Judgment :- 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. 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 amounts constituted income in the hands of the recipients. Counsel for the revenue in that case submitted in the Supreme Court that the payments were made to enable the assessee to recoupe the revenue expenditure incurred by them in running and maintaining the plantations and such payments were revenue receipts. The question arose whether such amounts constituted income in the hands of the recipients. Counsel for the revenue in that case submitted in the Supreme Court that the payments were made to enable the assessee to recoupe the revenue expenditure incurred by them in running and maintaining the plantations and such payments were revenue receipts. Accepting this argument, the Supreme Court cited with approval the decision of Macnaghton, J. in Higgs v. Wrightson, (H. M. Inspector of Taxes) (1944) 26 TC 73 (KB) where he stated that "ploughing grant" paid to a farmer to reimburse for his expenses in the ploughing up of grassland and bringing of the land into a state of cleanliness and fertility was not a capital receipt, but a revenue receipt. Applying that principle to the replantation cess paid to the assesses, the Supreme Court stated: "...amounts from the fund earmarked for the appellants on the basis of the rubber produced by them were paid against the expenditure incurred by them for maintaining the rubber plantation and producing the rubber. If so, it follows that the receipts by the assessees during the accounting year were revenue receipts and, therefore, liable to be included in their assessable income..." (V.S.S.V. Meenakshi Achi v. Commr. of Inc.-Tax, (1966) 60 ITR. 253,260 (SC)). 8. In Bengal Textiles Association v. Commr. of Inc.-Tax, (1960) 39 ITR. 723 (SC), the Supreme Court pointed out that money received as subsidy, otherwise than as a gift or for a beneficial purpose, such as relief of unemployment; etc., was a revenue receipt. The Court pointed out: "What is decisive in this case is that these payments were made to the association in order that they be used in the business of the association and for services rendered and they have to be viewed from that point of view. So viewed the payments cannot be said to be of a benevolent nature. Their very quality and nature make it impossible to treat them as a bounty or subsidy because the use of (be word bonus or subsidy in S.4, proviso (c), (Business Profits Tax Act, 1947) connotes that the payment is in the nature of a gift which in the instant case it is not " The Supreme Court then cited with approval the decision of the House of Lords in The Seaham Harbour Dock Co. v Crook (H. M. Inspector of Taxes) (1931) 16 TC 333. (KB) where payment made for relief of unemployment was held to be not taxable because of the beneficial nature of the payment, in that case. Lord Buchmaster, referring to the nature of the receipt, observed: "It was a grant which was made by a Government department with the idea that by its use men might be kept in employment , I find myself quite unable to see that it was a trade receipt, or that it bore any resemblance to a trade receipt. It appears to me to have been simply a grant made by the Government for the purpose which T have mentioned, and in those circumstances cannot be included in revenue for the purposes of tax." Lord Atkin in that case observed: "It appears to me that when these sums were granted and when they were received, they were received by the appropriate body not as part of their profits or gains or as a sum which went to make up the profits or gains or their trade. It is a receipt which is given for the express purpose which is named, and it has nothing to do with their trade in the sense in which you are considering the profits or gains of the trade. It appears to me, with respect, to be quite irrelevant whether the money, when received, is applied for capital purposes or is applied for revenue purposes; in neither case is the money properly said to be brought into a computation of the profits or gains of the trade". 