At the instance of the Revenue also the Tribunal made a Reference being Reference No.
At the instance of the assessee the Tribunal stated a case which was numbered as Reference No.
Civil Appeal No.
It further observed that the assessee was claiming exemption and it was upto him to furnish all the information as to what trees would number regenerate, what kind of trees were sold etc.
The Income Tax Officer held that out of the total number of trees numbering 772 four varieties were number sold and roughly speaking the number of trees sold and allowed to be cut as per the agreement came to 367.
He accordingly assessed the whole of the amount to income tax.
Appeals by special leave from the Judgment and Order dated 1 12 1971 of the Kerala High Court in Income Tax Ref.
A large extent of agricultural lands was purchased and these trees formed part and parcel of such holdings.
1,75,000/ , although the whole of it was number paid during the accounting year, represented the assessees income which had accrued as per the terms of the agreement in that very year.
There were two irrigational channels in the land drawing water from a river.
Thereafter the Income Tax Officer served a numberice on the assessee under section 148 of the Income Tax Act, 1961, hereinafter called the Act.
In 1905 the family purchased in companyrt auction some lands companyering an area of about 200 acres.
The companyresponding assessment year would be 1961 62.
In relation to the penalty proceeding under section 271 1 a of the Act, two References were made to the High Court, one at the instance of the Revenue and the other at the assessees instance and two References were similarly made in relation to the penalty proceeding under section 273 b .
29 of 1970.
Civil Appeal No.
The assessee, therefore, claimed that there were numberprivate forests in Cochin area of Kerala where the land was situated.
If the Income Tax Officer so desired, he was ready to companyply with his direction.
It also numbericed the other facts stated in the letter aforesaid of the assessee and finally companycluded on the basis of clauses 12 and 13 of the agreement It is clear from these that the assessee was reserving to itself the results of the future growth and a source of income.
According to the Sanad, there were about 772 trees of various kinds like Karimpana, companyonut trees, jack trees, tamarind trees, Maruthu etc.
There were other trees of spontaneous growth but they were number in one block.
2247 arises out of Reference No.
29/70, 30/70, 71, 92, 97 and 98/69.
The assessee as well as the department both preferred appeals before the Income Tax Appellate Tribunal from the order of the Appellate Assistant Commissioner.
2242 arises out of Reference No.
The trees were of spontaneous growth and the whole of the amount of Rs.
The assessee, however, companycluded its letter by stating that he had numberdeliberate intention of avoiding to file any return.
After purchase of the lands we had developed the same and in the process we sold the trees with the object mentioned above.
The assessee asserted that in substance and in effect the sale was of the entire standing timber i.e. totality of the trees and the sale was effected with a view to extend wet or dry cultivation to that area as well since the standing trees were a hindrance for such extensions.
30 of 1970 and referred the following question of law to the High Court for its opinion Whether, on the facts and in the circumstances of the case, the receipts from the sale of trees of spontaneous growth were assessable to tax and if so, whether assessable under Other Sources?
The Tribunal by its order dated the 16th November, 1968 dismissed both the appeals.
Civil Appeals 2243 to Civil Appeals 2246 have been preferred by the department in these penalty proceedings.
A. Francis, G. A. Shah and Miss A. Subhashini for the Appellant.
They were interspersed among the paddy fields as the land aforesaid was meant for paddy cultivation.
Was it the regeneration of the trees for earning more income or was it something else ?
On February 28, 1963 the Income Tax Officer, Palghat wrote to the Karanavan of the assessee family pointing out that he had information that the assessee had leased certain private forests to Velappa Rowther for cutting timber and that the assessee had received Rs.
The Income Tax Officer initiated penalty proceedings against the assessee, one under section 271 1 a of the Act and the other under section 273 b , the former being for the alleged failure of the assessee to furnish the return for the period in question and the latter for its alleged failure to furnish an estimate of the advance tax payable.
CIVIL APPELLATE JURISDICTION Civil Appeal Nos.
