P L D 1959 Supreme Court (Pak (PLP)

SHAHABUDDIN, J.‑These are certificated appeals from the common judgment of the Dacca High Court in four references (Nos. 23 to 26 of 1953) under S. 66 (1) of the Income Tax Act. The question referred to the High Court which is common to these appeals was‑"whether, in the facts and circumstances of this case, the Income from the sale of forest trees growing naturally on the soil constitutes `agricultural income' within the meaning of S. 2 (1) of the Income Tax Act so as to be exempt from Income -tax under S. 4 (3) (viii) of the Act." There was another question common to 3 out of these references but we are not concerned with it as the assessees against whom it was answered have not appealed. The appellant before us is the Commissioner of Income Tax East Bengal. Kumar Ram Narayan Roy Choudhury, respondent in appeal No. I‑D, Sreemati Bibhabati, respondent in Appeal No. 2‑D, Sarajubala Debi and another respondents in appeal No. 3‑D and Sh. Ananda Kamari Debi respondent in appeal No. 4‑D are co‑sharers in Bhowal Estate, their shares being I/3rd, 1/6th, 1/3rd and 1/6th respectively. The Estate has been under the manage ment of Court of Wards since 1921 and its forest tinder the control of the Forest Department from 1933. They were assessed on their income from the sale tree of their forest for the year 1943‑1946 under S. 34 and for 1947‑48 and 19449 under S. 23 (3) of the Act on the ground that the trees from the sale of which income was derived had grown spontaneously without ploughing or any other agricultural operations and that therefore the said income was not agricultural income exempt from tax under the Act. Their appeals to the Assistant Commissioner were dismisses and the Appellate Tribunal when the matter` game before it also dismissed the appeals. In the statement of the case the Tribuna~ pointed out that the report of the Divisional Forest Officers established (a) that the method of regeneration after felling the trees was allowing fresh shoots to sprout out of cut stumps and fostering their growth except in a very small area of 24.7 acres which have been regenerated by plantation which could not have matured into trees fit for felling during the relevant years ; (b) that on the rest of the area there was no soil working or any other agricultural operation such as hoeing the ground, digging holes, watering and fencing and (c) that subsequent operations such as weeding, climber cutting thinning etc. were employed only after the crop established itself by natural growth. The statement goes on to say that the Tribunal after a review of the decisions on the question as to what an agricultural operation is came to the following conclusion: ‑ "Reverting to the facts of the present case, all that appears to have been done is that after the coppice has established itself by natural growth, the operations carried on in the forests consisted in (a) Weeding and cutting, (b) fencing or pruning, (c) burning of leaves and (d) protection against grazing. These operations, in our opinion, do not constitute regular operation in forestry or the expenditure of skill and labour on the land itself as distinct from trees growing naturally on the soil. Plantation in an area of about 24 acres is immaterial because the trees so planted were not ripe for cutting or final felling in the relevant years of account". During the enquiry by the Department the assessees (respon dents) were called upon to produce accounts and statements to show if any expenditure of agricultural nature was incurred in respect of the trees sold during the account years, but though a month's time was given .no account or statement was filed. On the other hand, it was submitted in writing that a statement could. not be filed as no record was available. This is stated in the appellate judgment of the Assistant Commissioner. It is also stated there that it would take 40 years for regenerated area to mature and become ripe for sale while the forest department had taken charge of the forest only in 1933 prior to which the process of regeneration had not started, nor was skill and labour spent on the soil for Browning trees, and that consequently the trees which were sold during the relevant years were not those which were regene rated. Agreeing with this finding the Tribunal observed that even if the operations said to have been carried on in the present case were presumed to be agricultural it could not be held that they were employed in respect of the trees sold in the years under consider ation as those processes were employed only after 1933 and even if the shorter period of maturity mentioned by the assessees i.e., about 15 years or a little more is presumed to be correct as against the 40 years stated by the Forest Department the trees sold in the account years could not be the trees grown as a result of regeneration conducted by the Court of Wards. It was contended before the Tribunal that according to the Annual Progress Report of Forest Administration almost all the big trees had been removed before the department took charge of the forest and that therefore the trees that were sold during the relevant years of account must be the new trees that had grown as a result of regeneration. This contention was repelled, the Tribunal observing that the word "big" was a relative term, which was qualified by the word "almost". It went on to say as follows: "It will also appear from the report that the real intention of the Forest authorities was to bring out the fact that the remain ing trees were `mostly crooked and badly shaped' so as not to give better price. In our opinion, therefore, the asssesse has failed to prove in present case that the trees sold in the year of account were such trees as had grown on the soil as a result of regeneration." The entire finding on points was fully extracted in the statement of the case. From this finding it follows that the trees sold during