Timber sale proceeds from estate clearing were taxable as business profits, not capital or casual receipts.

Receipts from the sale of timber obtained by clearing forest land purchased for plantation purposes were treated as taxable business income because the timber was cut and sold in the course of the company's ordinary commercial operations. The fact that the trees formed part of a wasting or exhausted asset did not convert the proceeds into a capital receipt, since the sale arose from business exploitation of estate land rather than mere realisation of capital. The casual and non-recurring receipt exemption was also inapplicable because the receipt was deliberate, foreseeable, and connected with the company's business objects. The timber-sale proceeds, including the kuttikanam amount, were therefore liable to income-tax as trade profits.

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Issues: Whether the amount realised from sale of timber obtained by clearing forest land purchased for plantation purposes was taxable as income, and whether such receipt was exempt as a capital receipt or as a casual and non-recurring receipt.

Analysis: The timber was cut and sold as part of the company's ordinary operations in acquiring, clearing, developing and exploiting estate lands for plantation purposes. The receipts arose from a commercial operation carried out in the course of the company's business and not from a mere realisation of capital. The fact that the trees were part of a wasting or exhausted asset did not prevent the proceeds from being income. The exemption for casual and non-recurring receipts was inapplicable because the receipt was foreseen, deliberate, and connected with the company's business objects and trading activities.

Conclusion: The amount derived from sale of timber was assessable income and was taxable as business profit; it was neither a capital receipt nor an exempt casual receipt.

Final Conclusion: The reference was answered against the assessee, and the timber-sale proceeds, including the kuttikanam amount, were held liable to income-tax as trade profits.

Ratio Decidendi: Receipts arising from the commercial exploitation of a wasting capital asset in the ordinary course of a business are taxable income, and a deliberate receipt connected with the business is not a casual receipt merely because the underlying asset is exhausted in the process.

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