TMI Blog2018 (12) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... income derived from the forest cannot be treated as non-agricultural income. If the enquiry had been directed on proper lines, it would have been possible for the Income-tax authorities to ascertain how much of the income is attributable to forest of spontaneous growth and how much to trees planted by the proprietors. The assessee has fairly pleaded that one more opportunity be provided to the assessee and the assessee will appear before the authorities below and file all necessary cogent evidences to prove that the said land was an agricultural land used by the assessee for agricultural purposes and the assessee is entitled for exemption from income-tax on the gains which arose on sale of the said land - we are setting aside and restoring this matter back to the file of AO for denovo framing of an assessment by afresh determination of the issue on merits - Decided in favour of assessee for statistical purposes. - I.T.A. No.2451/Mum/2018 - - - Dated:- 16-11-2018 - SHRI JOGINDER SINGH, VICE PRESIDENT AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Dr. K Shivaram, Sr. Advocate And Ms. Neelam C. Jadhav For The Revenue : Shri. Chaudhary Arun Kumar Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Learned CIT[A) failed to appreciate that; the appellant has sold land as agricultural land and the said land was converted in to Non Agricultural land by the buyer after the sale. Exemption u/s.10 cannot be denied to the appellant. IV. Without prejudice to above, Income earned from sale of Agricultural Land is a Long Term Capital Gain as the same was held more than 36 months 5. On the facts and circumstance of the case, the date of purchase of said agricultural land was 23.12.2008(sic. 23.9.2008) and said land was sold on 29/10/2013, the period of holding of said agricultural land was more than thirty six months; hence, the gain earned by the appellant if it is held to be taxable, then said amount may taxed as Long Term Capital Gain with indexation . 6. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal. 3. The brief facts of the case are that the assessee is engaged in the business of supplying building material. The case of the assessee was selected by Revenue for framing an scrutiny assessment u/s. 143(3) r.w.s. 143(2) of the 1961 Act. During the course of assessment proceedings from the computation of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the Capital Asset. Thus, it was clamed that there is no capital gains earned by the assessee which could be subjected to income-tax. The assessee submitted that he had entered into an agreement for purchase of land on 23.09.2008 for consideration of ₹ 12,00,000/- out of which sum of ₹ 11,000/- was paid as well stamp duty of ₹ 18,000/- and registration fee of ₹ 12,000/- was also paid on sale agreement which is evident from Index No. 2. It was explained that irrevocable power of attorney was executed on 23.09.2008 in favour of the assessee by Mr. Shankar Tukaram and the said document was registered with Registrar of Stamp Duty. The assessee relied upon provisions of Section 53A of Transfer of Property Act, 1882 to contend that property stood transferred in favour of the assessee on 23.09.2008. The assessee submitted that the said agricultural land is situated in Khardi Village, a rural area managed by Gram Panchayat . It was submitted that a nearest Taluka is Shahpur which is governed by Panchayat Samiti under Panchayat Act and does not fall under Municipality or Cantonment Board. Thus, it was submitted that agricultural land falls outside the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the crop cultivated by Shri. Shankar Tukaram Shipayi , the seller of the land from whom the assessee purchased the land as grass‟. Similarly, the copy of 7/12 extract issued on 26.07.2013 by Talathi , Village Khardi appended to and forming part of the sale deed executed by the assessee(seller) with Shri Swapnil S. Shende and Shri Sachin S Lodha shows the crop grown as grass‟. Thus, the AO observed that the land was not under cultivation during any time during the relevant period. The AO observed that grass grows spontaneously on a vacant land , thus it cannot be said that the land was used for agricultural purposes. The assessee however claimed that he is growing grass, rice and plantations on the said land. But the AO observed that the assessee has not submitted any documentary evidences to show that cultivation activity was carried on the said land by the assessee such as proof of purchase of seeds, fertilizers, equipments purchases/maintained, electricity bill etc. . The AO also observed that the assessee has not shown any agricultural income from the said land for FY 2013-14 . The contention of the assessee that there was no surplus from the said agricultural inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that the persons to whom the assessee sold the land have also taken the land to develop for commercial purposes. The AO relied upon decision of Hon‟ble Supreme Courts in the case of Sarifabibi Mohammed Ibrahim and others v. CIT 204 ITR 631(SC) and decisions of Hon‟ble Bombay High Court in the case of Gopal C.Sharma v. CIT 209 ITR 946(Bom.) and Fazalbhoy Investments Co. Limited v. CIT 176 ITR 523(Bom.). Thus, the AO made additions to the income of the assessee to the tune of ₹ 3,98,84,086/- towards