COMMISSIONER OF INCOME TAX Vs. PATWARDHAN N T

JUDGEMENT

(1.) IN this reference, which the Tribunal has made to us under S. 66(1) of the Indian IT Act, the point in dispute is whether the receipt of the sale proceeds of the trees standing on the grasslands of the assessee for a number of years and which have been uprooted and bodily removed is capital or revenue in nature.

(2.) THE assessee is the Raja Saheb of Miraj, who owned about 10 square miles of grasslands. On these lands there were a large number of trees which had grown spontaneously and had stood for a number of years. In the accounting year 1948 -49 the assessee sold these trees by four auctions. According to the conditions of the auction, the purchaser was to pay in lump sum the amount for which he had bid at the auction. The purchase price was, however, realised by instalments over a period of time so as to suit the convenience of the purchasers. There was also a term of the auction under which the purchaser was to uproot the trees and remove the roots from the lands.

(3.) MR . G. N. Joshi, learned counsel for the Revenue, has contended before us that the view taken by the Tribunal is entirely erroneous and unsustainable. He has contended in the first place that, on the facts and circumstances of the case, the sale to the purchaser was a sale of trees. The further condition imposed upon the purchaser that he had to uproot the trees sold to him was a condition which was for the benefit of the vendor and not to his detriment. There was, therefore, no question of diminution of his capital asset and the condition did not in any way alter the real nature of the transaction which was a sale of trees of spontaneous growth. Mr. Joshi has argued that the legal position with regard to the income from sale of trees of spontaneous growth is now well settled. Such income is not agricultural income but income liable to tax under the IT Act. The sale proceeds, therefore, which the assessee has realised in the present case were not exempt from income -tax.