Capital receipt treatment for old rubber trees sold after unproductive years; proceeds are not agricultural income.

Sale proceeds from old, unyielding rubber trees cut down after they ceased to yield latex were treated as capital receipts, not agricultural income. The Court reasoned that the statutory definition of agricultural income under section 2(a) of the Kerala Agricultural Income-tax Act, 1950 did not extend to proceeds from trees forming part of the capital structure of the estate. Because the trees were not grown for sale as produce but were used to earn latex, their disposal represented realization of capital asset value rather than income derived from agriculture.

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Issues: Whether the sale proceeds of old and unyielding rubber trees, cut down after they ceased to yield latex, constituted capital receipts or agricultural income liable to tax.

Analysis: The statutory definition of agricultural income under section 2(a) of the Kerala Agricultural Income-tax Act, 1950 did not cover proceeds from the sale of rubber trees used as part of the capital structure of the estate for earning latex. The trees were not grown for sale as produce but were part of the capital assets employed for generating income. When they became old and unproductive, their sale yielded a realization of capital and not income from agriculture.

Conclusion: The sale proceeds were capital receipts and not taxable as agricultural income; the issue was decided in favour of the assessee.

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