the years in question were of spontaneous growth without any human effort or skill, and as the Privy Council had held in Raja Mustafa Ali Khan v. The Commissioner of Income Tax (75 I A 268 : P L D 1948 P C 259) that Income from the sale of such trees was not "agricultural" income within the meaning of the Act, there was no necessity for a reference. Nevertheless, the Tribunal on an application of the assessee thought it fit to make a reference. The learned Judges of the High Court disagreed with the Tribunal on both the points and answered the above question in the affirmative. They held that the operations relied on by the assessee were agricultural operations and that therefore the income from the sale of the trees was exempt from being taxed. In coming to this conclusion they relied on an earlier decision of their Court in Gopal Das Choudhury v. The Commissioner, Agri cultural Income Tax East Bengal (4 P L R 439 (Dacca series)), which had adopted the view expressed by the Calcutta High Court in Commissioner of Agri cultural Income Tax West Bengal v. Raja Jugdish Chandra Deo Dhabel Deb (53 C W N 596), viz. that according to the above mentioned decision of the Privy Council (Raja Mustafa Ali Khan's case) utilisation of land for operations in forestry is an agricultural purpose and tilling of the soil is not a conclusive test of such purpose. The correctness of this decision was doubted in Benoy Kumar Sahas Roy v. Commissioner of Income Tax West Bengal (A I R 1954 Cal. 225) but the learned Judges out of whose judgment these appeals have arisen held that the principle of the later decision was the same as that of the earlier and they therefore did not see any reason to differ from the view taken in 4 D L R

439. They relied also on the decision of the Assam High Court in Sm. Jyotikana Choudhurani and others v. I. T. Commissioner, Assam (A I R 1954 Assam 113) where the majority view was that if human agency intervened on a planned and scientific scale to do away with causes which interfere with the growth of the trees or tend to destroy them, such processes though not involving tillage would still constitute agricultural processes. As regards the alternative ground on which the Tribunal dismissed the appeals the learned Judges of the Dacca High Court observed as follows: ‑ "The second ground on which the Appellate Tribunal refused to give relief to the assessee, namely, that even if the operations carried on in the particular forests of the Bhowal Estate be said to be such as to constitute agricultural operations inas much as the assessee had failed to prove that the trees sold in the years of account were such trees as had grown on the soil as a result of regeneration, appears to us to be erroneous. This ground was vehemently supported by the learned Advocate appearing for the Department, and in fact, it was argued that unless the assessee was able to prove that from the period of germination from a seed of a tree up to the time it is sold, the assessee was bound to show by what process he got those trees ; otherwise, he could not succeed. This is what, we think, was never intended by the Legislature, and in fact, if the assessee is required to prove with regard to each particular tree from which he derived income that it was grown from the seed by his efforts and fostered by him till it was cut down and sold, it will amount to placing an impossible burden on the assessee which he could hardly discharge for the purpose of earning exemption, The language of the section is quite plain, and all that the assessee is required to show for the purpose of earning the exemption, is that the income in question was derived from the land which is `used for agricultural purpose' ". The observations would have been fully justified if the entire area of the forest had been the regenerated area and it had been established that the processes which are said to be agricultural were actually employed in respect of the entire area, for in these circumstances it would be unnecessary to prove that each tree which was sold during the account years was fostered by the assessee from the time it sprouted out till it attained maturity. But the facts of the case were otherwise. Only 19,000 acres out of 37,504 acres were regenerated according to coppice method i.e., allowing the shoots sprouting out of the cut stumps of trees that had been felled and fostering the growth of those plants. On 2474 acres out of this area there was a plantation raised during the last 16 years of management, which started only in 1933 when the process of regeneration started while according to the Forest Department it takes 40 years for a plant to mature. On these facts it is clear that the trees sold during the relevant years could not have been of the regenerated area. If, therefore, the trees of the rest of the area which alone could have become fit for sale during the account years had been subjected to the process now claimed to be agricultural, the burden of proving that fact lay heavily on the assessees; and consequently the Tribunal was justified in inferring from their failure to produce accounts or statement showing expenditure on the employment of these processes that they were not employed at all. In Raja Mustafa Ali Khan's case already referred to their Lordships of the Privy Council after pointing out that to become entitled to exemption from tax the primary con dition to be satisfied is that the land has been used for agricultural purposes observed that the assessee's case fails if he does not prove that the land has been so used. In this connection their Lordships expressed their concurrence with certain decisions in cluding the decision of the Allahabad High Court in Benoy Ratan Banerji v. The Commissioner of Income Tax U. P., C. P. and Berar (15 I T R 98) where the question referred was whether the income from the sale of forest trees of spontaneous growth without intervention of human agency was `agricultural income'. The Tribunal had found that there was no evidence on the record showing that the growth of the trees in question was a result of any actual cultivation by the assessee at all. The High Court held that it was bound by that finding and that it had no jurisdiction to reopen it. It was also observed: ‑ "Where the assessee has made no contribution by way of cultivation no question can arise either of the land on which they grew being used for agricultural purposes or of the trees themselves and the income they produced being the result of agriculture". In the present case also the finding of the Tribunal was that there was no contribution by the assessee to the growth of trees sold in the years in question and the learned Judges of the High Court could not go behind that finding. There has been diversity of opinion as to the effect of certain observations in the judgment of the Privy Council in Raja Mustafa Ali Khan's case on cases where human skill and efforts have been applied in the growth of the forest trees though such effort and skill did not involve the actual tilling of the soil, but there has been no conflict of opinion and no doubt whatsoever that that decision is definitely an authority for the position that income from sale of trees which had grown spontaneously without any human effort is not "agricultural income'". That being the settled law and the finding of the appellate Tribunal in this case being that trees that were sold were not from the regenerated area there was hardly any question of law to be considered for the determination of this particular case. As a matter of fact the Tribunal itself has in its judgment after discussing the general question of law as to whether the processes in question amounted to agricultural pro cesses or not observed to the effect that that was only academic in‑ view of the facts of the case on which it then proceeded to record the finding discussed above. Nevertheless, it made a reference to the High Court couching the question in language capable of being interpreted to mean that the High Court should consider the point on the basis that the processes alleged to have been employed were in fact so employed. The High Court dealt with the question on that basis; and before us it was not con tended that the finding of the Tribunal as regards the facts was sufficient for the question referred being answered in the negative. On the other hand, the argument was that the operations in question were not agricultural and that the view of the High Court that they were agricultural was not correct. We therefore, think that we should consider whether the operations claimed to have been employed were agricultural, although the finding of fact recorded by the Tribunal is sufficient to dispose of the case. It was argued by Mr. Mesbahuddin for the Income Tax Commissioner that none of the operations in question was agri cultural and the view of the Calcutta and Assam High Courts which found favour with the learned Judges of the Dacca High Court was not in accordance with the provisions of the Act defining "agricultural income" or the law laid down by the Privy Council in Raja Mustafa Ali Khan's case. Reference was made by the learned advocate to the decision of the Supreme Court of India in Commissioner of Income Tax West Bengal v. Raja Benoy Kumar, Sahas Roy (32 I T R 466) (the appeal from the decision in A 1 R 1954 Cal. 215 referred to above) where the learned Judges after a dis cussion of the case law on the subject including the decision of the Privy Council in Raja Mustafa Ali Khan's case dissented from the view of the Calcutta and Assam decisions relied on in the judgment under appeal. It was pointed out by Mr. Mesbahuddin that this decision was followed in two other cases reported in the same volume of I T R from pages 587 and 705 onwards, the last men tioned case being an appeal from the decision reported in A I R 1954 Assam

113. Mr. Guha for the assessees, on the other hand, argued that the view taken by the Supreme Court of India was an extreme one, that the Act being a taxing statute a more liberal interpretation should be adopted and this Court should, therefore, prefer the view taken in the judgment under appeal. "Agricultural income" is defined in the Act as meaning. (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land‑revenue in taxable territories or subject to a local rate assessed and collected by officers of the (Government) as such ; (b) any income derived from such land by‑ (i) agriculture, or (ii) 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, 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)." But neither "agriculture" nor "agricultural purposes" has been defined. The term "agriculture" in its derivation and etymological sense means ager land and cultra cultivation. There is, however an extended meaning given to this term. Webster's New International Dictionary defines it in a broader sense thus "the science and art of the protection of plants and animals useful to man, including to a variable extent the preparation of these pro ducts for man's use and their disposal by marketing or otherwise. In this broad use it includes farming, horticulture, forestry, dairy ing, sugar making etc." The pursuits covered by this extended meaning are in themselves separate subjects and each one of them is defined as a science or art or a business. For instance, forestry is defined in the same Dictionary as the science and art of farming, cultivating, places of management of grown timber while the Oxford Dictionary defines it as science and art of farming and cultivating forests, management of ground timber. It is no doubt true that in some cases of forestry there is cultivation, for instance where the trees are planted for the first time, but it cannot he said that the expression is synonymous with "agricultural", as, there are cases of forests of spontaneous growth, where there is no cultivation