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1950 (5) TMI 35
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....enue receipts? (ii)Whether, in the event of the amount realised by the petitioners from the Sal trees in question being held as revenue receipts, such receipts can be regarded as agricultural income within the meaning of Section 2(a) of the Assam Agricultural Income-tax Act, 1939? (iii)Whether the amount received by the assessee as salami for settlement of agricultural holding is agricultural income within the meaning of Section 2 (a) (I) of the Assam Agricultural Income-tax Act? (iv)Whether the petitioner is entitled to a deduction of 15 per cent, on the amount salami as collection charges? 3. In Reference No. 8 of 1949, besides the four questions mentioned above, there is another question (No. 5), which is as follows : - "Whether the amount paid to the ladies mentioned in para. 11 above under the will of the late Raja P.C. Barua, and charged on Lakheraj Srijangram (Touzi No. 34 of Goalpara Collectorate) should be deducted from the agricultural income, " 4. In Reference No. 1 of 1949, only three out of the first four questions have been referred. The third question was not included in the reference. But we have before us a petition praying....
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....ar 11,353 Mechpara 6,604 Parbatjoar 1,832 Mechpara 4. Jyotsna Nath Choudhury. Co-sharer in Mechpara Estates. 1940-47 1947-48 1948-49 40,507 55,809 37,156 4,234 20,509 5,997 5. Jagadindra Narayan Choudhury. Co-sharer in Parbatjoar and Mechpara Estate. 1946-47 54,483 Parbatjoar 36,015 Mechpara 3,971 Parbatjoar 3,882 Mechpara 1947-48 22,956 Parbatjoar 51,159 Mechpara 4,838 Parbatjoar 18,800 Mechpara 1948-49 93,254 Parbatjoar 34,059 Mechpara 4,728 Parbatjoar 5,497 Mechpara 6. Ranjit Narayan Choudhury. Co-sharer in Parbatjoar and Mechpara Estates. 1946-47 1947-48 39,105 Parbatjoar 36,015 Mechpara 16,886 Parbatjoar 51,1 59 Mechpara 2,801 Parbatjoar 3,882 Mechpara 3,517 Parbatjoar 18,800 Mechpara 1948-49 67,138 Parbatjoar 34,059 Mechpara 3,436 Parbatjoar 5,497 Mechpara 7. Raja Bhairaben-dra Narayan Bhup Bahadur. Proprietor of the Bijni Raj Estates. 1946-47 1947-48 24,08,980 4,01,219 45,230 34,052 8. ....
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....of rent-in-kind to render the produce raised or received by him fit to be taken to market, or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii); Explanation.-Agricultural income derived from such land by the Cultivation of tea means that portion of the income derived from the cultivation, manufacture and sale of tea as is denned to be agricultural income for the purposes of the enactments relating to Indian Income-tax." 10. Agricultural income-tax, according to the Act, means tax payable tinder this Act. Under Section 3 of the Act, agricultural income-tax is chargeable at the rate or rates specified in the annual Assam Finance Acts subject to the provisions of Section 6 for each financial year in accordance with and subject to the provisions of the Act on the total agricultural income of the previous year. Agricultural income is exempt from taxation under the Income-tax Act. It is not included in the total income which is assessable under that Act by virtue of provisions contained in Sections 3 and 4 of the ....
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....uestion remains whether the proceeds from the sale of trees in a forest is conversion of capital into cash or it merely represents the proceeds of capital. The question as to what is conveyed by the expression "income" as used in the Indian Income-tax Act arose in Commissioner of Income-tax v. Shaw Wallace & Co. [1932] 59 IA 206; AIR 1932. PC 138. 14. Sir George Lowndes when delivering the judgment of their Lordships of the Privy Council observed as follows : - "Income, their Lordships think, in this Act, connotes a periodical monetary return 'coming in' with some sort of regularity, or expected regularity, from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. Thus income has been likened pictorially to the fruit of a tree, or the crop of a field. It is essentially the produce of something which is often loosely spoken of as 'capital', But capital, though possibly the source in the case of income from securities, is in most cases hardly more than an element in the process of produ....
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..... Shaw Wallace & Co. [1932] 59 IA 206; AIR 1932, PC 138, Lord Wright observed as follows : - "Sir George Lowndes speaks of ' income ' being likened pictorially to the fruit of a tree or the crop of a field. But it is clear that such picturesque similes cannot be used to limit the true character of income in general, and particularly when it is constituted by mining rent or royalties." 18. In Maharaja of Kapurthala v. Commissioner of Income-tax, [1945] 13 ITR 74; AIR 1945 Oudh. 35 one question referred to the Court was whether the assessee's net receipts from the sale of forest trees were assessee's income liable to income-tax or merely capital converted into cash and not liable to income-tax. The annual profit over a period of 13 years was found to be Rs. 2,132 from grass and Rs. 4,425 from trees-covered land. The position appeared to have remained much the same until 1928 when wholesale cutting commenced with a view to clearing the forest in order to make the land arable. During the next ten years the whole forest was cut down and as it was cut, the land was let out to tenants. It was not until 1938-39 that the sale proceeds were assessed to income-tax.....
