TaxTMI 
TaxTMI 
TaxTMI 
1958 (10) TMI 9
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.... the account books of the respondent. The point in controversy is as to whether this income is chargeable to tax. It is the contention of the respondent that this is agricultural income as defined in section 2(1) of the Act, and that it is, in consequence, exempt under section 4(3)(viii). By his order dated January 31, 1943, the Income-tax Officer held that the forests in question had not been proved to have been planted by the respondent, that the trees were of spontaneous growth, and that the income therefrom was not within the exemption under section 4(3)(viii) ; and this order was confirmed on appeal by the Appellate Assistant Commissioner. The respondent took the matter in further appeal to the Appellate Tribunal, and there put forward the contention that the Income-tax Officer had failed to take into account a letter of the Dewan dated June 3, 1942, which gave a detailed account of the operations carried on by the estate in the rearing and maintenance of forests and that on the facts mentioned in that letter, his finding that there had been no plantation of trees was erroneous. By its order dated April 9, 1946, the Tribunal accepted this contention, and directed a fresh enqui....
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....e income being the same for all the years. On the application of the respondent, the Tribunal referred the following question for the decision of the High Court : "Whether on the facts and in the circumstances the income derived from forest in this case is taxable under the Indian Income-tax Act." The reference was heard by Panigrahi, C.J., and Misra, J., who answered it in the negative. They observed : "It appears to us that the cases as set out by both parties have been put too high. The Department takes the view that unless there is actual cultivation of the soil the income from the forest trees cannot be regarded as agricultural income. The fact that the assessee has spent some money and planted valuable trees in some areas is not sufficient to free the income out of the extensive forests, which owe their existence to spontaneous growth, from its liability to taxation. The assessee on the other hand seeks to create an impression that there is not a single tree of spontaneous growth, in these forests, and such trees as now constitute the forests have sprung up out of the stumps left by the hillmen as a result of the system of 'Podu' cultivation adopted by them. It appears ....
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....ed from the sale of trees was not agricultural income, and answered the reference in favour of the respondent. The learned Judges, however, granted a certificate to the appellant under section 66A(2) of the Act, and that is how the appeal comes before us. At the very outset, we should dissent from the view expressed by the learned Judges that the burden is on the Department to prove that the income sought to be taxed is not agricultural income. The law is well settled that it is for a person who claims exemption to establish it, and there is no reason why it should be otherwise when the exemption claimed is under the Income-tax Act. The learned Judges were of the opinion that their conclusion followed on the principle of the law of income-tax that "where an exemption is conferred by a statute, the State must not get the tax either directly or indirectly", and support for this view was sought in the following observations of Lord Somervell, L.J., in Australian Mutual Provident Society v. Inland Revenue Commissioners : "The rule must be construed together with the exempting provisions which, in our opinion, must be regarded as paramount. So far as the rule, if taken in isolation,....
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....ncome. In order to claim an exemption from payment of income-tax in respect of what the assessee considered agricultural income, the assessee had to put before the Income-tax Authorities proper materials which would enable them to come to a conclusion that the income which was sought to be assessed was agricultural income. It was not for the Income-tax Authorities to prove that it was not agricultural income. It was this wrong approach to the question which vitiated the judgment of the High Court and led it to an erroneous conclusion." On the merits, the question what is agricultural income within section 2(1) of the Act is the subject of a recent decision of this court in Commissioner of Income-tax v. Raja Benoy Kumar Sahas Roy. There, it was held that before an income could be held to be agricultural income, it must be shown to have been derived from land by agriculture or by one or the other of the operations described in clauses (i) and (ii) of section 2(1)(b) of the Act, that the term "agriculture" meant, in its ordinary sense, cultivation of the field, that in that sense it would connote such basic operations as tilling of the land, sowing of trees, plantation and the like,....
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....the forest was a virgin forest or whether it had subsequently sprung up, the evidence relating to Podu cultivation would have been very material. But the point for decision is not whether the forests were ancient and primeval, but whether they had been planted by the estate authorities, and on that, the Podu cultivation would have no bearing. As a result of the Podu cultivation, the original forests would have disappeared. But the question would still remain whether the forest which again sprang up was of spontaneous growth, or was the result of plantation. Now, there is no evidence that as and when the jungle had disappeared under Podu cultivation, the estate intervened and planted trees on the areas thus denuded. On the other hand, the learned Judges themselves found that after the destruction of the original forests in the process of Podu cultivation, there was a fresh growth of forests from the stumps of the trees which had been burnt. If that is the fact, then the new growth is also spontaneous and is not the result of any plantation. In fairness to the learned Judges, it must be observed that at the time when they heard the reference there was a conflict of judicial opinion....
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....n what is essentially a question of fact, viz., whether the trees were of spontaneous growth or were products of plantation. On this, the Tribunal has given a clear finding on a consideration of all the material evidence, and its finding is final and not open to challenge in a reference under section 66(1) of the Act. Even the learned Judges of the High Court who considered themselves free to review that finding and, as already pointed out, without justification, could only observe that the trees must have mostly grown from the stumps left when the forests were burnt for purposes of Podu cultivation a finding which is fatal to the contention now urged for the respondent that they were the result of plantation. We are of opinion that there are no grounds on which the finding of the Tribunal could be attacked in these proceedings. It remains to deal with one other contention urged on behalf of the respondent, and that is based on the fact that the amounts spent in the upkeep of the forests were large in comparison with the receipts therefrom. The following are the figures relating to the forest receipts and expenses for the years with which the present assessments are concerned : ....