Reference jurisdiction is limited to the question referred, and natural forest tree sale receipts are not agricultural income.

In a reference under the Income-tax Act, the High Court's jurisdiction is confined to the actual question referred, so it cannot travel beyond the reference to decide an un-referred issue such as whether a receipt is capital or income. Applying its earlier view on agricultural income, the Court held that receipts from the sale of forest trees growing naturally without human intervention do not fall within agricultural income and are not exempt. The referred question was answered against the assessee and in favour of the Revenue.

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Issues: (i) Whether the High Court, in a reference under the Income-tax Act, was confined to answering only the actual question referred and could not examine an un-referred issue; (ii) Whether income from the sale of forest trees growing naturally without human intervention constituted agricultural income and was exempt from tax.

Issue (i): The reference jurisdiction under Section 66 was treated as advisory. The High Court held that its function was confined to considering and answering the actual question referred, and that it was not justified in travelling beyond that question to decide an issue not raised or referred.

Conclusion: The High Court declined to consider the un-referred question whether the receipts were capital rather than income.

Issue (ii): Applying its earlier view on the meaning of agricultural income, the Court answered the referred question against the assessee. The receipts from the sale of forest trees growing naturally were not treated as agricultural income within the meaning of the Act, and the statutory exemption was therefore unavailable.

Conclusion: The answer to the referred question was in favour of the Revenue and against the assessee.

Final Conclusion: The reference was answered against the assessee, the High Court reaffirming the limited scope of reference jurisdiction and holding that income from the sale of naturally growing forest trees was not agricultural income.

Ratio Decidendi: In a reference under the Income-tax Act, the High Court is confined to the actual question referred, and income from the sale of forest trees growing naturally without human intervention does not amount to agricultural income for exemption purposes.

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