Capital receipt from sale of shade trees for rubber plantation is not agricultural income when trees form part of plantation capital structure.

Trees planted exclusively as shade trees for rubber plants were treated as part of the plantation's capital structure, not as assets held for periodic exploitation by sale. When the trees were later cut after becoming useless, the sale proceeds were characterised as capital receipts rather than agricultural income. The legal principle applied was that a receipt does not become taxable as agricultural income merely because it arises from plantation activity or land use. On that basis, the sale value of the shade trees was held not includible as agricultural income, and the issue was answered in favour of the assessee.

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Issues: Whether the sale proceeds of trees planted solely to provide shade to rubber plants and later sold when they became useless constituted taxable agricultural income.

Analysis: Trees grown exclusively as shade trees for the benefit of rubber plants were held to be part of the plantation's capital structure rather than trees planted for periodic exploitation by sale. The sale proceeds of such trees, when cut after becoming useless, were therefore of a capital nature and could not be treated as agricultural income. The reasoning followed the principle that capital receipts do not become taxable merely because they arise from land or plantation operations.

Conclusion: The sale value of the shade trees was not includible as agricultural income and the question was answered in favour of the assessee.

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