Capital receipt from once-and-for-all sale of rooted trees treated as disposal of part of the capital asset, not income.

Receipts from the once-and-for-all sale of trees uprooted with their roots were held to be capital in nature, because the transaction amounted to disposal of part of the enduring capital structure rather than recurring exploitation of produce. The trees had grown spontaneously on the land and stood for years, but the sale required uprooting and removal with roots, leaving the land with the assessee. On these facts, the receipt was treated as capital realisation and not income liable to tax.

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Issues: Whether the receipt from the sale of trees uprooted with their roots, standing on the assessee's land for a number of years and sold in a single year, was capital in nature and exempt from income-tax.

Analysis: The decisive question was whether, on the facts and circumstances, the transaction was a mere sale of produce yielding revenue or a disposal of part of the assessee's capital asset. The trees had grown spontaneously on the land, had remained standing for years, and were sold once and for all with a condition that they be uprooted and removed with their roots. The land remained with the assessee, but the roots formed part of the asset and were the source from which fresh growth would spring. The Court held that the nature of the receipt depended on the facts and circumstances of the case, and in this case the sale with roots amounted to a disposal of capital asset, not a revenue realisation.

Conclusion: The receipt was capital in nature and not liable to income-tax; the question was answered in favour of the assessee.

Ratio Decidendi: Where trees standing on land are sold once and for all with their roots, and the transaction results in disposal of part of the enduring capital structure rather than recurring exploitation of produce, the receipt is capital and not revenue.

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