short term capital gain on sale of land wherein the assessee was denied exemption on gains arising from sale of agricultural land, by holding as under vide assessment order dated 22.12.2016 passed u/s 143(3) of the 1961 Act:- a). No agricultural activity was carried out by the assessee neither anytime in the past or even in the recent period upto the actual date of sale transaction. Therefore the land in question cannot be considered as an agricultural land and the sale proceeds received on sale of such land is to be taxed under Capital Gain. b) While purchasing the said plot of land, the assessee was in complete knowledge of the potential commercial val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btained prior to sale of land. Thus, accordingly the assessee obtained the aforesaid clearances from relevant authorities before the sale of the aforesaid land. It was submitted by the assessee before learned CIT(A) that permission for conversion of land into non agricultural purposes was applied by the buyer which was issued by the office of District Collector, Thane on 11.11.2014 .The assessee claimed that in sale deed it was inadvertently mentioned the value as open plot instead of agricultural land , thereby valuing land at ₹ 3,43,43,000/- and accordingly stamp duty was determined to be payable at ₹ 16,40,010/-. The assessee filed as additional evidences before learned CIT(A) (a) letter from Sub-Registrar dated 17.01.2018 , (b)copy of an affidavit dated 25.01.2017 of Mr Vijay Shankar Son of Mr. Shankar Tukaram , land owner , for carrying out agricultural activities on the said land ,(c) certificate dated 06.01.2017 from Shahpur Agricultural produce committee certifying that grass is an agricultural product, (d) certificate dated 19.04.2017 from Tehsildar certifying that the land under dispute was an agricultural land , (e) certificate dated 17.01.2018 from Sub-Regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- on 17.10.2008 vide cheque no. 034075 and irrevocable power of attorney was obtained. Subsequently on payment of balance amount of ₹ 1,00,000/- in cash on 16.10.2012, the land was finally got registered and handed over to the appellant on the same date. 4.1 It is further clarified that the appellant is in retail business of steel and cement on small scale and filing the return of income u/s 44AD of the Act, under presumptive scheme, therefore, had not maintained books / P L a/c / Balance sheets, however the copies of statements of income computation / ITRs are filed for AY 2008-09 to AY 2013-14. It is claimed that the land was sold on 29.10.2013, for total consideration of ₹ 4,10,00,000/-, to developer Mr. Sachin Lodha, as against market value of ₹ 3,43,43,000/-. For selling the land, it is claimed that the developer / buyer put the condition for obtaining clearance / NOC from forest department (that land does not fall in the forest department), town area planning department (that land does not fall under town area development scheme) and Bhatsa Dam Division (that land does not fall under dam catchment area) and accordingly the same were obtained by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce produced by him during the course of proceedings before the Assessing Officer, except in the following-circumstances, namely:- (a) Where the assessing officer has refused to admit evidence which ought to have been admitted; or (b) Where the appellant was prevented by the sufficient cause from producing the evidence which he was called upon to produce by the assessing officer; or (c) Where the appellant was prevented by the sufficient cause from producing before the assessing officer any evidence which is relevant to any ground of appeal; or (d) Where the assessing officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidences shall be admitted under sub-rule (1) unless the Commissioner (Appeals) records in writing the reasons for its admission. 4.3 From the above facts it is seen that the appellant's case does not fall under any of above conditions, laid in the Rule 46A of the IT Rules 1962 and the appellant has also not brought any material on record to establish any ,of the above circumstances to establish his claim, hence not admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value vis-a-vis actual sale consideration, on the date of registration was ₹ 12 lacs. The possession was also handed over to the appellant after registering of the said land. 5.1 The appellant had determined the short term capital gain of ₹ 3,98,84,086/- (Rs. 4,10,00,000 - ₹ 11,15,914/-) and the same was claimed as exempt u/s. 10(37) of the I.T. Act, in the statement of income, filed along with the return of income. In order to ascertain the genuineness of the claim of exemption of ₹ 3.99 crores, the AO resorted to call for relevant details from the appellant i.e. Purchase-deed, Sale-deed, copy of 7/12 Extract, confirmation from the District Collector regarding conversion of land into N.A. land, various correspondences made by the appellant for converting the land into N.A., etc. On perusal of these details / documents, the AO observed that the land was purchased, by way of purchase agreement dated 23.9.2008, for total consideration of ₹ 12,00,000/-. Out of that, the appellant had paid an amount of ₹ 11,000/-, against the sale consideration, ₹ 48,000/- against stamp duty and ₹ 12,000/- against registration charges. The appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was executed / registered) and on 16.10.2012 (the date on which the sale-deed was registered), remained same i.e. ₹ 12,00,000/- only, being barren land. It is seen that within a span of one year i.e. on 29.10.2013, the land under dispute was sold for ₹ 4,10,00,000/-, as against the market value of ₹ 3,43,43,000/-, clearly establish that at the time of sale the land was NA. It is surprised to note that as how come the valuation of land, under dispute, could be increased from ₹ 12,00,000/- on 16.10.2012 to ₹ 3,43,43,000/- on 29.10.2013, i.e. within span of one year without the change of land use. From these facts, it is evident clear that the use of land was changed to NA due to which the market value / value determined by the Stamp duty Officer was increased from ₹ 12,00,000/- on 16.10.2012 to ₹ 3,43,43,000/- on 29.10.2013. This clearly indicates the fact that the land under dispute was not an agricultural land, when it was sold i.e. on 29.10.2013, by the appellant. 5.3 From the facts of the case it is seen that the appellant is engaged in the business of supply of building material and has never engaged in the business of agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted accordingly. As regard the claim of taxability of STCG of ₹ 3,98,84,086/- as LTCG is concerned, the same is not tenable in view of the fact that on 23.9.2008, the agreement to purchase the land, under dispute, was entered into by giving part advances against purchase consideration and balance amount was paid when the land was registered on 16.10.2012 and the possession was handed also over. Within a span of almost 1 year the land was sold on 29.10.2013, therefore, the claim of LTCG is rejected. Moreover, the appellant himself has offered the said gain in the computation of income, for the relevant year, as STCG and claimed exemption u/s 10 (37) of the Act, therefore, the same is also rejected. 5.5 From the facts of the case it is inferred that the appellant, immediately after purchase of land on 16.10.2012, initiated the process of converting land used to NA and accordingly obtained various clearance certificates i.e. from Forest Department on 25.10.2013, Town Planning Department on 23.8.2013 and NOC from Executive Engineer, Bhatsa Dam Division No. 1 on 7.10.2013 and also applied for conversion of land used to NA, in the office of the Collector, as stated here in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty can only be described as a business ventures. Smt. Parvathi Devi Ors. Vs CIT(AP) 164 ITR 675 The extent of the land that had been purchased was about 10 acres. It was purchased by four persons joining together. The land which had been purchased had already been converted into non-agricultural land. It would, therefore, be reasonable to conclude that the land must have been purchased not as agricultural land nor as house sites, but for only trading purposes..... The character of the land was such that it could not be used as agricultural land nor could it be put to any other use, except as house sites. In view of the facts of instant case, it was impossible to say that the property in question had been purchased for personal use or possession or for enjoyment or for investment. Considering all these facts, there was no hesitation in holding that the of land in question had been made not as an investment, but clearly for the purpose of trading in the land. It was accordingly held that the transaction was an adventure in the nature of trade. CIT Vs. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466 (SC). The Hon‟ble SC clearly laid down that the term & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case, (e) The fact that the land is assessed to the Land Revenue as agricultural land under the State Revenue Law is certainly a relevant fact but it is not conclusive. The Gujarat High Court in CIT Vs Siddharth J Desai (1983) 139 ITR 628, reviewed the several earlier decisions of the Gujarat High Court as well as the decision of the S. C. in Begumpet Place's case and has evolved the following 13 factors; (1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue. (2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? (3) Whether such user of the land was for a long period or whether it was of a temporary character or by way of a stop-gap arrangement? (4) Whether the income derived from the agricultural operations carried on in the land bore rational proportion to the investment made in purchasing the land? (5) whether, the permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural purposes for a reasonable span of time prior to the relevant date and further whether on the relevant date the land was intended to be put to use for agricultural purpose for a reasonable span of time in the future. Hemachand Hirachand Shah Vs CIT (1994) 206 ITR 55 (Guj.) - held that the assessee who claimed to be an agriculturist, had entered into a series of transactions of purchase and sale of lands. The AO found that the purchase and sale of those lands by the assessee was part of an organized business activity and profit arising from sale of such lands was to be treated as taxable income. It was held by the High Court as under: The explanation offered by the assessee for disposing of the lands soon after his purchase were just not acceptable. The explanation of the assessee in most of the cases