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TMI Blog1969 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... reas and now a jungle. The assessee company was formed in the year 1943. After the formation of the company, the assessee bought several coffee estates and consolidated them. During the relevant accounting period in respect of the assessment years 1961-62, 1962-63 and 1963-64, the assessee sold from its lands rosewood trees. The proceeds of sale of the said rosewood trees after deduction of expenditure was claimed to be not assessable to tax under the Act. The assessee in its return to the Income-tax Officer under the Central Income-tax Act claimed that the said amounts are not taxable on the ground that they constitute capital and not income. The Income-tax Officer, Coorg Circle, Mercara, rejected the contention of the assessee and assessed the amount to tax. Before the Agricultural Income-tax Officer, the assessee contended that the said amount had been assessed under the Central Income-tax Act and hence could not be assessed under the Act and, further, that the receipts are capital and as such not taxable as income. The Agricultural Income-tax Officer overruled the objection and assessed the receipts to tax under the Act. The Agricultural Income-tax Officer was of the opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agency and as the assessee has performed substantial agricultural operations on the trees the income from the sale of these trees is liable to be taxed as agricultural income. In the meantime, the assessee had preferred appeals against the order of the Income-tax Officer to the Appellate Assistant Commissioner of Income-tax, who affirmed the orders of the Income-tax Officer. Against the order of the Appellate Assistant Commissioner, the assessee preferred appeals to the Income-tax Appellate Tribunal; the said appeals are pending disposal. Against the common order passed by the Commissioner of Agricultural Income-tax in Mysore, the assessee preferred one Revision Petition under section 55 of the Act and that Revision Petition was numbered as C. R. P. No. 1008 of 1967. At the hearing, when it was brought to the notice of the assessee's learned counsel, that the common order made by the Commissioner relates to three assessment years and three revision petitions ought to have been filed, the assessee filed Civil Revision Petitions Nos. 1939 and 1940 of 1969. Besides the revision petitions, the assessee has filed Writ Petition No. 2382 of 1967 impleading as respondents, the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rent-in-kind to render the produce raised or received by him fit to be taken to market, or (iii) the sale, by a cultivator or receiver of rent-in-kind of the produce raised or received by him in respect of which no process has been performed other than a process of the nature described in paragraph (ii). " It is common ground that the assessee is not receiving any rent or revenue and therefore clause (1) of section 2(1)(a) is not applicable. The receipts in question can come only under clause (2) of section 2(1)(a). In order to constitute agricultural income, two conditions have to be satisfied viz., (i) the land must be used for growing all or any of the commercial crops, and (ii) that the income should be derived from such land by agriculture. Unless both the conditions are satisfied, the receipts do not constitute agricultural income. It is not disputed that out of 10,610 acres, 8,243 acres alone are cultivated under different crops and that the jungle land is of the extent of 2,367 acres. That the said jungle land is not cultivated under any crop is not disputed by the respondent. From the assessment order for the assessment year 1963-64 of the Agricultural Income-tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural purposes and is either assessed to land revenue in the taxable territories or is subject to local rates assessed and collected by officers of the Government as such; and (ii) that the income should be derived from such land by agriculture or by one or the other of the operations described in clauses (ii) and (iii) of section 2(1)(b) of the Indian Income-tax Act. The same decision has held that agriculture is the basic idea underlying the expressions " agricultural purposes " and " agricultural operations "; that the term " agriculture " is understood as cultivation of the field and the term thus understood means cultivation of the land meaning thereby, tilling of the land, sowing of the seeds, planting and similar operations on the land and such operations would be the basic operations which would require the expenditure of human skill and labour upon the land itself. The question therefore is whether the rosewood trees were planted by the predecessors in interest of the assessee or they are of spontaneous growth. That the rosewood trees were trees retained in the estates as shads trees is common ground. According to the assessee the rosewood trees in existence in the jungl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inches. In Sanskrit, rosewood tree is called shinshapayam. Mention of shinshapayam is made in the Vedas. In Encyclopaedia Britannica, it is stated that the rosewood trees are native to Brazil, Honduras, Jamaica, Africa and India. Having regard to the above authorities, it is clear that rosewood trees grow in abundance in the forests of the Western Ghats, that it is a tree of very slow growth and that, in order to attain the minimum exploitable size of 6 feet in girth, the tree must be more than 100 years old. In the affidavit of the retired Chief Conservator of Forests filed before the Commissioner of Agricultural Income-tax, he has given the opinion that the trees in question must be above 150 years old. In the Modern Coffee Production by A. E. Haarer, at page 7, the history of coffee plantation in India has been given. The relevant passage reads thus: " According to the Indian tradition, coffee was introduced into India by a Moslem prilgrim by name Baba Budan, as early as 1600 or 1695; he, it is said, planted his seeds near his hut at Chickmagalur in the mountains of Mysore. The British are said to have introduced coffee to the Malabar Coast in 1700, obtaining their planting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central Income-tax Act, the Income-tax Officer has found that the trees are old, aged more than 100 years, and that they are of spontaneous growth. The proper inference to be drawn from the material on record is that the rosewood trees were not planted by human agency or labour but they were in existence before the estates were opened and they were retained as shade trees for the coffee bushes. In our opinion, there was no material at all for the Agricultural Income-tax Officer and the Commissioner of Agricultural Income-tax to come to the conclusion that the rosewood trees were planted by human agency. The Commissioner, therefore, was wrong in coming to the conclusion that the rosewood trees were planted by human agency and the receipts from the sale thereof are agricultural income. The contention of the assessee that the receipts from sale of rosewood trees are not income but capital was rejected by the Agricultural Income-tax Officer and the Commissioner of Agricultural Income-tax. It is common ground that the rosewood trees were maintained as shade trees for the coffee bushes. Shade trees are absolutely essential for the protection of coffee bushes. It is not possible to gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above decision of the Kerala High Court was affirmed by the Supreme Court in State of Kerala v. Karimharuvi Tea Estate Ltd. In Commissioner of Agricultural Income-tax v. Kailas Rubber &.Co. Ltd. the question was whether the proceeds of sale of rubber trees from a rubber estate after the trees had become old and useless constituted agricultural income or capital. The Supreme Court held that the rubber trees formed part of the capital assets of the respondent. If the wood of the coffee bushes in the assessee's estates were sold when the coffee bushes become old and useless the receipts would constitute capital. So also the receipts from sale of the shade trees. We asked the learned Government Pleader as to how the instant case is different from the cases decided by the Supreme Court. He submitted that the distinction is that in State of Kerala v. Karimtharuvi Tea Estate Ltd. The trees were cut down and sold after they had kecome useless by the efflux of time but, in the instant case, there is no evidence that the rosewood trees had become useless by efflux of time. We do not think that the decision of the Supreme Court rested on the fact that the shade trees had become old and u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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