AMBAT ECHUKUTTY MENON Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is a reference under S.256(1) of the Income Tax Act, 1961. The question referred is:

(2.) The assessee is a Hindu undivided family which owns large agricultural lands. In 1905 it took in court auction some lands covering an area of 200 acres. In the lands so" taken, there Were two irrational channels drawing water from a river. According to the Sannad, there were about 772 trees of various kinds like karimpana, coconut trees, jack trees, tamarind trees, maruthu, etc. These were Hot in one block but were interspersed among the paddy fields. There were other trees of spontaneous growth. By an agreement dated 28-11-1960 the English translation of Which is Annexure 'A', the representatives of the assessee sold to one Velappa Rowther trees from about 60 acres of the land obtained by the assessee in court auction on certain terms and conditions mentioned in that agreement Annexure 'A.' Two clauses of this agreement which have been relied on for the Tribunal for holding that the sale price is income are those in Clause.12 and 13 which we may extract:

(3.) No.3 referred to in Clause.13 is the said Velappa Rowther. The terms relating to payment stipulated in Annexure 'A' were not adhered to by Velappa Rowther. There were further agreements deferring the payments to be made by Velappa Rowther. These are not very important for the purpose of answering the question but will be relevant in the connected Income Tax Referred Case No. 29 of 1970 and will be referred to in dealing with that case. According to the assessee, the agreement dated 28-11-1960 (Annexure 'A') was entered into "with a view to extend wet or dry cultivation to that area as well, since the standing trees were a hindrance for such extension". This was mentioned in a letter dated 3-4-1963