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.... down and carried away, the capital was thereby decreased. The learned Judges did not make any distinction between the income derived from the sale of paddy which is grown on land and the income derived from the sale of timber cut in a forest and were of the view that income derived from the sale of paddy would be assessable but for the special exemption given to it under the Indian Income-tax Act. The amount received by the owner of unassessed forest lands by sale of timber trees thereon was held to be income and assessable as such. 23. The authorities referred to above yield the result that the forms which income may assume would baffle attempts at enumeration. A precise definition covering all cases is not possible and the Legislature, has not attempted to define it. It is generally though not necessarily a recurrent return from a definite source. Receipts from capital which is exhausted in the process of realisation may none the less be income. The fact that the receipts are from a source which is a wasting asset like that of a mine is an irrelevant consideration and anything which could properly be described as income would be taxable unless expressly exempted from taxation....
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....recurring receipts from the sale of trees from forests which are worked in such a way that their continued existence is assured are revenue receipts and as such taxable under the Assam Act if they can be regarded as agricultural in character. 26. Our answer to the first question, therefore, is that the amounts realised by the assessees from the sale of Sal trees are revenue receipts. 27. The second question is whether receipts from the sale of trees, which we regard as revenue receipts, constitute agricultural income for the purposes of the Assam Act. 28. In order that income should be described as agricultural under Section 2 of the Act, it is necessary that it should be rent or revenue derived from land which is used for agricultural purposes and is either assessed to land revenue in Assam or subject to a local rate assessed and collected by officers of the Crown as such or it should be income derived from such land by agriculture or by the performance by a cultivator or receiver of rent in kind of any process ordinarily employed by a cultivator or receiver of rent in kind to render the produce raised or received by him fit to be taken to market. It would appear from the....
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....The dictionaries tell us that 'agriculture' comes from ager, field and caltura, cultivation. This implies the use of human skill and labour ; and that is exactly how the dictionaries define it. Webster says that agriculture is the 'science or art of cultivating the ground', and includes in it the rearing and management of live-stock, animal husbandry, farming and so forth. Other dictionaries, including the Oxford English Dictionary, imply the same basic conception. Some include ' forestry ' in the term. It is to be observed, however, that the word used when forestry is included, is forestry and not forests. The distinction is important because when one turns to the definition of forestry in the dictionaries, one finds that it is also an art or science. Thus, Webster says it is the art of farming or cultivating forests; the management of growing timber' and the Oxford English Dictionary says much the same thing. Therefore, throughout we find that the essence of agriculture, even when it is extended to include 'forestry', is the application of human skill and labour. Without that it can be neither an art nor a science. And that we feel must be the ....
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....me derived from the sale of trees was not agricultural. It was necessary, in the view of their Lordships that whether exemption was claimed under Section 2(1)(a) or Section 2(1)(b) of the definition of agricultural income given in the Indian Income-tax Act, the primary condition must be satisfied that the land in question was used for agricultural purposes. It was observed by Lord Simonds as follows :- "It is sufficient for the purpose of the present appeal to say (1) that in their opinion no assistance is to be got from the meaning ascribed to the word ' agriculture ' in other statutes and (2) that, though it must always be difficult to draw the line, yet, unless there is some measure of cultivation of the land, some expenditure of skill and labour upon it, it cannot be said to be used for agricultural purposes within the meaning of the Income-tax Act. " 36. Their Lordships have not laid down that some measure of cultivation is absolutely necessary before it can be said that land is used for agricultural purposes. In fact "some measure of cultivation" is placed on a par with some expenditure of skill and labour. If either of the two conditions exists, the land could ....
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....so been exploded. If there is actual tilling of the soil for producing the product, it is the unquestionable result of agricultural pursuit." 40. The test brought out above was applied to the proved facts of the case which were as follows : (1) The total area of the forest was 14,000 acres. It was parcelled out in blocks of 1000 acres each, Trees in each block were sold when the trees were about 15 years old. (2) To prevent damage of the new shoots in the early stages of their growth and to give new vigour to the new shoots and saplings, the ground is kept free from undergrowth of jungle and by removal of leaves. (3) During the early stages of the growth in each block, the areas cut down are closely guarded by forest guards at least for one year from the time when the block in question is cut down thus keeping out both men and cattle off from the lands so that they may not damage the growing shoots by trampling and/or browsing as the case may be. (4) Cutting the trees in each particular block after 15 years in a particular season. 41. There was admittedly no cultivation of the soil. The test laid down by their Lordships of the Privy Council was interpreted. The meaning assign....
