Natural forest tree sale receipts are not agricultural income, and distant residential buildings fail the statutory proximity test.

Income from the sale of forest trees growing naturally without human intervention is not agricultural income under the Income-tax Act, so the exemption for agricultural income was unavailable. The land being assessed to land revenue did not change that character. The proviso relating to a residential building also failed because the building was about 16 miles from the land and therefore not in the immediate vicinity required by the statute. Both issues were answered against the assessee and in favour of the Revenue, making the receipts taxable and denying the claimed proviso benefit.

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Issues: (i) Whether income from the sale of forest trees growing naturally on land, even if the land is assessed to land revenue, is agricultural income within the meaning of the Income-tax Act and exempt from tax. (ii) Whether the assessee was entitled to the benefit of the proviso to Section 2(1)(c) of the Income-tax Act in view of the distance of the residential building from the land.

Issue (i): Whether income from the sale of forest trees growing naturally on land, even if the land is assessed to land revenue, is agricultural income within the meaning of the Income-tax Act and exempt from tax.

Analysis: The question had already been considered in an earlier reference involving the same statutory definition. On that reasoning, income derived from the sale of timber of forest trees growing without human intervention was held not to fall within agricultural income under Section 2(1)(a). As a result, the exemption under Section 4(3)(viii) was not available.

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Issue (ii): Whether the assessee was entitled to the benefit of the proviso to Section 2(1)(c) of the Income-tax Act in view of the distance of the residential building from the land.

Analysis: The question was not argued in detail, but the record showed that the residential building was about 16 miles away from the land. On that basis, the building could not be treated as being in the immediate vicinity of the land so as to attract the proviso.

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Final Conclusion: The references were disposed of by affirming that the receipts from the sale of naturally grown forest trees were taxable and that no benefit could be claimed under the proviso relating to the residential building.

Ratio Decidendi: Income from the sale of naturally growing forest trees is not agricultural income unless agricultural operations or human intervention bring it within the statutory definition, and a residential building located far from the land cannot satisfy a proviso requiring immediate vicinity.

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