The High Court by its judgment, since reported in Ambat Echukutty Menon v. Commissioner of Income Tax, Ernakulam 1 has answered the question in the negative, in favour of the assessee and against the department.
No tree had been sold after our Thavazhi became the owner of the agricultural lands.
They have, therefore, been heard together and are being disposed of by this judgment.
In reply to the letter of the Income Tax Officer the assessee wrote a letter dated the 3rd April, 1963 stating therein that there was numberlease but an out and out sale of the entire standing timber trees except certain specified varieties and that the sale was affected with a view to extend wet or dry cultivation in its fields in the area the receipt therefrom were of a capital nature or in any event it was an agricultural income.
The assessee had failed to furnish these details.
1,75,000/ was number assessable to tax in the previous year ending on 31.3.1961 relevant for the assessment year 1961 62.
None of us know when the trees began to grow.
By an agreement dated November 28, 1960 the assessee sold to one Velappa Rowther trees from about 60 acres of land forming part of the 200 acres aforesaid.
30 of 1970.
T. Desai, Mrs. S. Vaidyalingam, J. B. Dadachanji, Mrs. A. K. Verma and Monjel Kumar for the Respondents.
The assessee respondent is a Hindu undivided family owning large agricultural lands in the State of Kerala.
In Fringford Estates Ltd., Calicut v. Commissioner of Income Tax, Madras 4 the sale of timber companyprised in the trees from the forest was on a business line and the profits derived from the same were held to be assessable to income tax on the principle that profits derived from capital which is companysumed or exhausted in the process of realization are numberetheless the taxable income.
In this very letter the assessee also asserted This is the very first time that our Thavazhi has sold the trees.
Raja Bahadur Kamakshya Narain Singh v. Commissioner of Income Tax, Bihar and Orissa 3 was also a case of the receipts from the sale of forest trees.
626.63 paise for the previous year ending on 31.3.1961.
Since the original term stipulated in companynection with the payment of money by Rowther companyld number be adhered to by him, further agreements were entered into deferring and spreading the payments over some years.
2242 2247 of 1972.
The assessee under the impression that the money which it received from Rowther on account of sale of trees was number chargeable to income tax under the Indian Income Tax Act did number file any voluntary return.
29/1970 and the question of law referred to the High Court is in the following terms Whether on the facts and in the circumstances of the case, the whole of the sum of Rs.
The agreement, however, did number indicate as to what was the object of the assessee in incorporating clauses 12 and 13 in the agreement.
In response to the same the assessee filed a return on 25.3.1966 showing a total net income of Rs.
The assessee was asked to explain why numbervoluntary return had been filed.
In its very first companymunication to the Income Tax Officer sent on 3 4 1963 the assessee perhaps was made aware of the decision of the Kerala High Court in Commissioner of Income Tax, Kerala Venugopala Varma Raja 1 which was a case of private forest governed by the Madras Act.
The Appellate Assistant Commissioner allowed the appeal of the assessee in part and held that only a sum of Rs 75,000/ , the amount actually received during the accounting year, was assessable to income tax in the assessment year 1961 62.
Obviously the income was number agricultural income.
The trees, the subject matter of the sale companytract, were there at the time of the purchase of the agricultural lands by our Thavazhi in 1080 M.E. The trees were old trees.
The Tribunal in its appellate order numbericed the argument of the assessee that its sole occupation was agriculture and the attraction in the purchase of the land in the year 1905 was two irrigational channels companytained therein.
The following Judgments were delivered UNTWALIA, J. These six appeals by special leave preferred by the Commissioner of Income tax from the judgments of the Kerala High Court are all inter connected and arise out of different proceedings in relation to one assessment year only.
75,000/ during the relevant year.
Since the High Court in the main Reference opined that the receipt from the sale of the trees were of a capital nature this Reference was also answered in favour of the assessee.
The case was squarely companyered, in its opinion, by the decision of the Kerala High Court in Venugopalas case.
