TMI Blog1954 (5) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... owed as a loss relating to the business carried on by the assessee? Questions 1, 2 and 3 are common in all the references, while question No. 4 arises only in respect of Miscellaneous Judicial Case No. 24 of 1951 which arises out of the order passed for the assessment year 1948-49 in Income Tax Appeal No. 1481 of 1949-50. So far as the first two questions are concerned there is a slight difference in the case in regard to Bankura forest and Kharagpur forest. In regard to Bankura forest, the forest is leased out by auction on short terms for lump sums. The terms of the lease are not to be found on the records of these cases. It is, however, said that, according to the terms of the lease, the lessee is entitled to cut down and remove all sal trees, but not those which are more than 3 feet in girth above 3 feet from the ground, and all other jungle trees, other than fruit bearing trees and valuable timber trees. The lessee is further entitled to cut stumps not higher than 5 feet over ground so that new shoots may grow in rains and in time major trees are produced. The lessee cannot enter the forest during the rains, when new shoots come out, and he had to guard the forest from tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, in consideration of the extension of the prospecting licences and validating the leases and the licences, and in full settlement of the claim for salami the company paid to the assessee ₹ 5,25,000 in respect of the extension of the prospecting licences, a capital sum of ₹ 40,000 far validating the leases and licences and another sum of ₹ 1,76,306 in full settlement of cesses. The assessee had claimed that the sum of ₹ 5,25,000, received as salami and the amount of ₹ 1,76,306, received on account of cesses, were not taxable, and it was so held by this Court. Their Lordships, following the case of Raja Bahadur Visweshwar Singh ([1939] 7 I.T.R. 536) held that it would be impossible to lay down any hard and fast rule that a salami can in no case be taxable. But the question must depend upon the facts and circumstances of each case. In some cases it may be payment of rent in advance; in other cases it might well be a lump sum payment for the leasehold interest, in which case it will be a capital receipt. And the case of Rani Bhubneshwari Kuer ([1940] 8 I.T.R. 550), where Harries, C.J., and Fazl Ali, J., (as he then was) had held that It cannot be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital receipt, was not accepted, and it was held that the receipt from the sale of forest trees was income assessable to tax. In the recent case of Fringford Estates Ltd. v. Commissioner of Income-tax, Madras [1951] 20 I.T.R. 385, the Madras High Court has also taken the same view as was taken in the Patna case, Raja Bahadur Kamakshya Narain Singh v. Commissioner of Income-tax, Bihar and Orissa [1943] 22 Pat. 713; 11 I.T.R. 513, and it was held that income derived from sale of forest trees is not capital receipt and is liable to tax, even though there is exhaustion of capital assets in the shape of valuable and long standing trees. In the case of Raja Bahadur Kamakshya Narain Singh v. Commissioner of Income-tax [1946] 14 I.T.R. 673, Lord Wright, delivering the judgment of the Judicial Committee, had observed as follows:- If the receipts are income, it is not material for tax purposes that that for which they are paid comes from a wasting property. If the payment ceases because the source ceases so does the tax. Once it is established that the royalties are income within the meaning of the Act it is not material that the mines are in course of being exhausted unless there is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to deal with the case of Commissioner of Agricultural Income- tax, West Bengal v. Raja Jagadish Chandra Deo Dhabal Deb [1949] 17 I.T.R. 426 in some detail while dealing with the second question, I do not think it proper to consider that case any further so far as this point is concerned. In that view of the matter, I would hold that the income from Bankura forest is not agricultural income and, as such, exempt from taxation. I would, therefore, answer question No. 1 in the negative. Turning now to question No. 2, whether in the facts and circumstances of the case the receipts from Kharagpur forest are agricultural income, it should be mentioned at the outset that Mr. Mazumdar did not address us in regard to two sources of income, namely, from bamboos and sabai grass; he has confined his argument to the income derived from timber. The finding of fact of the Tribunal is that there was a scheme by which the sal and ebony trees which grow in the forests were conserved by allowing each tree a circle of 15 feet by clearing the jungle of other trees which fall within that area, thus leaving sufficient space for growth. Although some coppice work was also undertaken, it is clear tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... West