2014 (9) TMI 792 - HC - Income Tax

Income from sale of trees to be treated as income from business or not Held that - The Tribunal was rightly of the view that the assessee was not felling trees for the sale of wood to any outsider for generating income and the fact that the cut trees are used for own consumption is admitted by the Revenue - the wood cut from the tree is used by the company as fire-wood - the cutting of trees, leaving the stump as required by the condition imposed by the forest department is not for generating income out of the trees, but for felling of the wood for own consumption relying upon CIT Vs Ambat Echukutty Menon 1979 (9) TMI 2 - SUPREME Court it is not a case of business income the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
1. Addition of income from the sale of trees in the tea garden.
2. Interpretation of business income in relation to felling of trees for own consumption.
3. Applicability of Supreme Court judgments in Vishnudatta Antharjanam's case and Ambat Echukutty Menon's case.

Analysis:
1. The appeal involved a dispute regarding the addition of income from the sale of trees in the tea garden by the Assessing Officer under Section 143(3) of the Income Tax Act. The Commissioner of Income Tax (Appeals) allowed the appeal of the assessee and deleted the addition, relying on the Supreme Court judgment in Vishnudatta Antharjanam's case, which held that felling of trees is outside the purview of business income. The Revenue then appealed to the Tribunal.

2. The Tribunal observed that the assessee was not felling trees for generating income by selling wood to outsiders but for own consumption, as admitted by the Revenue. Considering the nature of the assessee's business in growing and producing tea, the Tribunal concluded that cutting trees was not for generating income but for own consumption. The Tribunal further cited the Supreme Court judgment in CIT Vs Ambat Echukutty Menon to support its view that it was not a case of business income.

3. The High Court, after hearing arguments and reviewing the orders of the Commissioner of Income Tax (Appeals) and the Tribunal, found that both authorities based their decisions on different Supreme Court judgments - Vishnudatta Antharjanam's case and Ambat Echukutty Menon's case. The High Court acknowledged that there was no dispute regarding the law laid down in the two Supreme Court decisions. Upon examining the facts, the High Court determined that there was no error in the Tribunal's order and that the Supreme Court judgments were applicable to the present case, leading to the dismissal of the appeal for lack of substantial legal questions.

This comprehensive analysis highlights the key issues, legal interpretations, and the application of relevant case law in the judgment delivered by the Madras High Court.