Clear-felling receipt treated as revenue income where forest asset remained intact for regeneration.

Amounts received for felling trees under a clear-felling forest regime were treated as revenue in character because the arrangement involved removal of recurring growth while the roots, stumps and underlying asset remained intact for regeneration. Since the asset was not sterilised and future growth was contemplated, the receipt was not capital in nature. The amount was therefore assessable to income-tax as a revenue receipt.

---

---

Issues: Whether the amount received for felling of trees from the forest was a capital receipt or a revenue receipt and, if revenue, liable to income-tax.

Analysis: The receipt arose from clear felling under the applicable forest regime. Under that method, trees are to be felled at a controlled height with the roots and stumps left intact, and the area is to remain protected so that regeneration and future growth may take place. The arrangement therefore contemplated removal of a recurring growth without sterilising the asset. A receipt obtained in such circumstances is revenue in character rather than capital in nature.

Conclusion: The amount of Rs. 75,000 was a revenue receipt and not a capital receipt, and it was assessable to income-tax.

---