Forest exploitation receipts from timber and charcoal sales were revenue receipts, not capital receipts, as part of normal business operations.

Receipts from the sale of timber and charcoal from forest lands were treated as revenue receipts where the forest operations formed part of the assessee's organised business of exploiting forest wealth. The court distinguished cases involving mere realisation of a capital asset, holding that cutting trees with roots, or obtaining exemption from forest-preservation restrictions, did not change the character of the receipts. Because the cutting and sale were part of the normal profit-making structure and not a disposal of capital once and for all, the receipts were assessable as revenue and not as capital gains.

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Issues: Whether the receipts from sale of timber and charcoal from the assessee's forest lands were taxable as revenue receipts or were capital receipts assessable as capital gains.

Analysis: The forest operations were carried on as part of the assessee's organised business of exploitation of forest wealth. The court distinguished cases where trees were cut with roots merely to annihilate the asset or where the transaction amounted to realisation of capital. Here, the receipts arose from the normal working of the assessee's forest-exploitation activity, and the fact that exemption had been obtained from the forest-preservation restrictions, or that trees were cut with roots, did not alter the character of the receipts. The profit motive of the assessee was not decisive; what mattered was that the cutting and sale formed part of the profit-making structure and did not amount to disposal of a capital asset once and for all.

Conclusion: The receipts were revenue receipts and not capital receipts. The answer was against the assessee and in favour of the Revenue.

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