TMI Blog1950 (5) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners from the Sal trees in question being held as revenue receipts, such receipts can be regarded as agricultural income within the meaning of Section 2(a) of the Assam Agricultural Income-tax Act, 1939? (iii)Whether the amount received by the assessee as salami for settlement of agricultural holding is agricultural income within the meaning of Section 2 (a) (I) of the Assam Agricultural Income-tax Act? (iv)Whether the petitioner is entitled to a deduction of 15 per cent, on the amount salami as collection charges? 3. In Reference No. 8 of 1949, besides the four questions mentioned above, there is another question (No. 5), which is as follows : - Whether the amount paid to the ladies mentioned in para. 11 above under the will of the late Raja P.C. Barua, and charged on Lakheraj Srijangram (Touzi No. 34 of Goalpara Collectorate) should be deducted from the agricultural income, 4. In Reference No. 1 of 1949, only three out of the first four questions have been referred. The third question was not included in the reference. But we have before us a petition praying that the Member, Assam Board of Agricultural Income-tax, be directed to refer this question to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Mechpara Estates. 1946-47 46,131 Parbatjoar 12,036 Mechpara 5,338 Parbatjoar 1,295 Mechpara 1947-48 21,678 Parbatjoar 17,043 Mechpara 554 Parbatjoar 6,267 Mechpara 1948-49 93,123 Parbatjoar 11,353 Mechpara 6,604 Parbatjoar 1,832 Mechpara 4. Jyotsna Nath Choudhury. Co-sharer in Mechpara Estates. 1940-47 1947-48 1948-49 40,507 55,809 37,156 4,234 20,509 5,997 5. Jagadindra Narayan Choudhury. Co-sharer in Parbatjoar and Mechpara Estate. 1946-47 54,483 Parbatjoar 36,015 Mechpara 3,971 Parbatjoar 3,882 Mechpara 1947-48 22,956 Parbatjoar 51,159 Mechpara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax, in his reference stated that the receipts in question were derived from ' periodical sale of Sal trees grown on the land.' This statement of fact has not been disputed. In spite of this, it is claimed on behalf of the assessees that the receipts from the sales of Sal trees represent capital receipts and they could not be regarded as income or revenue receipts for purposes of the Assam Agricultural Income-tax Act. 8. It is pointed out that when trees from a forest are sold the transaction is substantially a sale of a part of the forest which is the capital. It results in some diminution of the capital, however small. The receipts in these circumstances ought to be treated as capital receipts. 9. The Assam Agricultural Income-tax Act defines agricultural income as follows : - (a) 'Agricultural income' means - (1) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in Assam or subject to a local rate assessed and collected by officers of the Crown as such. (2) Any income derived from such land by - (i) Agriculture, or (ii) the performance by a cultivator or receiver of rent-in-kind o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on income. This item is limited to income other than agricultural income. List 2 of the same Schedule enumerates matters in respect to which the State Legislatures have exclusive powers to make law. Item 46 of List 2 permits the State Legislatures to impose tax on agricultural income. 12. The word income has not been defined by the Statute. It must be taken to have been used in the Constitution of India as also in the other Acts. Central and Provincial, in its general sense. Again its meaning and connotation in all the enactments ought to be the same as the context in any of the enactments does not indicate anything to the contrary. The authorities bearing on the interpretation of the word as used in the Indian Income-tax Act will, therefore, govern the. interpretation of the word as used in the Assam Act also. This position is not disputed and the learned counsel for the assessees has himself drawn our attention to all the authorities bearing on the meaning of the word as used in the Indian Income-tax Act treating them as relevant to the question before us. 13. Income, according to its dictionary meaning means proceeds from labour, business, property or capital. The dict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alties per ton. The contention raised before their Lordships was that on a true construction of the Indian Income-tax Act, mineral royalties depending on the tonnage of minerals raised and despatched are not properly chargeable to tax because they are in their nature and quality capital and are not income or income derived from other sources within the meaning of Sections 6 and 12 of the Act. Their Lordships held that there was no real justification for treating the royalties as capital payments. They regarded the royalty as rent in substance, or as compensation which the occupier paid to the landlord for that species of occupation which the contract allowed. The fact that the mines were a wasting asset was considered irrelevant. Lord Wright in delivering the judgment of their Lordships observed as follows : - Income is not necessarily the recurrent return from a definite source, though it is generally of that character. Income again may consist of a series of separate receipts, as it generally does in the case of professional earnings. The multiplicity of forms which 'income' may assume is beyond enumeration. 17. Referring to the definition of the word income as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r High Court also relying on Kamakshya Narain Singh v. Commissioner of Income-tax, Bihar and Orissa [1943] 11 ITR 513; AIR 1943 PC 153 held in Beohar Singh v. Commissioner of Income-tax [1948] 16 ITR 433 ; ITR 1947 Nag. 425, that whether a given receipt is capital receipt or income depends on circumstances so that what is income in the hands of one man may be capital in those of another. But where the assessees sold timber annually from the forest and there was no reduction or loss of any capital asset, viz., forest land, it was held that the receipts derived by sale of timber were income and not receipts of a capital nature. 21. In Kamakshya Narain Singh v. Commissioner of Income-tax, Bihar and Orissa [1946] 14 ITR 683 ; AIR 1947 Pat. 115, a Division Bench of the Patna High Court treated net receipts from the sale of forest as income liable to income-tax and not merely capital receipts. 