of the soil at all, but only operations of forestry employed subsequent to the sprouting of the produce in order to foster the growth of plants into matured forest trees. If the intention of the legislature was that even such subsequent opera tions, which do not involve cultivation should by themselves be regarded as agricultural it would have included the word "forestry" in the definition of "agricultural income." In I L R 51 Cal. 504 Rankin, J., as he then was, in repelling the contention of the assessee that rent received for the use of land for stacking timber is agricultural income as the said use was for purposes of forestry, observed : "I am not convinced that the legislature, if it intended to include "even forestry," would have been content to say agri culture." Further, some of the pursuits included in the extended meaning such as dairying, and sugar making are obviously industries and it cannot be said that they come within the definition of agriculture and are thus exempt from tax. It, therefore seems to us that the term "agriculture" has been used in the Act in a narrow sense and so interpreted, it means that an operation to be agricultural must involve or be connected with the cultivation of the soil. The following passage in the judgment of their Lordships of the Privy Council in Raja Mustafa Ali Khan's case referred to already, which as stated above, directly applies to cases of forests of spontaneous growth contains weighty observations as to what constitutes "agriculture." "As appears from the form of the question, the income under the first head was derived from the sale of trees described as `forest trees growing on land naturally,' and the case has throughout proceeded on the footing that there was nothing to show that the assessee was carrying on any regular operations in forestry and that the jungle from which trees had been cut and, sold was a spontaneons growth. The question seems not yet to have been decided whether land can be said to be used for agricultural purposes within the section, if it has been planted with trees and cultivated in the regular course of arboriculture, and on this question their Lordships express no opinion. 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 on it, it cannot be said to be used for agricultural purposes within the meaning of the Income Tax Act. In the present case their Lordships agree with the High Court in thinking that there is no evidence which would justify the conclusion that this condition is satisfied." In respect of the primary condition laid down in the above observations for an operation to constitute an "agriculture opera tion" there has been conflict of judicial opinion. The decision of the Calcutta High Court in 53 C W N case, which found favour with the learned Judges of the Dacca High Court in the judgment under appeal was to the effect that as a result of the above decision of their Lordships the view that tilling of the soil was the sine qua non for bringing an operation within the term "agriculture" was exploded. In that case the forest concerned consisted mainly of sale trees in blocks of 1000 acres `each. Shoots that sprouted out of the stumps of the trees cut down grew into matured trees in 15 years time and in order to prevent damage to the young shoots in the earlier stages of growth the area was closely guarded and from the ground undergrowth of jungle was removed. It was held by the High Court of Calcutta that though there was no cultivation of land or planting of trees, the operations carried out were regular operations in forestry, and that according to the Privy Council such operations were agricultural. The learned Judges observed: ‑ "If the view of the Judicial Committee were to exclude all kinds of income from the category of agricultural income, unless there were actual cultivation of the soil, reference to `regular operations of forestry' would have been unnecessary not that there must always be `some measure of cultivation of the land' and some `expenditure of skill and labour' upon it, but that the proof of either would be sufficient to bring the case within either clause (a) or (b) of S. 2 (1) of the Act. `Regular opera tions in forestry' do require expenditure of skill and labour upon the land on which the forest grows". To the same effect was the view taken in the Assam case relied on in the judgment under appeal Jyotikana Chowdhurani and others v. I. T. Commissioner Assam (A I R 1954 Assam 113) but in S. N. Ganguly v. Commis sioner of Bihar and Orissa (24 I T R 16), which is referred to but not followed in the judgment under appeal, where the operations included sowing of seeds in scattered portions of the forest, the normal process of regeneration by fostering the growth of shoots sprouting out of the stumps of cut trees, weeding and cutting of channels to help the flow of rain water it was held that tillage was not essential for an operation to constitute "agricultural operation" but that human labour and skill referred to in the observations of the Privy Council should be extended on to the land itself and not merely to the growth on the land. The above mentioned operations employed in that case were considered as expenditure of labour and skill on land. Prior to this decision, the Allahabad High Court in Partap Singh Balbir Singh v. The Commissioner of Income Tax U. P., C. P. and Berar (22 I T R 1) had taken a different view of the observations of their Lordships in Raja Mustafa Ali Khan's case. There in the statement of the case the Tribunal had mentioned that it was conceded before it that there was no evidence on the record of the assessment proceeding that there ever had been cultivation of the soil on which the trees stood, and the form in which the question was formulated also indicated that the growth of the trees on the land was natural and spontaneous without the intervention of human agency. The skill and labour spent in that case were directed