LexV. VENUGOPALA VARMA RAJAH versus COMMISSIONER OF INCOME-TAX, KERALA
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A V. VENUGOPALA VARMA RAJAH v. COMMISSIONER OF INCOME-TAX, KERALA February 13 I September 24, 1969 547 B [J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.) Capital or Income-Contract for 'clear felling' of trees i.e. cutting them so as to leave six inches of the stump to allow regeneration-Forest of spontaneous growtlz-lncome from sale of trees so felled whether in the nature of revenue. c- In computing the income of the appellant's father for the assessment year 1959-60 the Income-tax Officer included Rs. 75,000 received under an agreement for cutting and removing trees from 500 acres of forest land in Madras State. The Income-tax Officer held that the income was taxable because the land was leased for 'clear felling' by the father of the appeJlant. What the expression 'clear felling' meant was not investigated by the Inc.ome-tax Officer. The Appellate Assistant Commissioner con- firmed the assessment order. But the Tribunal held that the receipt was D of a capital nature and deleted it from the taxable income.· In reference the High Coun differed from the Tribunal. In appeal against the High Court's order this Coui"t directed the Tribunal to submit to this Court a supplementary statement of case setting out the terms of the agreement between the fathelr of the appe1lant relating to the rights conveyed to the lessees and especially about the import of the term relating to 'clear fell- ing.' The Tribunal in its supplementary statement of case set out the re- 1evant terms of the agreement and observed that the import of the ex- E pression 'clear felling' is that 'all trees except casurina are to be felled at a height not exceeding six inches from the grc.-und, the barks being left intact on the stump and adhering ·to it all round the stump without being torn off or otherwise changed." It was not suggested that there were any casurina trees in the forest land let out to the lessees and· it was common ground that the trees in the forest were of spontaneous growth. r G H HELD : The appeal must be dismissed. Om the finding in the ·present case it was clear that the trees were nor removed with roots. The stumps of the trees were aUowed- to remain in the land so that the trees may regenerate. If a persorr sells merely leaves or fruit of the trees . or even branches of the trees it would be, difficult (subject to the special exemption under s. 4(3)(viii) of the- Income-tax Act, 1922) to hold that the realisation is not of the nature of income. It is true that the tree is a pan of the land. But by selling a part of the trunk, the assessee does not necessarily rea\ise a part of bi< capital. [553 B-C] Commissioner of Income.tax, Madras, v. T. Manavedatr Tfrumalpad, I.L.R. 54 Mad. 21, In re: Ram Prasad, I.L.R. 52 All. 419, Maharaja of Kapurtha/a v. Commissioner of Income-tax, C.P. & U.P. 13 I.T.R. 74, Raia Bahadur Kamkshya · Nar'1in Singh v. Commissioner of Income-tar. Bihar & Orissa, 14 I.T.R. 673, Fringford Estate Ltd., Calicut v: Com- missioner of Income-tax, Madras, 20 l.T.R. 285, Commissioner of lnco.me- tax, Bombay South v. N. T. Patwardhan, 41 I.T.R. 313,Sl\'.Zte of Kera/a v. Karlmtharuyi Tea Estate Ltd. 51 I.T.R. 129 and Commissioner of Income-tax, Mysore v, H. B. Van Ingen, 53 I.T.R. 681, referred to. 548 SUPREME COURT REPORTS [1970] 2 S.C.R. [Question whether in ca'se of sale of trees with the roots so that there A is no possibility of regeneration the realisation ritay be said to be in the nature of capital, left open.] [553 Dl CIVIL APPELLATE JURISDICTION : Civil Appeal No. 810 of 1967. Appeal by special leave from the judgment and order dated August 3, 1966 of the Kerala High Court in Income-tax Referred B Case No. 49 of 1965. K. Ja,varam, for the appellant. S. T. Desai, R. N. Sachthe)i and B. D. Sharm!J, for the respon- dent. Sardar Bahadur Saharya for the Intervener. The Judgment of the Court was delivered by Shah, J. In computing the income of the appellant's father -to tax for the assessment year 1959-60 the Income-tax officer included Rs. 75,000 received under an agreement for cutting and removing trees from 500 acres of Mangayam Katchithode forest. The Appe!Jate Assistant Commissioner after calling for a report -0n certain facts confirmed the order. But the Tribunal held that the receipt was of a capital nature and deleted it from the taxable income. At the instance of the Commissioner of Income-tax, the Tri- bunal refer
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