The Commissioner Of Income-Tax, West Bengal, Calcutta v. Raja Benoy Kumar Saras Roy

Section: CONCLUSION S.C.R. SUPREME COURT REPORTS 101 THE COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA RAJA BENOY KUMAR SARAS ROY (BHAGWATI, VENKATARAMA AYYAR and J.L. KAPUR JJ.) Income-tax-Exemption-Income from sale of forest trees, if .and when agricultural income-"Agriculture", Meaning of-Indian Income-tax Act (XI of 1922), ss. 2(1), 4(3) (viii). The question for decision in this appeal by the Commissioner ·of Income-tax was whether a sum of Rs. 51,978 shown by the assessee in his return as income from his forest land was agricul-tural income within the meaning of s. 2(1) of the Indian Income-tax Act and was as such exempt from taxation under s. 4(3)(viii) of the Act. The forest was of spontaneous growth, 150 years old, and consisted of sal and piyasal trees. It was in parts denuded of trees from time to time by destructive elements and the . assessee had to plant fresh trees in those parts. Considerable amount of human labour and skill lmd to be applied year after year for . maintaining the forest, protecting the offshoots from the stumps of the trees that had been cut and sold and in reviving its denuded parts by fresh plantation. The staff employed by the assessee performed such operations as· pruning, weeding, felling, clearing, cutting of channels, guarding the trees and sowing seeds by dig-ging the soil in the denuded areas. The Income-tax Officer rejected the assessee's claim of exemption an added a sum of Rs. 34,430 to the assessable income, allowing a sum of Rs. 17,548 as expend-iture. The Assistant Commissioner of Income-tax confirmed the assessment. The Appellate Tribunal held that the sowing of seeds were few and far between and the income, derived as it was from jungle products, was not agricultural income within the meaning of the Act. The High Court took a contrary view, held that tillage of the soil was not essential, and the income was agricul-tural income as human labour and skill had been expended on the land itself and answered the question in favour of the assessee. No attempt was, however, made by the Income-tax Authorities to ascertain the income actually derived from the trees planted by the assessee, nor were any materials placed on the record from which its exact amount could be ascertained, but having regard to the magnitude of the expenditure shown by the assessee as against the total income this Court held that a substantial portion of it must have been derived from the trees planted by the assessee. Held, that the income actually derived from the trees planted by the assessee was agricultural income within the meaning of s. 2(1) of the Indian Income-tax Act and no attempt having been 1957 May, 23 19S1 made to ascertain its exact amount and a fresh enquiry being The Commissioner u!'de~irable after such a long lapse of time, the appeal must be of Income-tax, d1sm1ssed. of Income-tax, d1sm1ssed. Wc!rc!::fal The term 'agriculture' in s. 2(l)(b)(i) of the Indian Income-tax •· Act connotes the entire and integrated activity of an agriculturist Raja Benoy Kumar performed on the land in order to raise its produce and consists of Sahas Roy such basic and essential operations, requiring human skill and labour on the land itself, as the tilling of the soil, sowing of the seeds, planting and similar operations on the land and such other subsequent operations, performed after the produce sprouts from the land, as weeding, digging of the soil around the growth, removal of undesirable under-growths, tending, pruning, cutting, harvesting and marketing. But these subsequent operations, if unconnected with the basic operations, cannot by themselves constitute agriculture. It is only when the land is subjected to such integrated activity, that it can be said to be used for 'agricultural purpose' and its income called agricultural income within the meaning of the Act. . Case-law discussed. 1957 103 Whatever is produced by such agriculture must be an agricul-tural product and the ambit of the term 'agriculture' cannot be confined merely to the production of grain and food for men and cattle but must extend to all products of the land that have some utility either for consumption or trade and commerce. Fruit and vegetable plantations, groves, pastures, articles of luxury such as betel, coffee, tea, spices, tobacco etc. or commercial crops like cotton, flax, jute, hemp, indigo etc. as also forest products such as timber, sol and piyasal trees, casuarina plantations, tendu leaves,. horranuts etc. can come within its ambit. Murugesa Chetti v. Chinnathambi Goundan, (1901) I.LR. 24 Mad. 421 and Raja of Venkatagiri v. Ayyappa Reddy, (1913) I.LR. 38 Mad. 738, disapproved. Such an extended meaning of the term 'agriculture' and it& processes and products can be tenable only where there is cultiva-tion, which means the basic operations, and can never be disso-ciated from them. There is, therefore, no warrc1.nt for its further extension so as to include activities which are in some way connected with or dependent on land, such as breeding and rear-ing of livestock, dairy-farming, butter and cheese making and poultry-farming. Moo/ji Sicko & Co., In re, (1925) 10 T.C. 341 and Commissioner of Income-tax v. K. E. Sundara Mudaliar, (1950) 18 l.T.R. 259, disapproved. Although human labour and skill are required both in the performance of the basic as well as the subsequent operati~ns, it is only in the case of the basic operations alone that such skill and labour can be said to have been spent on the land itcself, and this distinction becomes important where they arc disjointed and do S.C.R. SUPREME COURT REPORTS not form an integrated activity, as in the case of products of land that are of spontaneous growth where hunian skill and labour are spent merely in fostering the growth, preservation and regenera-tion of such products. 