TMI Blog1958 (10) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... protected forest. The respondent derives income from the forests by the sale, of timber such as teak, salwood, lac, myrabolam, tamarind, cashewnuts and firewood. There is no dispute either as to the receipt of such income or as to its quantum. All that appears in the account books of the respondent. The point in controversy is as to whether this income is chargeable to tax. It is the contention of the respondent that this is agricultural income as defined in section 2(1) of the Act, and that it is, in consequence, exempt under section 4(3)(viii). By his order dated January 31, 1943, the Income-tax Officer held that the forests in question had not been proved to have been planted by the respondent, that the trees were of spontaneous growth, and that the income therefrom was not within the exemption under section 4(3)(viii) ; and this order was confirmed on appeal by the Appellate Assistant Commissioner. The respondent took the matter in further appeal to the Appellate Tribunal, and there put forward the contention that the Income-tax Officer had failed to take into account a letter of the Dewan dated June 3, 1942, which gave a detailed account of the operations carried on by the est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber during the assessment years, and that the respondent had failed to establish facts on which he could claim exemption. It should be mentioned that this order covered the assessments for five years from 1942-43 to 1946-47, the facts relating to the character of the income being the same for all the years. On the application of the respondent, the Tribunal referred the following question for the decision of the High Court : "Whether on the facts and in the circumstances the income derived from forest in this case is taxable under the Indian Income-tax Act." The reference was heard by Panigrahi, C.J., and Misra, J., who answered it in the negative. They observed : "It appears to us that the cases as set out by both parties have been put too high. The Department takes the view that unless there is actual cultivation of the soil the income from the forest trees cannot be regarded as agricultural income. The fact that the assessee has spent some money and planted valuable trees in some areas is not sufficient to free the income out of the extensive forests, which owe their existence to spontaneous growth, from its liability to taxation. The assessee on the other hand seeks to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certainly upon the Department to prove that the income derived from the forests was chargeable to tax and fell outside the scope of the exemption mentioned in section 4(3)(viii)." In this view, they held that the Department had failed to establish that the income derived from the sale of trees was not agricultural income, and answered the reference in favour of the respondent. The learned Judges, however, granted a certificate to the appellant under section 66A(2) of the Act, and that is how the appeal comes before us. At the very outset, we should dissent from the view expressed by the learned Judges that the burden is on the Department to prove that the income sought to be taxed is not agricultural income. The law is well settled that it is for a person who claims exemption to establish it, and there is no reason why it should be otherwise when the exemption claimed is under the Income-tax Act. The learned Judges were of the opinion that their conclusion followed on the principle of the law of income-tax that "where an exemption is conferred by a statute, the State must not get the tax either directly or indirectly", and support for this view was sought in the following ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the court observed : "...the High Court erroneously framed the question in the negative form and placed the burden on the Income-tax Authorities of proving that the income from the sale of milk received by the assessee during the accounting year was not agricultural income. In order to claim an exemption from payment of income-tax in respect of what the assessee considered agricultural income, the assessee had to put before the Income-tax Authorities proper materials which would enable them to come to a conclusion that the income which was sought to be assessed was agricultural income. It was not for the Income-tax Authorities to prove that it was not agricultural income. It was this wrong approach to the question which vitiated the judgment of the High Court and led it to an erroneous conclusion." On the merits, the question what is agricultural income within section 2(1) of the Act is the subject of a recent decision of this court in Commissioner of Income-tax v. Raja Benoy Kumar Sahas Roy. There, it was held that before an income could be held to be agricultural income, it must be shown to have been derived from land by agriculture or by one or the other of the oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference under section 66(1) of the Act. The learned Judges declined to accept this finding, because they considered that the Tribunal had not appreciated the true significance of Podu cultivation. That, in our opinion, is a misdirection. If the point for decision had been whether the forest was a virgin forest or whether it had subsequently sprung up, the evidence relating to Podu cultivation would have been very material. But the point for decision is not whether the forests were ancient and primeval, but whether they had been planted by the estate authorities, and on that, the Podu cultivation would have no bearing. As a result of the Podu cultivation, the original forests would have disappeared. But the question would still remain whether the forest which again sprang up was of spontaneous growth, or was the result of plantation. Now, there is no evidence that as and when the jungle had disappeared under Podu cultivation, the estate intervened and planted trees on the areas thus denuded. On the other hand, the learned Judges themselves found that after the destruction of the original forests in the process of Podu cultivation, there was a fresh growth of forests from the stum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on these facts, it would be proper to conclude that the forests were in their entirety the result of plantation. It would be an erroneous approach, it was argued, to call upon the assessee to prove tree by tree that it was planted. Now, these are matters of appreciation of evidence on what is essentially a question of fact, viz., whether the trees were of spontaneous growth or were products of plantation. On this, the Tribunal has given a clear finding on a consideration of all the material evidence, and its finding is final and not open to challenge in a reference under section 66(1) of the Act. Even the learned Judges of the High Court who considered themselves free to review that finding and, as already pointed out, without justification, could only observe that the trees must have mostly grown from the stumps left when the forests were burnt for purposes of Podu cultivation a finding which is fatal to the contention now urged for the respondent that they were the result of plantation. We are of opinion that there are no grounds on which the finding of the Tribunal could be attacked in these proceedings. It remains to deal with one other contention urged on behalf of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions do not lay down that if considerable amounts are expended in the maintenance of forests, then it must be held that the trees were planted by the proprietors. They only mean that if a considerable portion of the forests is found to have been planted, a substantial portion of the forest income may be taken to have been derived therefrom. And this too, it must be remarked, is only a presumption of fact, the strength of which must depend on all the facts found. In the face of the clear finding in the present case that the forests with which the assessment years are concerned were of spontaneous growth, the observations quoted above can be of no assistance to the respondent. It is scarcely necessary to add that the observations, "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", quoted above cannot be read, as was sought to be done for the respondent, as throwing on the Department the burden of showing that the income sought to be taxed was not agricultural income. That, in their context, is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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