1963 PLP 1019 (PTD)

S. 2(1) "Agricultural income "Income derived from the sale of sal trees Whether "agricultural income." Income derived from the sale of sal trees is not agricultural income within the meaning of section 2(1) of the Income tax Act, 1922, because these trees are of spontaneous growth and the operations performed for deriving such income do not include any expenditure of skill or labour on land itself. Partap Singh Balbeer Singh v. Commissioner of Income tax (1952) 22 I T R l; Commissioner of Income tax v. Raja Benoy Kumar Sahas Roy (1957) 32 I T R 466 (S C) and Commissioner of Income tax v. Jyotikana Chowdhurani (1957) 32 I T R 705 (S C) fol. STATEMENT OF CASE By this application under section 66(1) the assessee requires us to refer to the High Court certain questions of law said to arise out of the Tribunal's order. There can be no doubt that at least one question of law does arise out of our order and we, therefore, proceed to state the case in respect of that question. (2) The assessee has proposed five questions of which the first three are interconnected and raise a point whether the sale proceeds of sal trees from the assessee's forests are agricultural income. The other two questions are connected with certain deductions claimed for expenses. One claim is for Rs. 4,111-11-0 said to have been spent in repairing an Ambari building. The assessee had, however, claimed before the Appellate Assistant Commissioner successfully that the Ambari building was appurtenant to the agricultural estate of the assessee, meaning in this context the agricultural estate other than the forests. We, therefore, held that if the annual value of the Ambari building was not taxable on the ground of its being appurtenant to the assessee's agricultural estate, it followed that the expenses in connection with its upkeep could not be allowed. Even now we do not understand the assessee to offer the property income in respect of the Ambari building for assessment under section 9. We do not see how any question of law arises on these facts. (3) Another question sought to be raised by the assessee is in respect of allowance for certain expenses. He did not keep a separate account as regards the expenses incurred in connection with the management of his non agricultural properties. Therefore, an estimate had to be made. The authorities below found that the expenses actually allowed were in excess of 10 % of the gross receipts, which was the percentage usually adopted in other cases. The correctness of an estimate made after considering all the relevant facts cannot be a question of law. (4) On the main point in dispute, the relevant facts are these: The assessee owns an estate (worth in 1945 nearly Rs. 3 lakhs) comprising inter alia forests, the gardens, agricultural lands, house properties. His estate is managed by a guardian appointed by the District Court, Dehra Dun, who receives commission at 5% of the gross income. The assessment record for 1945-46 shows that the assessee has been deriving a considerable income from forest produce as shown below: Rs. 1945 46 ... ... 14,049 1946 47 ... ... 13, 811 1947 48 ... ... 9,186 1948 49 ... ... 60, 541 1949 50 ... ... 44,820 (Rs. 110 by sale of grass). Except for small sums of a few hundred rupees realised by sale of grass or wood in some of the years, the income was mostly by sale of sal trees to be cut and carried away by the purchaser. The income has been consistently treated as non agricultural and brought into charge to income tax. (5) There is no evidence whatsoever about the origin of the sal forests. It was not said that any sod of soil was turned over or any pits were dug at any time, or that seeds or saplings were planted. The sal trees in the assessee's forests were apparently of spontaneous growth, as are sal trees all over this country normally. When a sal tree is cut at the stem half afoot above ground level, new shoots sprout forth, which in 15 or 20 years grow into trees big enough to be again cut and sold. Some evidence by affidavits has been adduced on behalf of the assessee to show the care which is bestowed on the manner of cutting the trees, so as not to prevent the proper growth of fresh shoots. Such attention would seem to ensure the earning of profits 15 or 20 years later, rather than contribute to the present profits earned by selling the standing trees. As observed by us in our order, the real question was whether the fact that labour and expense are involved in a prudent conduct of the operations of cutting standing trees (by axe, 6' above ground level and only of trees of 3' or over in girth at breast height), thinning out the shoots where necessary, protecting the young plants from damage by cattle or fire, etc. (these being the acts mentioned in the affidavit of Dharma Nand, assessee's family's employee as forester for 6 years) was enough to make the operations agricultural within the meaning of section 2(1). (6) We held, for the reasons given in our order which is annexed hereto, marked "A" and forms part of this case, that the operations were not agricutural and that the income from the sale of sal trees in the assessee's forests was not agricultural income within the meaning of section 2(1) of the Indian Income-tax Act. (7) The cases nearest in point were referred to in our order. It is only necessary to add that even in the Calcutta High Court, Chakravartti J. (as he then was) was very. careful in Maharajadhiraja of Darbhanga v. Commissioner of Agricultural Income tax ((1952) 21 I T R 258, 269) to reserve his opinion and to say that he should not be understood as expressing any opinion as to the correctness of the view taken by the Calcutta High Court in Raja Jagdish Chandra's case ((1949) 17 I T R 426). (8) We, therefore, frame the following question of law for decision by the High Court : "Whether in the circumstances of this case, the fact that forestry operations of the kind and nature referred to in paragraph 5 above were conducted by the assessee, is sufficient to make the income from the sale of standing sal trees which were cut and sold and about the planting and growth of which there is no evidence, agricultural income within the meaning of section 2(1) of the Income tax Act ?" (9) The draft statement of the case was placed on the table. The Commissioner has no suggestions to offer. The assessee makes some submissions in regard to Ambari house and his claim for expenses, about which we have refused to state a case. We, therefore, do not feel called upon to say anything further about those matters. As regards the question of law which, in our opinion, does arise out of our order, the assessee says that the affidavits on file show that the forestry operations of the kind and nature referred to in paragraph 5 above were done even from the birth of the sal trees in question. We do not so understand the affidavits, the deponents to which do not claim to have any knowledge about the forest in question for more than a few years. Copies of the affidavits referred to, of Shri Dharma Nand dated February 13, 1950 filed before the Income tax Officer and of Shri Sant Ram dated February 5, 1951, filed before the Appellate Assistant Commissioner are marked "B" and "B-1" and annexed hereto. We, therefore, see no reason to modify the statement in the question of law framed by us that there was no evidence about the planting and growth of the sal trees (which were cut and sold in the previous year relevant to the assessment year 1949-50). (10) The statement of the case will now be submitted to the High Court. R. L. Gulathi for the Assessee. Gopal Behari for the Commissioner.