Tax Management India. Com
                            Law and Practice: A Digital eBook ...
TMI - Tax Management India. Com
Case Laws Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Manuals News SMS Articles Highlights
        Home        
 
Extracts
Home List
← Previous Next →

SALE OF STANDING TREES

Income Tax - Started By: - ROHIT GOEL - Dated:- 13-2-2018 Last Replied Date:- 2-6-2018 - Hi,If land is purchased with standing trees and later on these trees are sold, would it be right to not treat the income as agriculture income just because basic operations were not performed by assessee himself but by the previous owner? - Reply By KASTURI SETHI - The Reply = Standing trees which are attached to earth are an immovable property. See judgement of Supreme Court in the case of CST Vs. Husenali .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t then it will be capital receipts . but if cut from stem leaving root then it will be an agricultural income. request experts to cast their views on this please. - Reply By YAGAY and SUN - The Reply = Madras High Court Commissioner Of Income- Tax vs K.E. Sundara Mudaliar And Ors. on 2 February, 1950 [ 1950 (2) TMI 9 - MADRAS HIGH COURT ] Equivalent citations: AIR 1950 Mad 566, 1950 18 ITR 259 Mad Author: S Rao Bench: S Rao, V Sastri JUDGMENT Satyanarayana Rao, J. 1. The only question that has b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hich is exempted from taxation under section 4 (3) (viii), Income tax Act. 2. The facts are not seriously in dispute; and it is also common knowledge that in order to raise casuarina plantation it is necessary to prepare the soil, raise seedlings, cultivate the land and plant them. After the plantation, the plants require watering for periods, ranging from 3 to 5 years according to the nature and quality of the soil. Even after the expiry of the period of three years or five years, the trees in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mpt from taxation under Section 4 (3) (viii). 3. The Act defines agricultural income in these terms : - Agricultural income means - (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in British India or subject to a local rate assessed and collected by the officers of the Crown as such; (b) any income derived from such land by - (i) agriculture, or (ii) the performance by a cultivator or receiver of rent in kind of any proces .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

meaning of the expression agricultural purposes was the subject-matter of conflicting decisions of Courts under various statutes in which the expression in some form or other occurred. It may not be quite legitimate to rely largely upon the decisions which have construed a similar or analogous expression in other Acts for interpreting the expression used in Section 2 (1), Income-tax Act. The recent decision of the Privy Council in Mustafa Ali v Commr. of Income-tax, U. P. Ajmer, 75 I. A. 268 : ( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ttee approved the test laid down by this Court in Gangadhara Rama Rao v Commissioner of Income tax. I. L. R. (1946) Mad. 745: A.I.R. (34) 1947 Mad 157) and also by the Chief Court of Oudh, and the High Court of Allahabad. For the purpose of disposing of the appeal before their Lordships, they laid down at p. 277 of the report that, ''though it must always be difficult to draw the line, yet, unless there is some measure of cultivation of the land, some expenditure of skill and labour on i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the case before their Lordships. It is that question that is raised in this reference. The test laid down in that decision is satisfied in the present case as the trees did not grow on the land spontaneously but were the result of cultivation of land, expenditure and skill and labour on it by the assessee. Even if the trees were raised by human labour on the land, unless the purpose was agriculture, the definition would not apply and the exemption does not operate. The land according to the def .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f Agricultural Income-tax v. Jagidish Chandra, Deo1949-17 I. T. R. 426 at p 435 (530 W.N. 596). From an examination of these meanings, it is clear that the word is used in a very general sense and not confined, as contended by Mr. Rama Rao Sahib on behalf of the Income-tax Commissioner, to either raising of food crops, or deriving fruit or other produce on the land such as mango garden coffee plantation or tea. It is common knowledge that other commercial crops such as tobacco, hemp, cotton and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