Bengal v. Raja Jagadish Chandra Deo Dhabal Deb [1949] 17 I.T.R. 426 already referred to above. Their Lordships of the Calcutta High Court, in that case, were considering the definition of agricultural income as defined in the Bengal Agricultural Income-tax Act, 1944. It must be at once stated that the definition given in that Act and the definition given in the Indian Income-tax Act are in similar terms. After an elaborate discussion of the various authorities, including the Privy Council case of Raja Mustafa Ali Khan [1948] 16 I.T.R. 330, it was held in that case that income from a virgin forest or forest of spontaneous growth was not agricultural income and the view that tilling of the soil was the sine qua non for bringing a pursuit within the term agricultural was not sound; and, upon the facts of that particular case, it was held that there was definite proof of cutting of the young plants for the appearance of new shoots and plucking of the leaves; that, therefore, application of human intervention was clear and that without such human intervention the purpose for which tendu leaves were used would not have been possible. This judgment has taken a much wider view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it must be found that the land itself was cultivated and that there was some expenditure of skill and labour upon it. In the present case, there is no material to show that the land on which the jungle stands was ever subjected to cultivation or that any skill or labour was spent upon that land. Even conceding that the two conditions laid down by their Lordships are to be read as alternative conditions, in my view, there is no material on which to hold that there was any expenditure of skill and labour upon the land. At the most, the jungles were cut in order to provide a circle of 15 feet round about the trees and there were some forest guards and other staff. The case of Yuvarajah of Pithapuram [1946] 14 I.T.R. 92 mentioned above has referred approvingly to the decision of this Court in Maharaja Pratap Udai Nath Sahi Deo [1941] 9 I.T.R. 313. Their Lordships had also approved of the definition given of agriculture in the Oxford Dictionary to mean the science or art of cultivating the soil, including the allied pursuits of gathering in the crops and rearing live-stock; tillage, husbandry, farming (in the widest sense) , and they further held that income derived from trees which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was regular forestry operation carried on by the staff of the assessee. Counsel advanced the argument that the phrase agricultural income in Section 2(1) of the Income-tax Act should be construed in a wide manner and even if the land itself was not cultivated, the income from the sale of timber in the forest would constitute agricultural income within the meaning of Section 2(1) if there was expenditure of human skill and human labour upon the forest and if there was regular forestry operation. In support of this argument counsel relied on the decision of the Judicial Committee in Raja Mustafa Ali Khan's case [1948] 16 I.T.R. 330. Counsel also referred to the decision of the Calcutta High Court in Commissioner of Agricultural Income-tax v. Raja Jagadish Chandra Deo Dhabal Deb [1949] 17 I.T.R. 426 in which sal trees growing in the assessee's forest were not planted by him and there was no cultivation of the land. It was, however, found in that case that the assessee had carried on regular operation in forestry the forest grew. It was held by the Calcutta High Court that the income from the sale of the sal trees agricultural income within the meaning of Section 2(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preceding paragraph that there was nothing to show that the assessee was carrying on any regular operation in forestry. I do not think that the argument of Mr. Mazumdar is correct. In support of his submission Mr. Mazumdar relied upon the decision of the Calcutta High Court in Commissioner of Agricultural Income-tax v. Raja Jagadish Chandra Deo Dhabal Deb [1949] 17 I.T.R. 426. With great respect I do not think that the Calcutta High Court has rightly interpreted the decision of the Privy Council in Raja Mustafa Ali Khan's case [1948] 16 I.T.R. 330. In my opinion the ratio decidendi of the Privy Council is that there must be some measure of cultivation of the land and some expenditure of skill and labour upon it, if the income from a forest should be treated as an agricultural income. I agree with my learned brother Sinha, J., that that is the true principle which is to be deduced from the judgment of Lord Simonds in the Privy Council case. But I shall assume in favour of the assessee that the wider interpretation ought to be given to the expression agricultural income in Section 2(1)(a). Even so it is clear that the assessee has not been carrying on any regular operation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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