was that the lands were dabhada lands, on which considerable expenditure would have to be incurred in order to develop them and make them fit for agricultural operations. The assessee who professed to be an agriculturist was aware of the nature and character of the land he was purchasing particularly when he professed to purchase the said lands for the purpose of agri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om sale of land wherein the assessee on the grounds that the said land was an agricultural land which was used for agricultural purposes claimed the exemption which stood disallowed by authorities below while the assessee never got chance to rebut the said documents obtained by the AO at the back of the assessee. The Ld. Senior Counsel for the assessee also contended that additional evidences were filed by the assessee before learned CIT(A) for the first time which goes to the root of the matter while the Ld. CIT(A) erred in refusing to admit the same. It was , however, fairly pleaded by the Ld. Senior Counsel for the assessee that onus is on the assessee to prove that the land was used for the purposes of agriculture wherein no income-tax on capital gains is payable on the sale of land and it was prayed by learned counsel for the assessee that if one more opportunity is granted to the assessee , then the assessee will be able to prove by cogent evidences/explanations that the said land was used by the assessee for agricultural purposes before its sale and hence no capital gain tax is exigible on the said gains, which can then be verified by the AO . It was prayed that directions m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view provisions of Section 10 of the 1961 Act. The assessee claimed that the said land was used for agricultural purposes wherein rice, grass and plantation were grown before it was sold by the assessee on 31.10.2013 and consequently the said land shall not be a capital asset as defined u/s 2(14) of the 1961 Act and falls under the exceptions provided under Section 2(14)(iii)(a) of the 1961 Act , as it is claimed by the assessee that the said land did not fall under municipality or cantonment board and is situated at a distance of 20 km from Taluka place Shahpur and the population of Grampanchayat Khardi is 5593. The claim was made by the assessee that the said land is situated in Khardi Village , a rural area managed by Gram Panchayat. It was claimed that nearest Taluka is Shahpur which is governed by Panchayat Samiti under Panchayat Act and does not fall under Municipality or Cantonment Board. The assessee claimed that CBDT circular no. 45 dated 02.09.1970 ( 79 ITR(St.) 33) is applicable and since agricultural land is situated in rural areas i..e outside any municipality or cantonment board having a population of not less than ten thousand and beyond the distance notified by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property as is contemplated u/s 2(47)(v) of the 1961 Act stood completed. The assessee has also claimed that in the sale deed executed by the assessee in favour of Mr Swapnil Shende and Mr Sachin Lodha for ₹ 4,10,00,000/- on 31.10.2013, the Sub-registrar inadvertently mentioned its value as open plot instead of agricultural land, thereby valuing the land for stamp duty purposes at ₹ 3,43,43,000/- and accordingly computed stamp duty of ₹ 16,40,010/- . The said land was sold by the assessee on 31.10.2013 to Mr Swapnil Shende and Mr Sachin Lodha for actual consideration of ₹ 4,10,00,000/-. As we see later in this order , the assessee brought on record before learned CIT(A) , letter dated 17.01.2018 from Sub-Registrar certifying that the land was an agricultural land and also other evidences to substantiate its aforesaid contentions but learned CIT(A) refused to admit additional evidences citing bar as is contained in Rule 46A of the Income-tax Rules, 1962. The Revenue disputed the contentions of the assessee by holding that the assessee is not entitled for exemption from capital gains from the sale of said land . Further , the Revenue held that the gains arisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 to 2014-15, there was no surplus. The authorities below have also observed that when the land was held by the assessee , then during that period itself the process was started for conversion of land from agricultural purposes to Non Agricultural‟ purposes by the assessee and several clearances were applied for and obtained by the assessee in connection with development of land for commercial purposes even prior to sale of the aforesaid land on 31.10.2013 to the buyers namely Mr Swapnil Shende and Mr. Sachin Lodha, such as clearance from Forest Department dated 25.10.2013 that the land does not fall within forest area, Clearance dated 07.10.2013 as to the land does not fall within catchment area of Bhatsa Canal division and NOC from Town Planning Department dated 23.08.2013 that there is no proposal for development of that land by Government , which all were obtained prior to sale of land by the assessee on 31.10.2013 . The assessee had explained that these clearances were obtained as the buyers namely Mr Swapnil Shende and Mr Sachin Lodha insisted for the said clearances before buying the said land from the assessee. However, it is undisputed that an application for conver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural land and was not used