al Agricultural Income-tax Act, 1944, which also contained a definition of agricultural income which is similar in language to the definition in the Income-tax Act. The question was whether income derived from the sale of certain Sal trees was an agricultural income and derived from a land which was used for agricultural purposes. There were regular operations of forestry in the case and on an exhaustive review of the decision bearing on the point Mookerjee J. with whom Das J. agreed laid down t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g of that Act. 6. The decision of Patanjali Sastri J. who delivered the judgment of the Bench in Sarojini Devi v. Srikrishna, I.L.R. (1945) Mad 61: (A.I.R. (31) 1944 Mad. 401) in which the meaning of agricultural land within List II and List III in the Schedule VII, Government of India Act, 1935, was considered throws considerable light and also supports the view that unless there is something in the language of the enactment the word agriculture must be interpreted in the general sense and not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of being used for raising any valuable plants or trees or for any other purpose of husbandry. It follows that the mango grove in question is agricultural land in respect of which the Hindu Women's Rights to Property Act, 1937, does not operate to regulate succession. The trend of the decision of Varadachariar J. in Federal Court in Meghraj v. Allih Rakhia I.L.R. (1942) 23 Lah. 623: (A. I. R. (29) 1942 F. C. 27) also supports the view of Patanjali Sastri J. In Kajumal v. Saligram, 5 Lab. 50: .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nicipalities Act. 7. The learned counsel for the Income-tax Commissioner, Mr. Rama Rao Sahib, in a forceful argument referred to the decisions which have construed similar expression in the Transfer of Property Act and in the Estates Land Act. The decision in Venkayya v. Ramaswami, 32 Mad. 39: (8 M.L.J 278) does not help very much as all that was decided in that case was that when land was held by a ryot possessing permanent rights of occupancy in the land for raising paddy and raggi, if be rais .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

., referred to the colloquial meaning of the word agriculture and also the general sense in which the word is used. In ordinary parlance, says the learned Judge, a man who planted fruit trees or bushes in an enclosed space would be said to keep a garden. Neither he nor still less one who planted and maintained trees for firewood or other such purposes would be called an agriculturist. The term Agriculture however is capable of being applied to tillage of the soil in the widest sense and alter co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ad. 98 : (4 M. L. J. 21). In Panadai Pathan v. Ramaswami Chetti, 45 Mad. 710 : (A. I. R. (9) 1922 Mad. 351), Spencer and Ramesam JJ., decided that the lease of land for growing casuarina trees was a lease for agricultural purpose within the meaning of Section 117, T. P. Act. Both the learned Judges referred to the Dictionary meaning of the word. Spencer J., at page 713 stated his conclusion in these words: In my opinion agriculture connotes the raising of useful or valuable products which derive .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ising of products used as food for man or beast will exclude all cultivation of fibrous plants such as cotton, jute and linen and all plants used for dyeing purposes, such as indigo, etc., and all timber trees and flowering plants. I do not think this is the intention of the Act. The rearing of casuarina plantation requires some preparation of the ground and subsequent care by watering the plants. This view however, was not accepted by Reilly and Ananthakrishna Ayyar JJ., in Chandrasekhara v. Do .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e and hemp etc., for agricultural purpose. He was of the opinion that agriculture should not be confined to the nature of the productions cultivated but should be defined by the circumstances in which cultivation is carried. He was however against including in the definition the planting of timber or firewood trees as they stand on the land for a considerable number of years and that the inclusion of such plantations in the term agriculture was opposed to the very idea itself. As the case, howev .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e. 8. Lastly, there is a group of cases which arise under the Estates Laud Act and where it was held that the holding of land for pasturage was not an agricultural purpose. Rajah of Venkatagiri v. Ayyappareddi, 88 Mad. 738 : (A. I. R. (2) 1915 Mad. 781), Maharaja of Venkatagiri v. Rami Reddi, 31 M. L. J. 211 : (A. I. R. (4) 1917 Mad. 106) and Seshayya Garu V. Rajah of Pithapur, 31 M. L. J. 214 : (A. I. R. (4) 1917 Mad. 649). The first of this group of cases stresses upon the meaning of the word .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d is not treated otherwise as part of rent. In the second place, Section 6 (2) enacts that if land is held under a contract for pasturage of cattle the tenant so holding the land would not acquire permanent rights of occupancy in the land and by reason of such letting the land, it does not become ryoti land. Agriculture is denned in the Act as including horticulture, which is an indication that the word is used in a narrower sense. It is for these reasons that those decisions held that the holdi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e answer to the question referred to us should be in the affirmative and in favour of the assessee. The assessees in these references are entitled to their costs which we fix at ₹ 1050 in all the references (i. e.) ₹ 150 for each assessee. 11. Viswanatha Sastri J.-The facts on which this reference is based are these: Casuarina trees do not grow spontaneously. Seedlings have first to be raised on beds prepared for the purpose and manured and watered. Seedlings are usually bought in la .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

red at intervals for the first 3 to 5 years the period varying with the nature of the soil and the local rainfall. Small earthern ridges are put up round each plant in group of plants so as to catch and retain rain water for the growing plants. The plants grow for a period ranging from 7 to 10 years, the period of growth varying with the nature of the soil, the demand for fuel and the pecuniary needs of the planters. The trees, when cut, are mostly used as fuel, though casuarina is also used for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

