1953 (3) TMI 41 - HC - Income Tax

Summary

Issues Involved:
1. Whether the sum of Rs. 12,046 collected as fees for grazing cattle on forest lands with spontaneously grown grass is exempt as agricultural income under Section 2 of the Indian Income-tax Act.

Issue-wise Detailed Analysis:

Issue 1: Definition and Exemption of Agricultural Income
The primary issue revolves around whether the income derived from grazing fees on forest lands with spontaneously grown grass qualifies as "agricultural income" under Section 2 of the Indian Income-tax Act, thereby exempting it from income-tax under Section 4(3)(viii).

Relevant Facts:
- The assessee owns a large estate, part of which includes forest land with spontaneously grown grass.
- Owners of cattle pay fees to graze their cattle on this land, generating an income of Rs. 12,046 for the assessee.
- The Appellate Assistant Commissioner of Income-tax initially held that this income was not agricultural and thus taxable. However, the Tribunal later ruled that it was agricultural income and exempt from tax.

Legal Provisions:
- Section 2(1) of the Indian Income-tax Act defines "agricultural income" to include:
- (a) Rent or revenue derived from land used for agricultural purposes.
- (b) Income derived from such land by agriculture, processing of agricultural produce, or sale of agricultural produce.
- (c) Income from buildings used in connection with agricultural operations.
- Section 4(3)(viii) exempts agricultural income from being included in the total income for income-tax purposes.

Judicial Precedents:
- The judgment references several key cases to elucidate the definition of agricultural income:
- Raja Mustafa Ali Khan v. Commissioner of Income-tax (1948) 16 I.T.R. 330: Income from trees of spontaneous growth was held not to be agricultural income as there was no human intervention in their growth.
- Yuvarajah of Pithapuram v. Commissioner of Income-tax (1946) 14 I.T.R. 92 and Benoy Ratan Banerji v. Commissioner of Income-tax (1947) 15 I.T.R. 98: Similar conclusions were drawn regarding spontaneous growth and lack of human agency.
- Emperor v. Probhat Chandra Barua (1924) 51 Cal. 504: Income from pasturage was considered agricultural income, as it was derived from land used for agricultural purposes.
- Mahendralal Choudhari v. Commissioner of Income-tax (1949) 17 I.T.R. 454: The Nagpur High Court held that land used for grazing cattle commonly used for agricultural purposes is agricultural land, and income derived from it is agricultural income.

Court's Analysis:
- The court distinguished between income from trees of spontaneous growth and income from pasturage. While trees of spontaneous growth do not involve agricultural operations, pasturage is intimately connected with agriculture.
- The court noted that rearing cattle is a part of agricultural operations, and land used for grazing cattle should be considered as used for agricultural purposes.
- The court referenced the opinions of Rankin, J., and Page, J., in the Emperor v. Probhat Chandra Barua case, which supported the view that income from pasturage is agricultural income.
- The court also agreed with the Full Bench decision in Mahendralal Choudhari v. Commissioner of Income-tax, which emphasized that land used for grazing cattle is used for agricultural purposes, and the income derived from it is agricultural income.

Conclusion:
- The court concluded that the income derived from allowing cattle to graze on forest land with spontaneously grown grass is agricultural income.
- The answer to the formulated question was in the affirmative, meaning the Rs. 12,046 collected as grazing fees is exempt from income-tax as agricultural income.

Costs:
- The assessee is entitled to costs assessed at Rs. 400.

Reference Answered Accordingly.