TMI Blog1960 (4) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... The condition of the auction was that the purchaser was to pay in lump sum the amount bid for in the auction. For the convenience of the auction purchase the auction amount was realised by instalments over a period of time. Another term of the auction was that the purchaser was to uproot the trees. This was the solitary occasion on which the assessee had sold trees. The record does not show that any such trees were sold subsequently or in prior years. 3. In the relevant assessment years 1951-52, 1952-53 and 1953-54, the assessee realised ₹ 53,490, ₹ 34,176 and ₹ 7,475. The quantum is not in dispute. The Department included the sums in the assessee's income from business in the sale of trees. The assessee, inter alia, contended that the land with trees, standing thereon was capital and the capital was not converted into a stock-in-trade and any sale of such trees by uprooting them was on capital account. The Tribunal for the reasons set out in its order in I.T.A. No. 3254 of 1957-58 dated May 5, 1958, annexed hereto as annexure A and forming part of the case, held that such income in the hands of the assessee was capital in nature because when the tree i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of trees. The assessee contended that the land with trees standing thereon was capital and the capital was not converted into a stock-intrade and the sale of the trees by uprooting them was on capital account. In the appeal before the Tribunal, the Tribunal accepted the contention of the assessee and held that the income in the hands of the assessee was capital in nature because when the tree is sold with its roots, it is clearly a capital asset which has been uprooted once and for all. It took the view that the roots of the trees certainly formed part of the capital structure of the assessee's holdings and when the trees were bodily uprooted it constituted a diminution of the assessee's capital asset. At the instance of the Commissioner, it referred the following question to this court under section 66(1) of the Indian Income-tax Act: Whether, on the facts and circumstances of the case, the receipt from the sale of trees by roots is capital in nature and exempt from income-tax? Mr. G.N. Joshi, learned counsel for the Revenue, has contended before us that the view taken by the Tribunal is entirely erroneous and unsustainable. He has contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is also well settled that the income from the timber of forest, where the trees grow naturally is income in the nature of a revenue. There can also be no dispute that the mere fact that in the process of selling of timber of forest, the forest will gradually get diminished will not make the income received from the sale of forest trees a receipt of capital nature. The judicial decisions to which Mr. Joshi has referred do not, however, lay down the proposition that in each and every case a sale of a tree or trees growing spontaneously must constitute a sale producing income irrespective of the other facts and circumstances of the case. In our opinion, whether a sale is a capital sale or sale producing income must depend upon the facts and circumstances of the case. What we have to consider, therefore, is whether, on the facts and in the circumstances of the present case, the auction sales by the assessee of the trees in 1948-49 constituted capital sales or sales producing income. Now, the facts of the present case are that on the area of 10 square miles of grasslands belonging to the assessee had stood a large number of trees which had grown spontaneously and all these trees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital. His capital is only the land and that also is the source of his income, Mr. Joshi argues that even if the trees are disposed of by their roots, so long as the land is retained, the source for a fresh germination of trees of spontaneous growth is still possessed by the man and the trees will grow again in course of time. We are not impressed by this argument. The fact that the man was not required to invest capital in growing the trees is, in our opinion, immaterial and the trees with their roots and growth are still an asset of the man. As to the possibility of a fresh growth of trees spontaneously springing up on the land in course of time we do not think that such distant and remote possibility would persuade us to hold that the capital asset of the man and the source of income was merely the land and the roots of the trees which had firmly grown and securely embedded in the land providing a ready and easy source for fresh growth of wood when the trees were cut did not form any part thereof. Then again considered from the point of view of a person engaging himself in the business of sale of trees the capital structure would, in our opinion, be not only the land on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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