22. In Commissioner of Income-tax v. Manavedan [1930] 54 Mad. 21, a Special Bench of the Madras High Court had to deal with the question whether the amounts received by sale of timber trees are income liable as such to income-tax. The contention raised was that the assessee had purchased the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax, agreed with the finding, and it is not now disputed. These forests, therefore, cannot even be regarded as wasting assets. But even if they are treated as wasting assets, the consideration is not relevant as held by their Lordships of the Privy Council in Kamakshya Narain Singh v. Commissioner of Income-tax, Bihar and Orissa [1943] 11 ITR 513; AIR 1943 PC 153. The capital in the case of the forests is land as held in Beohar Singh v. Commissioner of income-tax [1948] 16 ITR 433 ; ILR 1947 Nag. 425. The sale of trees from the forest does not bring out or result in any diminution of the capital. So long as the capital remains, receipts from the sale of trees cannot be regarded as capital receipts. On the facts of the cases before us, I have no hesitation in holding that the receipts from the sale of forest trees being revenue receipts constitute income. They cannot be classed as capital receipts. 25. Again so far as receipts from the sale of forest trees are concerned, the point is concluded by authority and if an annuity obtained as part of the consideration from the sale of property and royalties on a mining lease which results in the gradual exhaustion of the mine are classe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for food products or other useful or valuable growth of the field or garden, tillage, husbandry; also by extension, farming including any industry practised by a cultivator of the soil in connection with such cultivation, as breeding and rearing of stock, dairying, etc., the science that treats of the cultivation of the soil. 30. According to the Oxford Dictionary agriculture means the science or art of cultivating soil including the allied pursuits of gathering the crop and rearing livestock, tillage, husbandry, farming in the widest sense. 31. It may be observed that in spite of the diversity as to the scope and purpose of agriculture as revealed by the different definitions, there is one feature which is essentially common to all of these. This is the application of human skill and labour without which there can be no agriculture. Thus trees or even forests of spontaneous growth cannot be regarded as the result of any agricultural process. Income derived from such trees cannot be regarded as agricultural income. This aspect of the matter was brought out clearly by their Lordships of the Nagpur High Court in Beohar Singh v. Commissioner of income-tax [1948] 16 ITR 433 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in a forest. His contention was that the income being agricultural was exempted from taxation under Section 4, clause (3), sub-clause (8). The question referred to the Chief Court of Oudh in that case was, whether income from the sale of forest trees growing on land naturally and without intervention of human agency, even if the land is assessed to land revenue, is agricultural income within the meaning of Section 2(1)(a) of the Income-tax Act and as such exempt from income-tax under Section 4(3) (viii) of the Act. 34. It is clear from the question that income in that case was derived from the sale of trees growing on land naturally. In this connection Lord Simonds, who delivered the judgment of their Lordships of the Privy Council observed that : As appears from the form of the question, the income under the first head was derived from the sale of trees described as 'forest trees growing on land naturally,' and the case has throughout proceeded upon the footing that there was nothing to show that the assessee was carrying on any regular operations in forestry and that the jungle from which trees had been cut and sold was a spontaneous growth. 35. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case, the sum of ₹ 90,220-1-0 derived from the sale of Sal trees in the forest of the assessee can be treated as agricultural income within the meaning of Section 2 of the Bengal Agricultural Income-tax Act, 1944. 39. It may be noted that the relevant portion of the definition of agricultural income as given in Section 2(1) of the Bengal Agricultural Income-tax Act is in the same terms in which it is in the Assam Act. Their Lordships of the Calcutta High Court adopted the test laid down by their Lordships of the Privy Council in Commissioner of Agricultural Income-tax v. Jagadish Chandra [1949] 17 ITR 426; 53 CWN 596, and observed as follows : - The Judicial Committee makes it clear that (1) no assistance is to be sought from the meaning of the word 'agriculture' as given in other statutes and (2) unless there is 'some measure of cultivation of the land, some expenditure of skill and labour upon it', it cannot be said to be used for agricultural purposes. It is, therefore, incontrovertible that income from a virgin forest or forest of spontaneous growth is not agricultural income. The view that tilling of the soil was the sine qua n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of trees in the forest would be within the ambit of agricultural income as defined in the Assam Act. 43. It is now to be seen whether the income derived by the assessees in the cases before us can on the proved facts of the cases be held to be agricultural. This question arises in 55 appeals against the order of assessments covering different accounting periods commencing from 1945-46. All these appeals were disposed of by one order. Thirty eight appeals were from 13 proprietors of Mechpara Ward's Estate. The others were from co-sharers in Parbatjoar Estate and assessees of three other estates. The forests are all in the district of Goalpara. The Appellate Assistant Commissioner found that the forests in all the cases consisted mainly of Sal trees and though the history of their origin was not available, there was nothing before him to show that these Sal trees were of spontaneous growth. He recognised the possibility of the forests originally having been of spontaneous growth. He observed however that it was an admitted fact that forest trees are now protected and