Teak tree sale proceeds treated as capital receipt when uprooted trees exhausted the source and no recurring yield remained.

Sale proceeds from teak trees cut and removed with their roots for conversion of land to rubber plantation were capital in nature, not agricultural income. Because the trees were uprooted completely, the source was exhausted and no recurring return from a productive asset remained. The fact that the trees had been planted with a profit-making intention did not change the character of the receipt into taxable income. The amount was therefore treated as realisation of part of the capital structure rather than a periodical income stream.

---

---

Issues: Whether the sale proceeds of teak trees, cut and removed with their roots for the purpose of planting rubber, constituted capital receipt or agricultural income liable to tax.

Analysis: The teak trees were removed together with their roots, leaving no possibility of regeneration or further yield from the source. On those facts, the receipt could not be treated as a periodical return from a productive source. The circumstance that the trees had been planted with a profit motive did not convert a realisation of part of the capital structure into taxable income.

Conclusion: The sale proceeds were capital in nature and not agricultural income; the assessee succeeded on this issue.

Ratio Decidendi: Where trees are cut and removed with their roots so that the source is exhausted and no recurring return is possible, the sale proceeds are a realisation of capital and not income, even if the planting was undertaken with profit-making intent.

---