO had disallowed the claim for allowance of replantation expenses of Rs. 8,49,05,725/- in respect of immature plantations claimed under rule 7A(2) of the I.T. Rules by holding that the volume of investment indicates large scale replantation and the provisions of rule 7A(2) allows deduction in respect of replacing of plants that have died or permanently become useless in an area already planted but not abandoned and also placing reliance on the decision of the Hon'ble Kerala High Court in assessee’s own case reported in 30 taxmann.com 123. The AO also made addition of Rs. 89,37,356/- on account of miscellaneous income and income derived on account of forfeited Earnest Money Deposit of Rs. 87,40,812/- and Security Deposit of Rs. 96,544/- and bad debt recovery of Rs. 1,00,000/- rejecting the contention of the appellant that the above receipts have direct nexus with the plantation business of the appellant. Hence, the income should be computed application Rule 7A of I.T. Rules.
3 ITA Nos. 409 & 410/Coch/2025 Rehabilitation Plantations Ltd. 5. Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order dismissed the appeal in view of the subsequent Full Court judgement of the Hon'ble Kerala High Court in assessee’s own case reported in 143 taxmann.com. 377.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
The learned counsel for the assessee submitted that the decision of the Hon'ble Kerala High Court in assessee’s own case reported in 30 taxmann.com 126 is over ruled by the Full Bench of the Hon'ble Kerala High Court in assessee’s own case reported in 143 taxmann.com 377, therefore, the very premise on which the addition made by the AO, as sustained by the CIT(A) does not hold good. Thus, it is submitted that in view of these judgements the orders of the learned lower authorities be set aside and the addition made by the AO be deleted.
As regards addition of miscellaneous income of Rs. 89,37,356/- it is submitted that the miscellaneous income is derived out of business of the company, therefore, the income should be computed by applying provisions of rule 7A(2) of the I.T. Rules.
On the other hand, the ld. CIT-DR submitted that the Full Bench decision of the Hon'ble Kerala High Court held that the earlier decision in assessee’s own case is incorrect and held that in computation of business income u/s. 7A of the I.T. Rules the
4 ITA Nos. 409 & 410/Coch/2025 Rehabilitation Plantations Ltd. assessee is entitled under rule 7A(2) for allowance for dead and unyielding rubber trees in rubber plantation in an area not abandoned subject to provisions of section 10(31) of the Act and also set aside the matter to the file of the AO for fresh assessment keeping in view the ratio of the Full Bench decision in ITA No. 201 of 2013 dated 01.08.2013. Respectfully following the judgement of the Hon'ble Kerala High Court, we are of the considered opinion that the matter requires remand to the file of the AO for de novo adjudication in view of the ratio of the Full Bench judgement of the Hon'ble High Court in assessee’s own case 143 taxmann.com 377. Thus, Ground of appeal Nos. 1 to 6 stand partly allowed.
Ground No. 7 challenges disallowance of depreciation on WDV of Rs. 7,82,614/- installed at the Government Secretariat, Thiruvananthapuram. It is stated that the administrative staff of the Ministry of Labour and Rehabilitation are involved in the management of affairs of the company. As such the assets are used only for the purpose of the business of the assessee company. In view of this, we direct the AO to allow depreciation. This ground of appeal stands allowed.
Ground No. 8 challenges the addition on account of miscellaneous income as confirmed by the learned CIT(A). The addition of income represents security deposit as well as recovery of bad debts. The contention of the appellant that miscellaneous income represents income from plantation of rubber and, therefore,
5 ITA Nos. 409 & 410/Coch/2025 Rehabilitation Plantations Ltd. income should be computed applying provisions of rule 7A cannot be accepted as it would not give rise to agricultural income as there was no direct nexus with the business of rubber plantation and provisions of rule 7A have no application. In this regard reliance is placed on CIT v. Harrisons Malayalam Ltd. [2019] 414 ITR 344 (Ker). And its earlier decision in the case of CIT v. Thiruvambadi Rubber Co. Ltd. [2011] 15 taxmann.com 50 (Kerala). Ground of appeal No. 8 stand dismissed.
In the result, the appeal stands partly allowed.
Since identical issues and facts are involved in assessee’s appeal ITA No. 410/Coch/2025, our findings in ITA No. 409/Coch/2025 shall apply mutatis mutandis to this appeal also.
In the result, appeals filed by the assessee stand partly allowed for statistical purposes.
Order pronounced in the open court on 31st July, 2025.
Sd/ Sd/- (SONJOY SARMA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin, Dated: 31st July, 2025 n.p.
6 ITA Nos. 409 & 410/Coch/2025 Rehabilitation Plantations Ltd. Copy to:
The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order
Assistant Registrar ITAT, Cochin