Section 10(31)

Section 10(31) — the law in short

What the courts have decided on section 10(31), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — Rule 7A (rubber) and Rule 7B (coffee): the fixed apportionment percentages, both coffee cases, and the replanting allowance CBDT Circulars & InstructionsCuts both ways
  My client grows rubber and my other client grows and cures coffee. What percentage of the income is business income in each case, and does it change if the coffee is also roasted and ground?
  Rule 7A: income from the sale of centrifuged latex or cenex, or latex based crepes (such as pale latex crepe), or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe), or technically specified block rubbers, manufactured or processed from field latex or coagulum obtained from rubber plants GROWN BY THE SELLER IN INDIA, is computed as if it were business income and THIRTY-FIVE PER CENT of it is deemed to be income liable to tax — the balance sixty-five per cent being agricultural. Rule 7B has two cases: coffee GROWN AND CURED by the seller in India — TWENTY-FIVE PER CENT taxable, seventy-five per cent agricultural (sub-rule (1)); and coffee GROWN, CURED, ROASTED AND GROUNDED by the seller in India, with or without mixing chicory or other flavouring ingredients — FORTY PER CENT taxable, sixty per cent agricultural (sub-rule (1A)). Both rules carry a replanting allowance in their sub-rule (2), and the cost is not to be reduced by any subsidy that clause (31) of section 10 keeps out of total income.
• M/s. The Plantation Corporation of Kerala Ltd and M/s. The Velimalai Rubber Co. Ltd v ACIT, Kottayam ITATHelps departmentOverruled
  I am a rubber planter. I cleared an old unproductive block and replanted it, and claimed the cost under rule 7A(2). The Assessing Officer has disallowed it. Is there anything I can do?
  Not in Kerala. The Cochin Tribunal dismissed both appeals, holding itself bound by the Kerala High Court in Rehabilitation Plantations Ltd v CIT, which construed rule 7A(2) as covering only infilling — the replacement of dead or useless trees within an existing yielding area — and not the replanting of an area after cutting and removing an old plantation, and held that expenditure on planting and developing a plantation up to maturity must be capitalised. Rule 7A itself makes 35 per cent of the income from the specified rubber products taxable as business income and leaves 65 per cent as agricultural income for the State.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.