India but now the Indian Republic. When exemption from income-tax is sought under Section 4 (3) (viii), Income-tax Act, for agricultural income , the primary condition must be satisfied that the land whose income is in question is used for agricultural purposes. The expression, such land in Section 2 (1) (b) refers back to the land mentioned in Section 2 (1) (a) and must have the same quality, i.e. of being used for agriculture purposes. 12. I shall briefly advert to the genesis of the provisio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onwards, and nothing like this is found in the English Income-tax Act. Even at a time when there was no provision like Section 100, Government of India Act, 1935, the Federal and Provincial Lists and there was no incompetency on the part of the Central Legislature to levy a tax on agricultural income, the Income-tax Acts passed from time to time by the Central Legislature including the existing, Act of 1922, exempted from income-tax the agricultural income of lands assessed to public revenue. Th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng a full right to the enjoyment of the land and its produce, subject only to the aforesaid contribution to the State Land revenue is collected annually from the proprietor of the land and is presumably exigible from the income of the land. Cash payment in lieu of a share of the produce due to the State, was substituted long ago to facilitate collection of revenue. Income derived from the produce of the land having been subjected to the payment of the annual land revenue, it was thought inequita .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and the income derived from the produce of the lands, and therefore the exemption from income-tax was limited to agricultural income derived from assessed lands. Such is the reason for exemption from income-tax of agricultural income. 13. It is true that in tax cases the Court has not got to see what, in its judgment, the Legislature might reasonably do but what it has actually enacted by way of imposed burden or provided relief. The expression agriculture has been frequently used in different .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the question before us may be obtained by examining the reported decisions as showing how in particular circumstances the dividing line has been drawn. There being no definition of agriculture and agricultural purpose in the Income tax Act, the words have to be construed and understood in their popular sense and according to their ordinary meaning. 14. The Queen v. Income-tax Commissioners, (1888) 22 Q. B. 296 at p 309 : (58 L. J. Q. B. 196) affirmed on appeal in Commissioners of Special Purpos .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

; In re North British and Mercantile Insurance Co., I. L. R. (1937) 2 Cal 540. 15. To some extent the connotation of the word agriculture depends on the common notions of people in the particular country in which its interpretation is called for. Hearing of sheep, poultry, pigs, cows, bullocks, and horses, has been considered in England to be included in the term husbandry which is given as a synonym for agriculture in the Oxford dictionary. The same meaning has been attached to that expression .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not therefore propose to examine the many cases cited to us turning on the construction of the word ''agriculture used in other enactments. In some cases the view has been expressed that agriculture means the cultivation of a field the cultivation of an open space for raising annual or periodical crops or other produce of the land useful to man and animals. According to this view, the planting of timber or firewood trees which are to stand on the land for a considerable number of years i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mmon use throughout the world. In my opinion, the word ''agriculture is used in Section 2, Income-tax Act in a wide sense so as to denote the raising of useful or valuable products which derive nutriment from the soil with the aid of human skill and labour. It would include horticulture, which involves intensive cultivation of land as garden in the production of fruits, flowers or vegetables. It would also include growing of trees or plants whose growth is effected by the expenditure of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d draw their sustenance from the soil. 16. In Mustafa Ali v. Commissioner of Income-tax, 1949-1-M. L. J. 165 :(A. I. R. (36) 1949 P. C. 13) the Judicial Committee approved of the decisions in, Yuvarajah of Pithapuram v. Commissioner of Income-tax, I. L. R. (1946) Mad. 743 ; (A. I. R. (84) 1947 Mad. 157) and Benoy Ratan Banerji v. Commissioner of Income-tax. 1947-15 I. T. R. 98 (ALL.) and held that income derived from the sale of trees described as forest trees growing on land naturally was not a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