1957 The Commissioner·of Income-tax, West Bengal, Calcutta v. -Judicial opinion is unanimous that products which grow wild on the land or are of spontaneous growth and do not involve any Raja Benoy Kumar human skill or labour on the land, and all that the assessee has. Sahas Roy to perform in respect of them is only to collect them for consump--tion and marketing, are not products of agriculture and the income derived from them is not agricultural income within the meaning of s. 2(1) of the Act. When, however, the assessee performs subsequent operations on these products of land, the nature of those operations will have to be determined in the light of the principles enunciated above. Held.further, that there is no basis for the argument that the· demarcation of- agriculture and forestry as separate head~ of legis-lation in Entries 14 and 19 of List II of the Seventh Schedule to the Constitution has the effect of making them mutually exclusive. Income from forestry coming within the definition of 'agricultural income' contained in s. 2(1) of the Indian Income-tax Act will be agricultural income under Entry 46 and thus fall within the purview of that Act. . CIVIL APPELLATE JURISDICTION : Civil Appeal No. 165of1954. Appeal from the judgment and order dated May 27, 1953, of the Calcutta High Court in Income-tax Reference No. 35 of 1952. G. N. Joshi and R.H. Dhebar, for the appellant. Jyotish Chandra Pal and D. N. Mukherjee, for the respondent. 1957. May 23. The Judgment of the Court was delivered by BHAGW ATI, J .-This appeal with certificate of fitness Bhagwati [1]· under s. 66A(2) of the Indian Income-tax Act (XI of 1922) is directed againstthe Judgment and order of the High Court of Judicature at Calcutta on a refer-ence under s. 66(1) of the Act. The respondent owns an area of 6,000 acres of forest land assessed to land revenue and grown with Sal and Piyasal trees. The forest was originally of spontaneous growth, "not grown by the aid of human skill and 104 SUPREME COURT REPORTS (1958] 1957 1957 laobur" and it has been in existence for about 150 1 he Commissioner years. A considerable income is derived by the assessee 01 ,Income-tax, from sales of trees from this forest. The assessment JI est Bengal, . h. h h. ,. . 1 d d [Calcutta year m w 1c t 1s 1orest mcome was ast taxe un er the Indian Income-tax Act was 1923-24 but thereafter R a;a [. ]Sahas [s'" ]''"'Y Roy numar [v ]an d ti '11 1944 -45 w h' h . 1c 1s t e assessment year m ques-h · J(-. 01 tion, it was always left out of account. The assessment ,.[8]"'" • for 1944-45 also was first made without including there-in any forest income, but the assessment was subse-quently re-opened under s. 34. In response to a notice under s. 22(2) read with s. 34 of the Act, the respondent submitted a return showing the gro$s receipt of Rs. 51,978 from the said forest. A claim was, however, made that the said income was not assessable under the Act as it was agricultural income and was exempt under s. 4(3) (viii) of the Act. The Income Tax Officer rejected this claim and added a sum of Rs. 34,430 to the assessable income as income derived from the forest after allowing a sum of Rs. 17 ,548 as expenditure. The Appellate Assistant Commissioner confirmed the assessment and the Income-tax Appellate Tribunal also, was of opinion that the said income was not agricultural income but was .income derived from the sale of jungle produce of spontaneous growth and as such was. not covered by s. 2(1) of the Act. At the instance of the assessee the Tribunal referred to the High Court under s. 66(1) of the Act two questions of law arising out of its order, one of which was: "Whether on the facts and in the circumstances of this case, the sum of Rs. 34,430 is "agricultural income" and as such is exempt from payment of tax under section 4 (3) (viii) of the Indian Income-tax Act?" The Tribunal submitted a statement of case from which the following facts appear as admitted or established : "(i) The area covered by the forest is about 6,000 acres, trees growing being Sal and Piyasal; (ii) It is of spontaneous growth being about 150 years old. It is not a forest grown by the aid of human skill and labour;· (iii) The fores·t is occasionally parcelled out for 1957 the purposes of sale and the space from which trees The Commissioner sold are cut away is guarded by forest guards to ' 01 West Income-tax, Bengal, Income-tax, Bengal, Bengal, protect offshoots; Calcutta 01 ' West Income-tax, Bengal, Income-tax, Bengal, Bengal, Calcutta that R<rja Ben~y Kumar is Sahas Roy Bhagwati .1. (iv) It has been satisfactorily proved .considerable amount of human labour and care is being applied year after year for keeping the forest alive as also for reviving the portions that get denuded as a result of destruction by cattle and other causes; (v) The staff is employed by the asscssee to perform the following specific operations; (a) Pruning, . (b) Weeding, (c) Felling, ( d) Clearing, (e) Cutting of channels to help the flow of rain water, (f) Guarding the trees against pests and other destructive elements, (g) Sowing of seeds after digging of the soil in denuded areas." The Tribunal found that the employment of human 1957 labour and skill in items (a) to (f) was necessary for the maintenance and upkeep of any forest of spontaneous :growth. Regarding item (g), however, it found that the said operation had been performed only occa-sionally and over a small fraction of the area where the original growth had been found to have been com-pletely denuded. Su