KALPETTA ESTATES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE are connected cases. The same assessee is the applicant in these three connected cases. The respondent is the Revenue in all the eases. We are concerned with the assessment years 1969-70, 1970-71 and 1971-72. At the instance of the assessee/applicant, the Income-tax Appellate Tribunal has referred the following questions of law in these three cases for the decision of this court:

(2.) THE assessee/applicant is a limited company mainly dealing with rubber. THEy are owners of an estate known as Chulika Estate. Vellarmala Estate is an adjacent estate. It was owned by a company which went into liquidation. THE assessee-company acquired the Vellarmala Estate from the owners. THE resolution of the board of the assessee-company approving the purchase of the estate, is dated October 11, 1949, After October 1, 1956, Vellarmala Estate was not subject to land revenue. THE estate consisted of timber from forest of spontaneous growth. THE forest came under the Madras Preservation of Private Forests Act. During the relevant previous years, the assessee sold portions of the land in Vellarmala Estate. In 1970-71, it sold a portion in Chulika Estate and in 1971-72 a portion of land in Charity Estate also. THE common question that is posed in these references is whether the lands sold by the assessee-company, during the respective accounting periods, attracted capital gains tax. THE Income-tax Officer laid emphasis on the resolution of the assessee-company dated October 11, 1949, and concluded that the presence of valuable timber, estimated at Rs. 5 lakhs, prompted the purchase of the Vellarmala Estate, that the assessee used the land merely to extract timber and did not plant any tree and that no subsequent development was made in the estate. In certain areas, it was covered by wild bushes. He concluded that the capital assets sold during the relevant accounting periods was only forest land. Tax on capital gains was levied. In appeal, the Appellate Assistant Commissioner held that no agricultural operation was carried on by the assessee on the lands sold during the relevant previous years. It was not subject to land revenue after the formation of the State of Kerala. THE land was not shown to be necessarily as a fallow land for agricultural operations, THE above facts were not controverted before the Tribunal. THE Tribunal held that the purchase of Vellarmala Estate which consisted of a thousand acres was influenced by the presence of valuable timber valued at Rs. 5 lakhs by the manager of the assessee-company and in the light of the principles laid down by the Supreme Court in CED v. V. Venugopala Varma Rajah [1976] 105 ITR 593, it should be stated that the forest land containing trees of spontaneous growth are not agricultural lands and the lands sold by the assessee, in the previous years, are clearly forest lands coming under the Madras Preservation of Private Forests Act. In this view of the matter, the onus is on the assessee to show that the lands are agricultural lands and the assessee failed to do so. In this view of the matter, the decision of the Appellate Assistant Commissioner that the lands sold during the previous years are not agricultural lands but continued to remain waste lands and it was never used for any agricultural purposes, was confirmed. THE lands were found to be capital assets exigible to capital gains tax. THEreafter, at the instance of the assessee, questions of law for the three years have been separately formulated and referred for the decision of this court by the Income-tax Appellate Tribunal.

(3.) ON an evaluation of the rival pleas put forward before us, we are of the view that the Appellate Tribunal was justified in holding that the assessee failed to prove its case, namely, that the lands sold in the previous years are agricultural lands. If that be so, the levy of capital gains tax is justified for all the three years. A mere look at the questions of law referred for the three years will show that various factual findings have not been questioned by the assessee by framing appropriate questions in that behalf. Whether a piece of land is agricultural in character or a capital asset is largely a question of fact that should be determined by the cumulative effect of all facts and circumstances in a given case. The above proposition is well settled. [Krishna Iyer v. Addl. ITO [1966] 59 ITR 145 (Ker)]. The only question that is posed is whether, on the basis of the findings entered by the Appellate Tribunal, the conclusion that what was transferred in the relevant previous years is a capital asset attracting levy of capital gains tax is tenable. Even assuming that the question posed is a mixed question of fact and law, in so far as the factual findings are not assailed by framing an appropriate question, we have to hold on the facts found that the conclusion arrived at by the Appellate Tribunal is legal, rational and tenable.