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TMI Blog1953 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... de within a certain time, require the Appellate Tribunal to refer to the High Court any question of law arising out of its order and further provides that "the Appellate Tribunal shall, within ninety days of the receipt of such application, draw up a statement of the case and refer it to the High Court". In the present case the reference was not made within ninety days from the receipt of the application. As this was happening in too many cases, it appeared to this Court that the statutory direction contained in Section 66(1) of the Act was being disregarded by the Tribunal and, accordingly, it was directed by an administrative order that references made after the expiry of the period prescribed by the Act should be accepted only provisionally, subject to all just exceptions that might be taken at the hearing on the ground of limitation. The order was directed to be incorporated in the paper book of every case in which the question was involved so that the matter might be judicially examined. The present case is the first in which the matter has come up for consideration and we have heard the learned counsel for the Commissioner of Income-tax and the assessee. Both conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Apart from the true construction of Section 66(1), it is also settled law that a party cannot be made to suffer prejudice by any default or negligence on the part of the court. It appears to us further that no question of limitation affecting the rights of the parties can really arise in circumstances like the present, because the basis of all rules of limitation is that a party, being required or being at liberty to do a certain thing within a certain time, fails to do it within the time limited, whereas, in the present case, the default or negligence is of a third party. We accordingly hold that Section 66(1), in so far as it provides that a reference shall be made by the Tribunal within ninety days from the date of the application, is only directory and we hold further that for that reason as also the other reasons we have given, the present reference is valid, although made after the expiry of ninety days. We desire to add, however, that although the validity of a reference may not be affected by the expiry of the period prescribed by Section 66(1), it is not proper for the Tribunal to disregard that provision. The Act although it may not command the Tribunal to make a refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e orders passed in the case or any other material on what information the Income-tax Officer had actually proceeded. The Tribunal has however stated that "the only information that the Income-tax Officer received was derived from the decisions of the Kapurthala case (Maharaja of Kapurthala v. Commissioner of Income-tax, C.P. & U.P.*), and that it had "not been submitted before the Tribunal that the Income-tax Officer did not know that the assessee had forest income." The facts on which we must proceed, therefore, are that at the time of the original assessment, the Income-tax Officer was aware that the assessee had forest income and that thereafter he came to know from the decision in the Kapurthala case* that income derived from the sale of forest trees of spontaneous growth was not agricultural income and therefore not exempt from taxation under the Indian Income-tax Act. The question is whether in that state of the facts, action under Section 34, as it stood before the amendment of 1948, was rightly taken. Mr. Pal, who appears on behalf of the assessee, contended that, on the above facts, the true position was that the Income-tax Officer had merely changed his op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nition of "fact" a Chief Court decision as to the chargeability of a particular type of income cannot equally be an information as to the state of the law and so "information" within the meaning of Section 34. Indeed, in the case of V.M. Raghavalu Naidu & Sons v. Commissioner of Income-tax, Madras*, the Madras High Court, while preferring to follow the Bombay decision for the sake of uniformity, wished particularly not to be understood as holding that the information must relate to a pure question of fact. Information as to the state of the law, it was added, would equally bring Section 34 into operation. Cases where the Income-tax Officer merely changes his mind without any fresh information from an external source, as in Commissioner of Income-tax, Madras v. K.M.S. Lakshmana Iyer [1945] 13 I.T.R. 242, relied on by the assessee or where a successor proceeds on the view that his predecessor was wrong in law as in the case in V.M. Raghavalu Naidu & Sons v. Commissioner of Income-tax, Madras [1945] 13 I.T.R. 194, referred to above, are wholly beside the point. So are cases where the Income-tax Officer gives effect to a decision of the High Court as regards the ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowledge and unless it is shown that he was aware of the decision in which a contrary view had been taken, it cannot be said that the information conveyed by the decision on which he relied was not, to him, definite. Two subsidiary arguments remain to be noticed. Reference was made to Order XLVII, rule 1, of the Civil Procedure Code which speaks of "discovery of new and important matter or evidence" and with respect to which it has been held that an error of law is not a "new matter" as contemplated by the section nor analogous to any of the matters contemplated by it. I am unable to see how the construction put upon the words "new matter of evidence" read with the other occurring in Order XLVII, rule 1, can be of any assistance in construing the words "definite information" in Section 34 of the Income-tax Act. The reasoning on which the decision of the Privy Council in Chajju Ram v. Naki [1922] 49 I.A. 144, is based is wholly inapplicable to the case of Section 34, besides that the Privy Council had occasion to construe directly at least, only the words "any other sufficient reason". It was further contended by Mr. Pal that mere i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded as a result of destruction by cattle and other causes." The operations performed by the staff maintained by the assessee are "pruning, weeding, felling, clearing, cutting of channels to help the flow of rain water, guarding of the trees against pest and other destructive elements and sowing of seeds after digging of the soil in denuded areas." The Tribunal held that except the sowing of seeds, the operations carried out were equally necessary for the maintenance and upkeep of any forest of spontaneous growth and therefore they did not constitute such expenditure of human labour and skill as would make them operations of agriculture. The sowing of seeds, it was held further, was "few and far between" and the normal process by which the forest grew again, after a part of it had been cut down, was by the growing out of offshoots from the stumps left. The operations were therefore in the main only operations for the "maintenance, preservation, nursing and the rearing" of the forest and consequently the income derived from the sale of trees from it was not agricultural income. In the view of the Tribunal, the word "agriculture", as