ABRAHAM TALIAT Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE petitioner was holding about 3,000 rubber trees in Carmelyn Rubber Estate comprised in Survey No. 34/1 of Kalial Village in Vilavancode Taluk. THE petitioner, by an agreement dated August 19, 1981, entered into with one Mrs. Lilly Abraham, daughter of P. T. Abraham, residing at Kalial Village, Vilavancode Taluk, agreed to sell the three thousand rubber trees to be cut and removed with a view to replant the above area with rubber. THE said Mrs. Lilly Abraham agreed to purchase the said 3,000 rubber trees earmarked by the petitioner and identified by the said Mrs. Lily Abraham at the rate of Rs. 142 per tree, in all aggregating to Rs. 4,26,000, of which the said Mrs. Lilly Abraham paid an advance of Rs. 1,00,000 on March 23, 1981, and also agreed to pay the balance of Rs. 3,26,000 as entered into in the agreement and that the purchaser shall cut and remove the rubber trees in proportion to the amounts paid under the purchase price. THE said agreement was said to be oral in the first instance which was later reduced in a stamp paper on August 19, 1981. THE petitioner has stated that apart from the advance, he had received a sum of Rs. 1,02,942 during the accounting period April 1, 1981, to March 31, 1982, the corresponding assessment year being 1982-83. THE petitioner was of the view that the sale consideration of the rubber trees was not agricultural income and, consequently, the petitioner did not include the said amount in the statement of income and expenditure of the estate furnished to the assessing authority for the year in question. In response to the notice issued by the assessing authority under section 17(2) of the Tamilnadu Agricultural Income-tax Act, 1955 (hereinafter referred to as "the Act"), the account of the petitioner appeared before the Agricultural Income-tax Officer-I, and produced the accounts. THE Agricultural Income-tax Officer-I stated that the accountant of the petitioner deposed about the factum of the sale under the agreement with a condition that the trees should be cut and removed within a period of three years from March 20, 1981, to April 19, 1984, with permission to "slaughter tap" the trees and that the petitioner-assessee received a sum of Rs. 3,05,884 from the purchaser of the trees. THE assessing authority proceeded on the basis that since three years had been given to the purchaser to cut the trees, it was obvious that the sale included the privilege of slaughter tapping the trees also before cutting and removing them and stated that on inspection by him on December 13, 1982, slaughter tapping of the trees was going on by the purchaser of the trees, which was corroborated by the statement of the authorised representative of the petitioner. In view of the aforesaid statement, the assessing authority proceeded on the basis that the consideration received by the assessee was not only in relation to the value of the trees, but was also in relation to the grant of permission to extract latex from the trees and since the latex had been extracted from the trees, the amount of consideration received by the assessee had to bed bifurcated into two portions, one pertaining to the value of latex and the other attributable to the value of the trees and that the portion of the amount pertaining to latex had to be construed as agricultural income and consequently valued the tree at Rs. 75 per tree and also valued the income from the extract of latex at Rs. 67 per tree. Accordingly, the assessing authority determined the income at Rs. 1,42,329.20 and also determined his liability at Rs. 73,763.85. Aggrieved by the said order of the assessing authority, the petitioner filed Revision Petition No. 34 of 1983 before the Commissioner of Agricultural Income-tax, Madras, the second respondent herein. THE Commissioner of Agricultural Income-tax, on the basis of the statement of the revision petitioner, considered that the Agricultural Income-tax Officer, under section 17(3) of the Act, made an assessment of liability and that cannot be disputed by the revision petitioner and that the revision petitioner failed to prove the contentions of (i) capital receipts on cutting the trees, (ii) no agricultural operations thereon, and (iii) no agricultural income derived thereon and, consequently, by an order dated April 22, 1983, rejected the revision petition filed by the petitioner herein. It is at this stage that the petitioner has filed the above writ petition for issue of a writ of certiorari to quash the assessment order No. G. I. R. 52A of 1982-83 (Vil), dated December 17, 1982, of the third respondent herein and the order in R. P. No. 34 of 1983, dated April 22, 1983, of the second respondent herein.

(2.) MR. Sundararajan, learned counsel for the petitioner, represented that what was sold under the deed of agreement of sale is only trees and that the consideration received as a result of the sale of the rubber trees will constitute only a capital receipt and that cannot be construed as agricultural income. The assessing authority proceeded to determine the income by bifurcating the consideration received by the sale of the rubber trees contrary to the terms contained in the agreement and that, in the absence of any income as a result of the slaughter tapping, the determination of the tax liability by the assessing authority is not sustainable. Learned counsel for the petitioner strenuously contended that what was received by the petitioner under the deeded of agreement represented a capital receipt and that cannot be construed as a revenue receipt and that the petitioner had not derived any interest from the land and, consequently, the assessment made contrary to the terms of the agreement is unsustainable in law.

(3.) LEARNED counsel for the petitioner contended that the law on this aspect, deducible from the decisions cited hereinabove, is that the value received for the sale of the trees has to be considered only as a capital receipt and not as revenue and that, in the instant, case, if the ratio of those decisions is applied, the amount received under the agreement has to be construed only as a capital receipt and not as revenue and the impugned orders are unsustainable.