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Commissioner Of Income-Tax vs Kalpetta Estates Ltd. on 30 September, 1994

Kerala High Court
Commissioner Of Income-Tax vs Kalpetta Estates Ltd. on 30 September, 1994
Equivalent citations: 1995 211 ITR 635 Ker
Author: T V Iyer
Bench: T V Iyer, K Usha


JUDGMENT

T.L. Viswanatha Iyer, J.

1. The questions raised in these cases relate to the existence or otherwise of capital gains on the sale of rubber trees which were in existence and were yielding as on January 1, 1954, or as on January 1, 1964. The assessing authority took the view that these trees can be valued at Rs. 14 as on January 1, 1954, and at Rs. 20 as on January 1, 1964, and determined capital gains on the basis of the price fetched by them. They were sold as unyielding rubber trees during the accounting periods in question. The Commissioner of Income-tax (Appeals), however, found that no capital gains accrue to the assessee on the facts and circumstances of the case. The Tribunal, on appeal by the Revenue, followed the decisions of this court, one of which was referred to, namely, Income-tax References Nos. 315 and 316 of 1985 (CIT v. Midland Rubber and Produce Co. Ltd. [1991] 188 ITR 333), holding that no capital gains can be assessed on the sale of old and unyielding rubber trees since the fair market value of those trees as on January 1, 1954, or on January 1, 1964, as the case may be, would have been far higher since the trees were yielding trees in those days. Aggrieved by this order of the Tribunal, the Revenue sought reference of the following questions of law as arising out of the order of the Tribunal. But the Tribunal declined to refer these questions, namely :

“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in upholding the order of the Commissioner of Income-tax (Appeals) ?

2. Whether, on the facts and in the circumstances of the case, is not the order of the Tribunal vitiated-

(a) for not adopting or relying on any method of valuation ?

(b) for not adopting the real and correct method of valuation ?

(c) for not following the decision of the Kerala High Court in the case of the very same assessee in Income-tax Reference No. III of 1981–(CIT v. Kalpetta Estates Ltd. [1987] 167 ITR 666) for a different assessment year ?

3. Whether, on the facts and in the circumstances of the case, what is the manner and method of valuation that has to be adopted for determining the capital gain of a useless and unyielding rubber tree and should not the Tribunal have decided the method first and applied the same to the facts of the case ?

4. Whether, on the facts and in the circumstances of the case, did the Tribunal approach and decide the issue in the light of the answer to the first limb of the third question ?”

2. The Revenue is, therefore, before us under Section 256(2) of the Income-tax Act, 1961, to compel reference of these questions of law.

3. We find that the matter has been the subject of a number of decisions of this court and that this court has consistently taken the view that the value of yielding rubber trees as on January 1, 1954, or January 1, 1964, will be higher than the value of the same trees when sold as unyielding ones later, and, therefore, no capital gain accrues on the sale of the trees as old and unyielding ones. This is the view taken in CIT v. Alanickal Co. Ltd. [1986] 158 ITR 630 (Ker), Kanthimathy Plantations Pvt. Ltd. v. CIT [1990] 184 ITR 1 (Ker) and CIT v. Midland Rubber and Produce Co. Ltd. [1991] 188 ITR 333 (Ker). In the last of these cases, it has been mentioned that this court had occasion to examine this question of yielding trees of 1954 or 1964 sold as old and unyielding rubber trees later, in a series of cases and that the decision arrived at was that no capital gain arises on the sale of these old and unyielding rubber trees for the reason that the fair market value of those trees as on January 1, 1954, or January 1, 1964, as the case may be, would have been far higher as yielding trees. The consistent view of this court right from the decision in Alanichal Co. Ltd.’s case [1986] 158 ITR 630, has been that in circumstances such as this, no capital gain accrues on the sale of old and unyielding rubber trees and there is no question of bringing alleged capital gains to tax. Having regard to the consistent view taken by this court over the past few years, we do not find our way to unsettle this settled position at this distance of time.

4. Counsel for the Revenue had a further argument that during the prior years, the assessing authority had assessed capital gains at the hands the assessee and that those assessments have become final. The submission is that, having regard Jo those assessments, the Tribunal was not justified in arriving at a different conclusion during the assessment years with which we are concerned. According to counsel, the decision is barred by the principles of res judicata. Reliance was placed by him on the decision of the Division Bench in CIT v. Velimalai Rubber Co. Ltd. [1990] 181 ITR 299 (Ker). That was a case relating to the sale of rubber trees which were yielding as on January 1, 1954. The assessing authority assessed the capital gains on the sale of these trees at the unyielding stage treating the trees as having a value of Rs. 14 as on January 1, 1954. One of the contentions raised in a subsequent year was that there was no capital gain liable to be assessed. In that context, this court observed that though the principles of res judicata would not apply to income-tax proceeding’s, when a question of law or fact was decided in the assessee’s own case for an earlier assessment year, and the identical question came up for consideration for a later year, the Appellate Tribunal would be justified in placing reliance on the earlier decision to base its conclusion, in the absence of any new material or change in circumstances or afresh look necessitated on existing facts on a closer and more intelligent analysis.

5. We do not think that this decision would support the case of the Revenue. What the Bench did was to affirm that the principles of res judicata will not apply to income-tax proceedings. Nevertheless, the Appellate Tribunal may place reliance on an earlier decision to support its conclusion. It could not therefore be said that the decision in the assessee’s case before us, relating to the prior years, would operate as res judicata. The Tribunal is entitled to take a different view of the matter, if new materials were placed or on a closer and more intelligent analysis. It is evident from the various decisions placed before us that a different aspect of the matter has been presented for consideration, as laid down in the decisions mentioned earlier. The Tribunal was, therefore, entitled to have a fresh look at the matter based on the line of thinking disclosed by these decisions. That was what was done by the Tribunal in the instant case. We are not, therefore, inclined to accept the contention that the assessment in the earlier years operates as res judicata or that it precludes the assessee from raising the plea as done in the instant case. We overrule the contention. In the circumstances, we do not find any reason to refer the questions raised to this court under Section 256(2) of the Income-tax Act, 1961. These petitions are, therefore, dismissed.

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