9. In Karimtharuvi Tea Estates Ltd. v. State of Kerala. (1963) 48 ITR 83 (SC) a Bench of five judges of the Supreme Court observed: "The contention that the amount spent for the upkeep and maintenance of the immature plants till they become mature is in the nature of a capital expenditure is also not sound. It is a running expenditure and not of the nature of capital expenditure". This principle had already been adopted by the Supreme Court in Travancore Rubber and Tea Co. v. Commr. of Ag. I T., (1961) 41 ITR. It is a running expenditure and not of the nature of capital expenditure". This principle had already been adopted by the Supreme Court in Travancore Rubber and Tea Co. v. Commr. of Ag. I T., (1961) 41 ITR. 751 where the Court stated: "In our opinion the amount expended on the superintendence, weeding, etc., of the whole estate should have been allowed against the profits earned and it is no answer to the claim for a deduction that part of those expenses produced no return in that year because all the trees were not yielding rubber in that year." The Supreme Court in that case cited with approval the following observation of Lord President in Vallambrosa Rubber Co. Ltd. v. Farmer, (1910) 5 TC 529: "that in arriving at their assessable profits the Company are entitled to deduct the expenditure for superintendence, weeding, etc., on the whole estate and not one-seventh of such expenditure only." The Lord President pointed out that rubber trees did not yield rubber until they were about six years old. Expenditure for superintendence, weeding, etc., was incurred by the Company in respect of the whole estate including the non-bearing rubber estates, and such expenditure was an allowable deduction in the computation of the assessable profits, 10. In Assam Bengal Cement Co. Ltd., v. Commr. of Inc.-Tax, (1955) 27 ITR 34 (SC), Bhagawati, J. observed: "The distinction was thus made between the acquisition of an income-earning asset and the process of the earning of the income. Expenditure in the acquisition of that asset was capital expenditure and expenditure in the process of the earning of the profits was revenue expenditure " in Lincolnshire Sugar Co. v. Smart, (1937) AC 697: (1937) 20 Tax Cases 643, the House of Lords held that amounts paid out of public funds in the nature of subsidy to an undertaker to assist him in carrying on the undertaker's trade or business were trading receipts and were to be brought into account in arriving at the balance of profits or gains. (See also the decision of the House of Lords in Pentypridd and Rhondda Water Board v. Ostime, (1946) 14 ITR 45 (Supp.). 11. The principles to be deduced from these cases are: If the money paid is paid as a gift, it is not income in the hands of the recipient. (See also the decision of the House of Lords in Pentypridd and Rhondda Water Board v. Ostime, (1946) 14 ITR 45 (Supp.). 11. The principles to be deduced from these cases are: If the money paid is paid as a gift, it is not income in the hands of the recipient. If a grant is paid for a beneficial purpose, such as keeping men in employment, or starting an industry in a backward area or electrifying a remote area which could not be undertaken but for the grant, such payment, being of a beneficial character, is not taxed as income: Bengal Textiles Association v. Commr of Inc.-Tax. (1960) 39 ITR. 723; The Seaham Harbour Dock Co. v. Crook (H.M. Inspector of Taxes), (1931) 16 T.C. 333 (KB) Commr. of Inc.-Tax Poona Electric Supply Co. Ltd., (1946) 14 ITR. 622 (Bom.). On the other hand, if what is paid is to recoupe revenue expenses, it is a revenue receipt and is, therefore, assessable as income: V.S.S.V. Meenakshi Achi v. Commr, of Inc -Tax, (1966) 60 ITR 253 (SC); Ratna Sugar Mills Co. Ltd. v. Commr. of Inc-Tax, (1958) 33 ITR 644 (All.). Amounts spent for the maintenance of immature plants do not partake of the character of capital expenditure. They are a running expenditure. Money received to recoupe such revenue expenses is a revenue receipt. Karimtkaruvi Tea Estate v. State of Kerala. (1963) 48 ITR 83; Travancore Rubber and Tea Co. v. Commr. of Ag. IT (1961) 41 ITR 751: Vellambresa Rubber Co. Ltd. v. Farmer, (1910) 5 TC 529, V.S.S.V. Meenakshi Achi v. Commr. of Inc. Tax, (1966) 60 ITR 253 (SC); Higgs v. Wrightson (H. M. Inspector of Taxes), (1944) 26 TC 73 (KB). 12. It is significant that S.10 (30) of the Income-tax Act, 1961 specifically provides: "10. Income not included in total income. Ltd. v. Farmer, (1910) 5 TC 529, V.S.S.V. Meenakshi Achi v. Commr. of Inc. Tax, (1966) 60 ITR 253 (SC); Higgs v. Wrightson (H. M. Inspector of Taxes), (1944) 26 TC 73 (KB). 12. It is significant that S.10 (30) of the Income-tax Act, 1961 specifically provides: "10. Income not included in total income. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included x x x x (30) in the case of an assessee who carries on the business of growing and manufacturing tea in India, the amount of any subsidy received from or through the Tea Board under any such scheme for replantation or replacement of tea bushes or for rejuvenation or consolidation of areas used for cultivation of tea as the Central Government may, by notification in the Official Gazette specify. This exclusion of subsidy for tea plantation from the computation of total income shows that what was otherwise includible in such computation was specifically excluded by the legislature. The object of the legislature in so excluding the subsidy f or tea plantation was to confer a special benefit in view of the peculiar predicament of that industry. What is significant, however, is that, but for the exemption, subsidy of the nature is part of the includible items in the computation of income. In this context we may refer to Explanation (2) to S.5 of the Agricultural Income-tax Act. 1950. It reads: "Explanation 2. Nothing contained in this section shall be deemed to entitle a person deriving agricultural income to. deduction of any expenditure laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income has been derived during the previous year." 13. The object of this statutory Explanation is to overcome the decisions of the Supreme Court in Travancore Rubber & Tea Co. v. Commr. of Ag. I. T., (1961) 41 ITR. 751 and Karimtharuvi Tea Estates Ltd. v State of Kerala, (1963) 48 ITR. 83 where the Court stated that such expenditure was revenue expenditure. Significantly, the State legislature acted on the principle that, but for the statutory Explanation, money expended for cultivation, upkeep or maintenance of immature plants would be revenue expenditure. 14. of Ag. I. T., (1961) 41 ITR. 751 and Karimtharuvi Tea Estates Ltd. v State of Kerala, (1963) 48 ITR. 83 where the Court stated that such expenditure was revenue expenditure. Significantly, the State legislature acted on the principle that, but for the statutory Explanation, money expended for cultivation, upkeep or maintenance of immature plants would be revenue expenditure. 14. We may also in this context refer to a circular No. 142 dated August, 1974 issued by the Central Board of Direct Taxes. By this circular, the Board stated that 10 percent Central outright grant of subsidy scheme, 1971 was given for helping the growth of industries in selected backward districts areas and not for supplementing the profits of the recipient. The subsidy was accordingly not treated by the Board as a revenue receipt for the purpose of income-tax. In so deciding the Board acted on the principle that amounts paid specifically for beneficial purposes are not to be treated for the purpose of income-tax as a revenue receipt. 15. To the present case there is nothing to show that the subsidy was paid for any beneficial purpose'. On the other hand, the facts found indicate that the subsidy was paid to swell the profits of the assessee. The principle stated by Changla, J. (as he then was) in Commr. of Inc.-Tax v. Poona Electric Supply Co. Ltd. (1946) 14 ITR 622 (Bom.), on which counsel for the assessee relies, has no application to the facts of this case. In that case a non-refundable contribution was paid by the Government as part of the cost of constructing new electric supply lines which the assessee would not have undertaken without the contribution. The Court held that the contribution was not a trading receipt and was not assessable to tax in the hands of the assessee. That decision falls within the principle stated by the Supreme Court in Bengal Textiles Association v. Commr. of Inc.-Tax, (1960) 39 ITR. 723 (SC). Reliance by the assessee's counsel on The Seaham Harbour Dock Co. v. Crook, (1931) 16 TC 333 is equally misplaced, for, as we have already stated, that was a case where money was paid to keep men in employment. That, as the Supreme Court stated in Bengal Textiles Association v. Commr. of Income Tax, (1960) 39 ITR. 723, was a beneficial object. v. Crook, (1931) 16 TC 333 is equally misplaced, for, as we have already stated, that was a case where money was paid to keep men in employment. That, as the Supreme Court stated in Bengal Textiles Association v. Commr. of Income Tax, (1960) 39 ITR. 723, was a beneficial object. Counsel also relies upon the decision of the Delhi High Court in CIT v. State Trading Corpn. of India Ltd, (1973) 92 ITR. 294 where the Court found that a sum received prior to the commencement of the business was not a business receipt. That decision is not applicable to the facts of this case where the industry or the business of plantation has been in existence at all material times and money was received for plantation or replantation of certain areas with a view to producing higher yield. 16. In the light of the principles laid down in the decisions cited above, we see no substance in the contention of the assessee that the subsidy received by it during the relevant period towards reimbursement of the expenditure incurred in replantation, development, maintenance and upkeep of the rubber trees is not revenue receipt. Accordingly, we answer question No. (4) in the affirmative, that is, in favour of the revenue and against the assessee. 17. We direct the parties to bear their respective costs in these Tax Referred Cases. A copy of this judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.