for agricultural purposes. Undisputedly, the buyer Mr Sachin Lodha applied with District Collector , Thane for conversion of the aforesaid land from Agricultural‟ purposes land to Non Agricultural‟ purposes land . The said application was filed by the buyer, Mr Sachin Lodha on 27.12.2013 which was later revised on 02.08.2014 by the said buyer. The approval was finally granted on 11.11.2014 by the office of District Collector,Thane converting the aforesaid land for Non-Agricultural‟ purposes . The AO had obtained documents directly from the office of District Collector, Thane which were connected with the making of an application along with all appended documents for seeking conversion of said land to Non-Agricultural‟ purposes by the new buyer but the copies of the aforesaid documents so directly obtained by the AO directly from the office of District Collector, Thane were not given to the assessee for rebuttal. While arriving at the decision to disallow the claim of the assessee, one of the factor considered by authorities below for disallowance of the claim of the assessee for exemption from tax on gains arising from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal evidences filed by the assessee with learned CIT(A) for the first time are produced by the assessee to substantiate its case that the land sold was an agricultural land used for agricultural purposes when the said land was held by the assessee and in our considered view these additional evidences have an important bearing on the outcome of the assessee‟s claim that land sold was an agricultural land, the learned CIT(A) ought to have admitted these additional evidences in the interest of substantial justice vis-a-vis technicalities. More-so, the powers of learned CIT(A) is co-terminus with the powers of the AO. We, thus, in exercise of our powers direct admission of these additional evidences filed by the assessee to be evaluated on merits in accordance with law because wherever technicalities are pitted against substantial justice, the Courts will lean towards the cause which advances justice. We clarify that we have not commented on the merits of these additional evidences to arrive at the decision whether or not the land was an agricultural land , or whether or not the said land was used for agricultural purposes. Further, these additional evidences have so-far not stoo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, we are also reminded at this stage of landmark decision of Hon‟ble Supreme Court decision in the case of CIT v. Raja Benoy Kumar Sahas Roy reported in AIR 1957 SC 768 ( 1957) 32 ITR 466(SC) , wherein Hon‟ble Apex Court held as under: It appears from the above survey that there has been a divergence of opinion amongst the various Courts not only in regard to the connotation of the terms agriculture and agricultural purposes but also in regard to the nature of forestry operations performed in the forest which can be styled agricultural operations so as to constitute the land used for agricultural purposes within the definition of agricultural income as given both in the Indian Income-tax Act and in the several Agricultural Income-tax Acts passed by the various States. It may be noted at the outset that the definition of agricultural income given in section 2(1) of the Indian Income-tax Act is in identical terms with the definitions of that term as given in the various Agricultural Income-tax Acts passed by the several States. It will be idle therefore to treat Taxes on Agricultural Income which fall within the legislative competence of the State L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 at page 270 : I shall briefly advert to the genesis of the provision exempting agricultural income derived from lands assessed to land revenue, as I consider that the subject-matter with which the legislature was dealing, and the facts existing at the time with respect to which the legislation was made, are legitimate topics for consideration in ascertaining the object and scope of the exemption from income-tax conferred on agricultural income. This exemption, it would be noticed, has been a persistent feature of the income-tax legislation of this country from 1867 onwards, and nothing like it is found in the English Income Tax Acts. Even at a time when there was no provision like section 100 of the Goverment of India Act, 1935, with 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. This exemption was granted for no other reason than the justice and equity of exempting from further burden income wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to us to place some degree of reliance upon an interpretation settled by practice as contemporanea expositio we are in fact without any such assistance . Some reference was also made to what has been called a 'presumption against double taxation'. In Manindra Chandra Nandi v. Secretary of State [1907] ILR 34 Cal. 257, royalties from a coal mine were held liable both to cess under the Cess Act, 1880, and to income-tax under the Act of 1886, but it was said that, 'it may be conceded that Courts always look with disfavour upon double taxation, and statutes will be construed, if possible, to avoid double taxes.' Reference was made to certain dicta of American Courts and to the English case of Carr v. Fowle [1893] 1 QB 251. But the only observation in this case was to the effect that the statute