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....e with some measure of regularity. In this connection he expressed himself as follows :- "In these forests, operations in forestry such as clearing jungles, creepers and climbers, thinning by removal of less healthy trees from thickly grown areas, removal of unsound, crooked and diseased trees, burning of leaves to fertilise the ground, cutting of trees at special heights, reservation of blocks by turns and their operation in cyclic order, preservation of mother trees for the spread of seed, protection of forests from fire, etc., are admittedly regularly carried on and this is further testified to by an Officer of the Mechpara Ward's Estate." 44. According to him, the trees in these forests were not of spontaneous growth as regular operations were being undertaken for their growth, preservation and regeneration. The Member, Assam Board of Agricultural Income-tax, agreed with the finding of the Appellate Assistant Commissioner. He stated that it was admitted by the assessees that the Sal forests in question are to be nursed, preserved and developed at considerable expenses; labour and trouble on these forests had to be carefully looked after ; the noxious creepers wh....
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....ng sums of money under the heading salami during the year to which the assessments in question relate. The salami was assessed to tax under the Act. The assessees appealed from the order of the Agricultural Income-tax Officer. The Appellate Assistant Commissioner also held that the salami was income and that it could not be treated as capital receipt. In coming to this conclusion be observed as follows : - "Salamis were realised by the appellants by granting settlement of waste lands and abandoned holdings. No loss or injury was caused to the land by such settlements. The land continued to remain the property of the appellants and the lessees were only granted the non-occupancy right for use and occupation. There was no transfer of any vital right and interest permitting waste to be committed on the land and thereby diminishing its capital value. So, salamis as realised by these landlords cannot be treated as capital receipts. Salamis are received by these zamindars in course of their zamindary business. These flow from the land as normal incidents arising in course of the life of the non-occupancy raiyat's lease whenever landlord's consent is required by law. Thes....
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....ami for settlement of waste land or abandoned holding at the time of the assessment in 1941-42. On his application two points of law were referred to the Culcutta High Court. These were : (1) Whether salami received for settlement of agricultural holdings where the rate of annual rent reserved for such holdings is uniform and where the salami is taken once in the period of the occupation by a particular tenant but where the period of occupation is not ascertainable as no written leases are given is agricultural income ? and (2) Whether in view of the facts and circumstances of the case, the sum of Rs. 7,934 received by the assessee as salami for settlement of agricultural holdings is agricultural income within the meaning of Section 2(a)(1) of the said Assam Agricultural Income-tax Act ? 52. The answer to these questions were in the affirmative. The reasons for the answers were that the leases were relatively for small areas of land for the purposes of cultivation for periods which were not fixed. It also appeared to the learned Judges that the holdings so granted were at times abandoned. They could be let out again and the salamis could be charged. They were not based on any id....
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....icer to determine if the receipt amounts to 'income' with the well recognised principles of law describing that word. I do not think because the word 'salami' is used, in respect of a receipt, it is necessarily a receipt of a capital nature or is income liable to tax. As the authorities referred to in the above mentioned three decisions show, the nature of a receipt described as 'salami' in each has to be determined as a fact. I am unable to hold that the receipt described as 'salami,' if nothing more is stated in respect of it, must be treated as a capital receipt equally so because a receipt is described as 'salami,' it will be an error to treat it as income and to assess it as such. " 55. Mahajan, J., summed up the position as regards 'salami' thus : - "The question whether salami is in the nature of a capital receipt or is income depends on the facts and circumstances of each case and cannot be decided as a mere matter of law. The latest decision on the subject is in Bit Bikram Kishore v. Province of Assam [1949] 17 ITR 220, 53 CWN 164. After giving a resume of the earlier cases on the subject it was said that it was i....
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.... the facts bearing on the nature of these receipts in each case on the line indicated in the judgment of the Federal Court is necessary in order that an adequate statement of facts be furnished to this Court to enable it to determine the question, the material now available not being sufficient for the purpose. 59. We, therefore, direct that references 1 to 9 be referred back to the Member, Assam Board of Agricultural Income-tax, for furnishing us with a fuller statement of the case in the light of the judgment of their Lordships of the Federal Court after collecting necessary material on the five questions specifically stated in the order of that Court and also on question 6 given below which is now added to that list by this order. 60. Question 6 which is added at the request of the learned Advocate-General is as follows : - "What amount, if any, has been received as salami by the assessee in each accounting year by the settlement of waste lands?" 61. Question (4) contained in the references before up about collection charges is connected which question (3). In case it is ultimately found that receipts by way of salami are not taxable as agricultural income, the deter....