Revenue receipt from sale of tree trunks with roots left intact qualifies as taxable income, not capital realisation.

Receipts from the sale of tree trunks cut above the stump under a clear-felling arrangement were treated as revenue receipts, not capital receipts, because the roots were left intact and regeneration was intended. The cutting method showed that the assessee did not part with the tree asset in its entirety; instead, the transaction amounted to a realisation from the produce of the land. The possibility of regeneration was decisive in distinguishing a one-time disposal of the capital asset from an income-producing operation. On that reasoning, the receipt was held liable to income-tax and the appeal failed.

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Issues: Whether the receipts from sale of tree trunks under a clear-felling arrangement, where the stumps were left intact for regeneration, were capital receipts or revenue receipts liable to income-tax.

Analysis: The agreement, as clarified by the supplementary statement, showed that the trees were to be cut six inches above the ground with the bark left intact on the stump, so that regeneration could occur. On that finding, the trees were not removed with roots and the assessee did not part with the capital asset in its entirety. A receipt from the sale of trunks severed in this manner is a realisation from the produce of the land and not a conversion of the capital asset into money. The possibility of regeneration was material in distinguishing the case from a sale of trees with roots once and for all.

Conclusion: The receipt was revenue in nature and not a capital receipt; the appeal therefore failed.

Ratio Decidendi: Where tree trunks are sold after felling above the stump with the roots left intact for regeneration, the receipt is income of a revenue nature and not a realisation of capital.

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