presumably did not intend that a vicar should in effect pay the same tax (land tax) twice on the same hereditament. This is plain enough. Thus the income-tax is one tax, and income assessed under one schedule cannot be assessed all over again under another. That there is any legal presumption of a general character against 'double taxation' in any wider sense is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the market. The latter would all be agricultural operations when taken in conjunction with the basic operations above described, and it would be futile to urge that they are not agricultural operations at all. But even though these subsequent operations may be assimilated to agricultural operations, when they are in conjunction with these basic operations could it be said that even though they are divorced from these basic operations they would nevertheless enjoy the characteristic of agricultural operations ? Can one eliminate these basic operations altogether and say that even if these basic operations are not performed in a given case the mere performance of these subsequent operations would be tantamount to the performance of agricultural operations on the land so as to constitute the income derived by the assessee therefrom agricultural income within the definition of that term ? We are of opinion that the mere performance of these subsequent operations on the products of the land, where such products have not been raised on the land by the performance of the basic operations which we have described above would not be enough to characterize them as agricultural op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 421, 423, or Sadasiva Ayyar, J., in Raja of Venkatagiri v. Ayyappa Reddi [1915] ILR 38 Mad. 738, but must be understood as comprising all the products of the land which have some utility either for consumption or for trade and commerce and would also include forest products such as timber, sal and piyasal trees, casuarina plantations, tendu leaves, horra nuts etc. The question still remains whether there is any warrant for the further extension of the term agriculture to all activities in relation to the land or having connection with the land including breeding and rearing of live-stock, dairy-farming, butter and cheese-making, poultry-farming, etc. This extension is based on the dictionary meanings of the term and the definitions of agriculture collated in Wharton's Law Lexicon, as also the dicta of Lord Cullen and Lord Wright in Lean Dickinson v. Ball [1925] 10 Tax Cas. 341and Lord Glanely v. Wightman [1933] AC 618quoted above. Derbyshire, C.J., in Moolji Sicka Co., In re [1939] 7 ITR 493 treated tendu plants growing on the soil as part of the soil and therefore considered the pruning of the shrub as cultivation of the soil in a legal and technical sense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts which have some utility either for consumption or for trade and commerce, it will be seen that the term agriculture receives a wider interpretation both in regard to its operations as well as the results of the same. Nevertheless there is present all throughout the basic idea that there must be at the bottom of it cultivation of land in the sense of tilling of the land, sowing of the seeds, planting, and similar work done on the land itself. This basic conception is the essential sine qua non of any operation performed on the land constituting agricultural operation. If the basic operations are there, the rest of the operations found themselves upon the same. But if these basic operations are wanting the subsequent operations do not acquire the characteristic of agricultural operations. All these operations no doubt require the expenditure of human labour and skill but the human labour and skill spent in the performance of the basic operations only can be said to have been spent upon the land. The human labour and skill spent in the performance of subsequent operations cannot be said to have been spent on the land itself, though it may have the effect of preserving, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the fact that the forest is more than 150 years old, the areas which had thus become denuded and replanted cannot be considered to be negligible. The position therefore is that the whole of the income derived from the forest cannot be treated as non-agricultural income. If the enquiry had been directed on proper lines, it would have been possible for the Income-tax authorities to ascertain how much of the income is attributable to forest of spontaneous growth and how much to trees planted by the proprietors. But no such enquiry had been directed, and in view of the long lapse of time, we do not consider it desirable to direct any such enquiry now. The expenditure shown by the assessee for the maintenance of the forest is about ₹ 17,000 as against a total income of about ₹ 51,000. Having regard to the magnitude of this figure, we think that a substantial portion of the income must have been derived from trees planted by the proprietors themselves. As no attempt has been made by the Department to establish which portion of the income is attributable to forest of spontaneous growth, there are no materials on which we could say that the judgment of the Court below is wron ..... X X X X Extracts X X X X X X X X Extracts X X X X
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