used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that in the present case the facts were far stronger in favour of the assessee. On behalf of the Commissioner, Mr. Meyer cited a large number of decisions and contended that in order that there might be agriculture, some cultivation was essential or, at any rate, there had to be some expenditure of human skill and labour on the land itself. Before taking up the question on its merits, I feel bound to observe that the action of the Tribunal in declining to follow the decision in Jagadish Chandra Deo Dhabal Deb's case [1949] 17 I.T.R. 426 was highly improper. As was to be expected, Mr. Meyer made no attempt to defend it. The definition of "agricultural income" in the Indian Income-tax Act is precisely the same as in the West Bengal Act. It is precisely the income which the latter Act brings to charge that the former Act exempts. In those circumstances, the Tribunal had no option to disregard the decision in a case arising in this State for which the referee Court was this Court. Its clear duty was to follow it, irrespective of what views it might itself hold and leave it to the Commissioner to bring up the matter on a reference to this Court, if he was so advised. Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot; meant agricultural income as defined for the purposes of the enactments relating to Indian income-tax. One is thus thrown back on the definition in the Income-tax Act. To explain agricultural income as contemplated by the Income-tax Act by reference the provisions of the Government of India Act, 1935, is thus to argue in a circle. Nor do I think is the mention of the three separate items, agriculture (Item 20), forest (Item 22) and tax on agricultural income (Item 41) in List II of the Seventh Schedule of any help, because Item No. 22 obviously contemplates forests as such, their conservation or management or it may even be income from forest products, but a forest area may be made the subject of agriculture, directed to either growing or tending the forest, and if it is, such treatment of forest lands may quite clearly come under agriculture and the income from forest lands, so treated, will be agricultural income. The real question is what agriculture means. To say that since the Central Act exempts only agricultural income and since it is as such income that the exemption of forest income is claimed, the mention of agriculture, agricultural income and forests as separate ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by him". It is obvious that the two clauses must be taken as contemplating different varieties of agricultural income, or there could be no reason for setting them out separately. The use of the word "raised" in clause (iii) where the word "agriculture" does not occur, cannot therefore be conclusive or even indicative of the meaning of the latter word in clause (i). I have now cleared the ground for approaching the main question which is whether the operations found by the Tribunal amount to agriculture. If the original trees or some of them had still been standing, it could not have been said that the whole of the income was derived from the land by the operations carried out by the assessee, because those trees would not be the product of such operations. But as the forest has been in existence for 150 years and as the trees standing on sections of it are sold periodically by rotation, it can safely be presumed that the trees of which the forest now consists are mostly offshoots sprung and grown from stumps of the original trees after they had been cut down and that some have sprung from the seeds sown. It follows that whether or not the operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me expenditure of skill and labour upon it, it cannot be said to be used for agricultural purposes within the meaning of the Income-tax Act." In all subsequent expositions of "agricultural income" the passage quoted above has been taken as the text of the law and judicial decisions have been but commentaries upon it. Commentators have differed, as they usually do, but they seem to be in agreement in thinking that it is not said or implied in the text that in order to constitute agriculture, some actual tillage of the land is required. In the Calcutta case of Jagadish Chandra Deo Dhabal Deb [1949] 17 I.T.R. 426 it was said that the view that tilling of the soil was the sine que non for agriculture had been "exploded". The Assam High Court, in the case of Jyotirindra Narayan Sinha Chowdhury v. The State of Assam [1951] 19 I.T.R. 379, said that the Privy Council had not laid it down that tillage or actual cultivation was "an essential pre-requisite of agriculture". In the case of Pratap Singh Balbeer Singh v. Commissioner of Income-tax, U.P., & C.P. [1952] 22 I.T.R. 1, the Allahabad High Court said, somewhat grudgingly it would appear, that accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g what agriculture is, it is not necessary to confine oneself to the strict words of what the Privy Council said or to seek the whole definition there, although what their Lordships said must not be disregarded. I do not think that when the Privy Council said that there must be "some measure of cultivation on the land, some expenditure of skill and labour upon it", their Lordships intended to say that the expenditure of skill and labour must always be in the form of cultivation. The word "or" introduced by the Allahabad High Court between the two phrases does not occur in the original, but I think it is implied. The idea, it seems to me, is that if the land has been left to the forces of nature to grow what products such forces could, there is no agriculture and that there can be agriculture only if the labour and skill of man has operated on the land to cause or aid the growth of certain products. All that is necessary is that the land should be actively exploited with a view to procuring growths or better growths from the soil, but it does not seem to be also necessary that the exploitation should be by tillage. Mr. Meyer referred to the decision of the Nagpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal for disregarding all the operations except sowing of seeds, viz., they are equally necessary for the maintenance and upkeep of any forest of spontaneous growth, is sound because if such a forest is taken over and subjected to operations of forestry which involve agriculture, the fact that the forest was originally of spontaneous growth would not prevent the income from it being agricultural income. The Privy Council appears to have distinguished a forest of spontaneous growth from a forest in which regular operations of forestry were carried on, although it did not say, as appears to have been assumed in Jagadish Chandra Deo's case [1949] 17 I.T.R. 426, that if there were operations in forestry, there would be agriculture. The real and the proper reason for disregarding many of the operations in the present case would be that they do not involve culture of the land. But three of the operations are, in my opinion, vital. They are "weeding", "cutting of channels to help the flow of rain water" and "sowing of seeds after digging of the soil in denuded areas". I am aware that in some of the decisions weeding has been held to be not an agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X
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