also added the following observation : The question seems not yet to have been decided whether land can be said to be used for agricultural purposes within the section, if it has been planted with trees and cultivated in the regular course of arboriculture and upon this question, their Lordships express no opinion. This last observation was perhaps made ex abundanti, cautela and does not imply that the Board treated arboriculture, horticulture and sylviculture as standing on a different footing .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of time and might then be cut down for use as fuel or timber could not be said to be an agricultural purpose within the meaning of Section 2 (1) (a), Income, tax Act. 17. It is a matter of ordinary experience, at least in this part of the country, that mango, cocoanut, palmyra, orange, jack, arecanut, tamarind and other trees are planted usually in an enclosed land, and that these trees do not yield any fruit or crop in the early years of their growth. They remain on the land for a long number o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cannot be maintained that growing coffee is not an agricultural operation. Coffee and tea plants stand on the soil for many years, and their produce is gathered periodically. In the padugai lands or lands lying between the sandy bed and the flood bank of rivers, plantains are grown in many places in deltaic tracts. Young plants are often brought and planted in pits dug for the purpose in a row with sufficient interspaces. Trenches are dug by the side of a row of a plantain trees in order to catc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

thered in. Bamboo is often planted in enclosed lands by digging pits, filling them with sand and manure and then planting the young stalks in a bunch at suitable distances. Watering is done for the first, two or three years. Every year the land surrounding each bamboo cluster is dug with a spade and small earthern ridges are put up so as to catch and retain rain water. Bamboo plants attain maturity in about three or four years, and the thorny branches which grow on the main stem are then fit to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cluded in husbandry . These animals are considered to be the products of the soil, just like crops, roots, flowers and trees, for they live on the land and derive their sustenance from the soil and its produce. Glanley v. Whightman, (1938) A. c. 618 at p. 638, Commissioner of Income-tax, Burma v. Kokinne Dairy & Co., (1938) 6 I. T. R. 502 : (A. I. R. (25) 1938 Rang. 260 F.B.). It is not, therefore, legitimate, in my opinion, to confine the word agriculture to the cultivation of an open field .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ence or art of cultivating the soil, including the allied pursuits of gathering in the crops and rearing livestocks, tillage, husbandry, farming (in the widest sense). In Webster's Dictionary the expression is defined as the art or science of cultivating the ground, including the preparation of the soil, the planting of seeds, raising and harvesting of crops and the rearing, feeding-and management of livestock and as including in its broad sense, farming horticulture, etc. It has now been he .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1942 P. C. 27) where all the relevant earlier cases are reviewed, decisions turning on the interpretation of local Tenancy Acts are not of relevance in this connexion. Both in Meghraj v. Alla Rakhia, I. L. R. (1942) 23 Lah, 623 : (A. I. R. (29) 1942 F. C. 27) and in Sarojini Devi v. Krishna Anjaneya, I. L. R. (1945) Mad. 61: (A.I.R. (31) 1944 Mad. 401) it was pointed out that the expression agricultural land in Lists 2 and 3 of Schedule VII, Constitution Act, 1985, should receive a wide interpr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d of crop was grown thereon but should be subjected to tax if another variety was raised. Cultivation of cocoanut trees which stand on the land for decades and yield cocoanuts periodically has been held to be an agricultural purpose in Venkayya v. Ramaswami, 22 Mad. 89 : (8 M. L. J. 278) which was approved in Murugesa Chetti v. Chinnathambi Goundan, 24 Mad 421 at p. 425. In Narayana v. Subramaniam, I.L.R. (1987) Mad. 364: (A.I.R. (24) 1937 Mad. 254 F.B.) it was held that a cocoanut garden was a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

but not wholly, proceeds on the admission of counsel and cannot be considered to be a binding authority in view of the later decision above cited. The decision of Reilly and Ananthakrishna Aiyar JJ. in Chandrasekhara v. Duraisami, 54 Mad. 900: (A.I.R. (18) 1981 Mad. 659) holding that a tenant of land who took a lease for the purpose of planting casuarina trees thereon was not a ryot most be confined to cases arising under the Madras Estates Land Act. The incidental observations of Keilly J. in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a, v. Rukmini Devy, 48 C.W.N. 759 at p. 763 that land used for planting trees for fuel might possibly be considered. to be non-agricultural land, This observation is purely obiter and not a considered decision on the point, and even otherwise, I am unable to agree with it. 19. I would hold that irrespective of the nature of the produce or product of the land, whatever is grown on land aided by human labour and effort, whatever does not grow wild or spontaneously on the soil without human labour .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.