1952 (5) TMI 26 - HC - Income Tax

Sale of Spontaneous Forest Trees Not Exempt from Income Tax

Pratap Singh Balbeer Singh Versus Commissioner of Income-tax

The court held that income from the sale of forest trees of spontaneous growth on land assessed to land revenue is not agricultural income and therefore ... - Issues Involved:1. Whether income from the sale of forest trees of spontaneous growth, growing on land which is assessed to land revenue, is agricultural income within the meaning of Section 2(1)(a) of the Indian Income-tax Act and as such exempt from income-tax under Section 4(3)(viii) of the ActRs.2. Whether the assessee's net receipts from the sale of forest trees were the assessee's income liable to income-tax and not merely capital converted into cashRs.Issue-Wise Detailed Analysis:1. Whether income from the sale of forest trees of spontaneous growth, growing on land which is assessed to land revenue, is agricultural income within the meaning of Section 2(1)(a) of the Indian Income-tax Act and as such exempt from income-tax under Section 4(3)(viii) of the ActRs.The Tribunal initially framed the question to determine if the income from the sale of forest trees of spontaneous growth on land assessed to land revenue qualifies as agricultural income. The assessee argued that human labour and skill were used for the regeneration and preservation of these trees, thus the income should be considered agricultural and exempt from income tax.The Tribunal did not reject the contention that human labour and skill were applied but held that such efforts for regeneration and preservation did not amount to agricultural operations as they did not involve the cultivation of the soil. The Tribunal followed the precedent set in Chandrasekhara Bharati Swamigal v. Duraiswami Naidu, which determined that mere preservation and regeneration do not constitute 'agriculture.'The court examined Section 2(1) of the Indian Income-tax Act, which defines 'agricultural income' and concluded that the income in question did not fit within any clause of Section 2(1). The Tribunal noted that no evidence showed cultivation of the soil where the trees stood, and the trees grew naturally and spontaneously without human intervention. The court emphasized that for income to be considered agricultural, there must be some measure of cultivation of the land or expenditure of skill and labour upon it.The court referenced previous rulings, including Maharaja of Kapurthala v. Commissioner of Income-tax and Benoy Ratan Banerji v. Commissioner of Income-tax, which supported the view that spontaneous growth forests without soil cultivation do not qualify as land used for agricultural purposes. The Privy Council in Raja Mustafa Ali Khan v. Commissioner of Income-tax also affirmed that without cultivation or expenditure of skill and labour on the land, income from spontaneous growth forests is not agricultural income.The court found no evidence of significant agricultural operations such as watering, pruning, or protecting the trees. The processes carried out by the assessee, as mentioned in the order of the Appellate Assistant Commissioner, included pruning and weeding, which were insufficient to constitute 'agriculture.'The court concluded that mere preservation and regeneration of spontaneously grown trees do not amount to agricultural operations. Therefore, the income derived from such forests is not agricultural income.2. Whether the assessee's net receipts from the sale of forest trees were the assessee's income liable to income-tax and not merely capital converted into cashRs.It was the assessee's own case that the forest was being worked on scientific lines with a scheme of making profit, involving a regular working plan and deriving regular income from the forest. The assessee conceded that the net receipts from the sale of forest trees were indeed income liable to income-tax and not merely capital converted into cash.The court affirmed this concession, stating that the net receipts from the sale of forest trees were the assessee's income liable to income-tax.Conclusion:The court answered the first question in the negative, determining that the income from the sale of forest trees of spontaneous growth is not agricultural income and thus not exempt from income tax. The second question was answered in the affirmative, confirming that the net receipts from the sale of forest trees are the assessee's income liable to income-tax.