Capital receipt treatment for sale of spontaneous trees upheld; factual challenge to agricultural investment rejected as no substantial question of law.

Receipts from the sale of spontaneously grown trees cut under statutory permission were treated as capital rather than revenue, because the trees were removed in the prescribed manner, sold to the State at a price fixed by the authorities, the land was then used for cultivation, and the record showed no intention to allow regeneration or pursue a profit-making venture. The challenge to the explanation for investment in agricultural land was rejected because it raised only appreciation of evidence and sufficiency of facts, not a substantial question of law. The resulting receipt was not chargeable to tax, and the factual issue failed.

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Issues: (i) Whether the receipts from sale of trees of spontaneous growth cut pursuant to permission under the land revenue code were capital receipts or revenue receipts. (ii) Whether the challenge to the explanation for investment in agricultural land raised a substantial question of law.

Issue (i): Whether the receipts from sale of trees of spontaneous growth cut pursuant to permission under the land revenue code were capital receipts or revenue receipts.

Analysis: The nature of the receipt depended on the assessee's intention, the manner of cutting, the possibility of regeneration, and whether the transaction involved a profit-making activity. The trees were cut under statutory permission, the sale was made to the State at a price fixed by the authorities, the trees were cut in the prescribed manner, the land was thereafter used for cultivation, and the material on record showed no intention to permit regeneration or to carry on a commercial venture. On these facts, the receipt did not have the character of taxable income.

Conclusion: The receipt was a capital receipt and was not chargeable to tax; the issue was decided in favour of the assessee.

Issue (ii): Whether the challenge to the explanation for investment in agricultural land raised a substantial question of law.

Analysis: The explanation for the investment had been accepted by the fact-finding authorities, and the dispute concerned appreciation of evidence and sufficiency of factual explanation rather than any legal question. In appellate jurisdiction under the provision invoked, such a pure question of fact did not give rise to a substantial question of law.

Conclusion: The issue did not give rise to a substantial question of law and was answered against the appellant.

Final Conclusion: The main receipt was held to be capital in nature, the factual challenge to the investment issue was rejected, and the revenue appeal failed.

Ratio Decidendi: Where trees of spontaneous growth are cut under statutory control without any intention to permit regeneration or to engage in a profit-making activity, the resulting receipt is capital in nature; a pure question of fact does not become a substantial question of law merely because it is challenged in appeal.

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