TMI Blog1969 (2) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... cutting and removing trees from 500 acres on Mangayam Katchithode forest. The Appellate Assistant Commissioner after calling for a report on 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 Tribunal referred the following question to the High Court of Kerala : " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in holding that Rs. 75,000 being income from felling of trees from forests is not subject to income-tax ? The High Court answered the question in the negative. We are of the view that the facts found by the Tribunal are not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tensive quotation from the judgment of the High Court of Bombay in Commissioner of Income-tax v. N. T. Patwardhan, the Tribunal stated that the observations applied to the facts in the case before them, and on that account they upheld the claim of the appellant. The High Court observed that " it was agreed that the Mangayam Katchithode forest was within the ambit of the Madras Preservation of Private Forests Act, 1949, and the statutory rules on the subject and that the expression 'clear felling' is an expression with a definite and specific meaning as far as such forests are concerned ". They then proceeded to quote rule 7 framed under the Madras Preservation of Private Forests Act, 1949, and after setting out conditions (b) and (c) obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e later on destroyed " it was a case of clear felling and the receipt was of capital nature. The High Court was of the view that the " clear felling " of forest lands meant cutting trees and not removal of the roots so that there would be regeneration, future growth of the roots and the stumps and on that account the receipt was of revenue nature. It appears that before the Income-tax Officer the agreement dated September 11, 1957 was not produced. After the Appellate Assistant Commissioner remanded the case to the Income-tax Officer the latter submitted the " remand report " and at that time the agreement was produced. The Tribunal in support of its conclusion referred to the preamble of the document and the conditions thereof. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... February 13, 1969, we called for a supplementary statement of the case setting out the terms of the agreement conveying the rights in the forest trees to the lessees, and the true import of the expression "clear felling ". The Income-tax Appellate Tribunal has submitted a supplementary statement of the case. The Tribunal has set out the relevant terms of the agreement and has also observed that the import of the expression " clear felling " is that " all trees except Casuarina are to be felled at a height not exceeding six inches from the ground, the barks being left intact on the stump and adhering to it all round the stump without being torn off or otherwise changed. " There is no suggestion that there were any Casuarina trees in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at net receipts from the sale of forest trees is income liable to income-tax, even though the forest may be gradually exhausted by fellings. The court further observed that income from the sale of forest trees of spontaneous growth growing on land which is assessed to land revenue is not agricultural income within the meaning of section 2(1)(a) of the Income-tax Act and is not exempt from income-tax under section 4(3) (viii) of the Act. In Raja Bahadur Kamakshya Narain Singh v. Commissioner of in tax, a similar view was expressed by the Patna High Court. In Fringford Estates Ltd. v. Commissioner of Income-tax it was held that profits realised from the sale of timber were trade profits and were liable to income-tax. In that case the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt held in a case arising under the Kerala Agricultural Income-tax Act, 1950, that the amount realised by sale as firewood of old and useless gravelia trees grown and maintained in tea gardens for the purpose of affording shade to tea plants is capital receipt and not revenue receipt. The court observed : " The gravelia trees were grown and maintained for the sole purpose of providing shade to the tea bushes in the tea estates of the assessee. That such shade is essential for the proper cultivation of tea cannot be disputed and the trees should hence be considered to be as much a part of the capital assets of the company as the tea bushes themselves or the equipment in its factories. Some of the gravelia trees became old and useless with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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