KAMESHWAR SINGH SIR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE references are under S. 66(2) of the Indian IT Act. As the questions involved in these cases are common, they will be dealt with by this judgment. The following four questions were framed by this Court at the instance of the assessee, and the Tribunal has stated the case in regard to those questions.

(2.) QUESTIONS 1, 2 and 3 are common in all the references, while question No. 4 arises only in respect of Miscellaneous Judicial Case No. 24 of 1951 which arises out of the order passed for the asst. year 1948 -49 in IT Appeal No. 1481 of 1949 -50. So far as the first two questions are concerned there is a slight difference in the case in regard to Bankura forest and Kharagpur forest. In regard to Bankura forest, the forest is leased out by auction on short terms for lump sums. The terms of the lease are not to be found on the records of these cases. It is, however, said that, according to the terms of the lease, the lessee is entitled to cut down and remove all sal trees, but not those which are more than 3 feet in girth above 3 feet from the ground, and all other jungle trees, other than fruit bearing trees and valuable timber trees. The lessee is further entitled to cut stumps not higher than 5 feet over ground so that new shoots may grow in rains and in time major trees are produced. The lessee cannot enter the forest during the rains, when new shoots come out, and he had to guard the forest from trespassing by men and cattle. After the period of the lease expires, the lessee loses all his rights to enter the land and the land reverts to the assessee. It is claimed by the assessee that the receipt from these forests is not income and it is a capital receipt and thus not taxable on the ground that the lessee becomes possessed of the trees and the jungle during the period of the lease and is entitled to cut and remove them and, on that account, the money paid by the lessee is capital receipt in the hands of the assessee for transferring the trees to the lessee or transferring the right to cut the trees. In the alternative, the assessee claims that, as human skill and labour is employed, the income from the forest is covered by the definition of "agricultural income", as given in the Act, and, therefore, exempt from income -tax. So far as the case in regard to Kharagpur forest is concerned, there is no lease and there are three sources of income from that forest, namely (1) from bamboos, (2) from sabai grass and, (3) from timber. The assessment in regard to the first two is not challenged; the assessment in regard to income from timber only is challenged.

(3.) THE next contention in regard to the income from Bankura forest is that it is an agricultural income and, as such, exempt from tax under the Indian IT Act. It is to be noted that an eminent counsel of the position of Mr. Kolah had not seriously pressed this point before the Tribunal; but, as this matter has been argued before us, it is proper that this point also should be considered and answered. "Agricultural income" is defined in S. 2(1) on the Indian IT Act, and, according to the definition, it means "(a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed on land revenue in the taxable territories or subject to a local rate assessed and collected by officers of the Government as such; (b) any income derived from such land by - (i) agriculture, or (ii) the performance by a cultivator or receiver of rent -in -kind to render the produce raised or received by him fit to be taken to market, or (iii) the sale by a cultivator or receiver of rent -in -kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in sub -cl. (ii)..............................." The point is concluded by the authority of this Court in Maharaja Pratap Udai Nath Sahi Deo (1941) 9 ITR 313. Mr. Mazumdar has placed reliance upon the case of Commr. of Agrl. IT vs. Raja Jagadish Chandra Deo Dhabal Deb (1949) 17 ITR 426. Even if the test laid down in that case is applied, the assessee's income from Bankura forest cannot be said to be the result of some "expenditure of skill and labour" upon it. We have no evidence as to application of human efforts made in respect of this jungle. The lease has not been produced nor has any other material been placed before us to show that the assessee made any efforts in growing the trees in this jungle. As I will have to deal with the case of Commr. of Agrl. IT vs. Raja Jagadish Chandra Deo Dhabal Deb (supra) in some detail while dealing with the second question, I do not think it proper to consider that case any further so far as this point is concerned. In that view of the matter, I would hold that the income from Bankura forest is not agricultural income and, as such, exempt from taxation. I would, therefore, answer question No. 1 in the negative.