fostered in growth by the application of human labour and skill. In his view they were now under agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place of those cut every year. The exploitation of these forests clearly conforms to working plans. Blocks of trees are sold in rotation. New trees take root and grow. In the case of all the assessees, there have been receipts from sale of Sal trees in all the years of assessment. The operations, which are considered necessary by the assessees with a view to being able to sell trees from these forests periodically involve both skill and labour. The expenditure of this skill and labour is of a substantial and impressive character. The different processes described by the Appellate Assistant Commissioner and by the Member, Assam Board of Agricultural Income-tax, indicate without any doubt that the extensive operations in forestry are being employed. In these circumstances there cannot be any manner of doubt that the income derived by the assessees in all these cases by the sale of Sal trees during the years in question was agricultural income and was correctly assessed. 46. The third common question is whether the amount received as salami for settlement of agricultural holdings is agricultural income within the meaning of Section 2(a)(1) of the Assam Agricultural Income-tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittedly realised by the assessee landlord from his tenant in connection with settlement of waste or abandoned holdings as single non-recurring premia. The zamindar granted leases of waste lands or previously abandoned holdings for the purpose of cultivation for periods which were not fixed. At the time of settlement a salami was charged and the rate of rent fixed. The rate of rent so fixed is seldom changed. The amount of salami charged varied according to demand and had no relation to the rate of rent. The salamis, however, were not based upon any idea of damage done to the land. It will appear from the returns filed that the zamindars received considerable sums from salami and the salami formed a normal and regular feature of the zamindar's receipts from the agricultural lands in his estate. Such salamis were held to be agricultural income and not capital receipt in Birendra Kishore v. Secretary of State [1921] ILR 48 Cal. 766 and Jyotindra Narayan v. Province of Assam [1945] 13 ITR 263 ; 49 CWN 472. 51. Jyotindra Narayan was the assessee in 49 C.W.N. 472. He is one of the assessees in the reference before us. He was assessed to income-tax under the Assam Act on an item o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and. These were as follows : (1) The number of settlements of waste lands and abandoned holdings during the accounting year and the maximum and the minimum extents settled and salami received. (2) Does the salami vary with the quality of the land, the facilities for irrigation and such other favourable factors ? (3) How many tenants were ejected under Section 69 during the accounting year and how long they had been in occupation before such eviction ? (4) Is salami received when the lands are re-let after eviction ? (5) Is the salami that is paid in the zamindary of the assessee in the nature of a present given by the tenant to the landlord for his permission to occupy the land, or whether it is in substance a premium payable by a lessee at the inception of the tenancy ? 54. In delivering the judgment of the Court, the learned Chief Justice observed as follows :- In my opinion, the difficulty in deciding the question has arisen because the word 'salami' had not a fixed or definite meaning. Because the lessor chooses to describe a receipt as 'salami,' I do not think, in law, it is exempt from taxation. The nature of receipt has to be ascertained in each cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Board of Assam Agricultural Income-tax, and questions (3) and (4) be decided after facts necessary for the determination of question (3) are made available to the Court. 57. The learned Advocate-General concedes that the statement of facts now available on the record is net complete and supplementary statement is necessary before question (3) could be answered. He, therefore, agrees to the remand of the case to the Member, Assam Board of Agricultural Income-tax, as proposed by Mr. Ghose, the learned counsel for the assessees. 58. We think the counsel for the parties are correct in their view. It seems to us that references made to us in this case do not bring out anything more than what was stated in the reference to the Calcutta High Court in Jyotirindra Narayan Sinha's case [1945] 13 ITR 263; 49 CWN 472 which arose out of the assessment for the year 1941-42. In any case it is obvious that the information which their Lordships of the Federal Court considered necessary for the decision of the question whether receipts in a particular case constitute income or capital receipts is admittedly not before us. The learned counsel for the parties are agreed on this point. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n included in Reference No. 1 also. The learned Advocate-General agrees and does not object to a direction to the Member, Assam Board of Agricultural Income-tax, to refer this question to the Court under Section 28 (3) of the Assam Agricultural Income-tax Act. 63. We, therefore, direct under Section 28, clause (3), of the Assam Agricultural Income-tax Act that when sending a fuller statement of the case with respect to question (3) as regards the nature of the salami receipts, the question should be included in Reference No. 1 arising out of the two assessments of Jyotirindra Narayan Sinha Choudhury. 64. There remains one more question to be answered. This is contained in Reference No. 8 above. This question is as follows : - Whether the amount paid to the ladies mentioned in para. 11 of the petition for reference under the will of the late Raja P.C. Barua and charged on Lakheraj Srijangram (Touzi No. 34 of Goalpara Collectorate) should be deducted from the agricultural income of the petitioners ? 65. Permissible deductions are enumerated in Section 7 of the Assam Act. Clause (m) of Section 7 provides that the assessable income shall be subject to such other deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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