towards regeneration and preservation of those trees. It was observed by the learned Judges of the High Court that the essential element according to their Lordships of the Privy Council was some cultivation or labour which must be upon the land and not merely on the trees which are already growing as a result of spontaneous growth. In 32 I T R 466 the appeal that was filed from the judgment of the Calcutta High Court in A I R 1954 Cal. 225 cited above, the Supreme Court of India, after discussing the case law on this subject and stating that cultivation in the strict sense of the term is restricted to the tilling of the land, sowing of the seeds, planting and similar operations on the land observed as follows: ‑ "They would be the basic operations and would require the expenditure of human skill and labour upon the land itself. There are however other operations which have got to be resorted to by the agriculturist and which are absolutely necessary for the purpose of effectively raising the produce from the land. They are operations to be performed after the produce sprouts from the land e.g., weeding, digging the soil around the growth, removal of undesirable under growths and all operations which foster the growth and preserve the same not only from insects and pests but also from depradation from outside, tending, pruning, cutting, harvesting, and rendering the produce fit for the market. The latter would all be agricultural operations when taken in con junction with the basic operations above described, and it would be futile to urge that they are not agricultural operations at all. * * * * * * * * * * * We are of opinion that the mere performance of these sub sequent operations on the products of the land, where such products have not been raised on the land by the performance of the basic operations, which we have described above would not be enough to characterise them as agricultural operations. In order to invest them with the character of agricultural opera tions, these subsequent operations must necessarily be in con junction with and a continuation of the basic operations, which are the effective cause of the products being raised from the land. It is only if the products are raised from the land by the per formance of these basic operations that the subsequent operations attach themselves to the products of the land and acquire the characteristic of agricultural operations. The cultivation of the land does not comprise merely of raising the products of the land in the narrower sense of the term like tilling of the land, sowing of the seeds, planting, and similar work done on the land but also includes the subsequent operations set out above all of which operations, basic as well as subsequent, form one in tegrated activity of the agriculturist and the term `agriculture' has got to be understood as connoting this integrated activity of the agriculturist. One cannot dissociate the basic operations from the subsequent operations and say that the subsequent operations, even though they are divorced from the basic operations can constitute agricultural operations by themselves. If this integra ted activity which constitutes agriculture is undertaken and performed in regard to any land that land can be said to have been used for `agricultural purposes' and the income derived therefrom can be said to be `agricultural income' derived from the land by agriculture." This view was followed in three other cases, one of which was an appeal froth the decision in A I R 1954 Assam 113 relied on by the learned Judges of the Dacca High Court. The view expressed in 53 C W N rests on' an undue extension of the principle laid down in the Raja Mustafa Ali Khan's case. In defining the primary condition for an operation to constitute an "agricultural operation" their Lordships did not refer to skill and labour spent on things attached to land. What is referred to in the judgment is skill and labour spent on the land. It cannot be said that their Lordships intended to lay down that an operation in forestry is an "agricultural operation." Reference to "forestry operations" in the judgment was obviously made only to emphasise the fact that there was no human effort in that case at all. If the intention was to lay down that an operation in forestry is an agricultural operation their Lordships would not have re served their opinion on the question whether a plantation of a forest would constitute an "agricultural operation." Their Lordships, I think, were concerned only with defining the term "agriculture" and the language used by them indicates that cultiva tion is the essential condition. That being so, reference must be to human labour and skill spent on the land in connection with cultivation and not as held in Calcutta case reported in A I R 1954 Cal. 225 some operation on the land independent of cultiva tion. Cultivation means tilling of the soil, and if that has not been done then there must be skill and labour spent on the land already cultivated. We, therefore, with respect agree with the view taken by the Supreme Court of India. There is no force in the argument that this is an extreme view and a more liberal interpretation should be adopted. A fiscal statute should be constru ed strictly and no question of an equitable construction arises. For reasons stated above, it is clear that the word "agriculture" is not used in the Act in its extended meaning. From this it follows that the operations, which are claimed to have been employed in the present case were not agricultural. As stated already, the finding of the Tribunal, which is binding on us is that none of the trees sold during the account years could have been subjected to the said operations and that by itself concludes the matter against the assessee. The question referred by the Tribunal should have been answered in the negative. We therefore, allow the appeals, but pass no orders as to costs. A. H. Appeal allowed.