1966 (8) TMI 19 - HC - Income Tax

Assessee received Rs. 75,000 from lease of forest for clear felling of trees - should be considered as a revenue income and not as a capital income

Summary

Issues:
1. Whether income from felling of trees from forests is subject to income-tax.
2. Determination of income as capital or revenue receipt.
3. Interpretation of the clear felling method under the Madras Preservation of Private Forests Act, 1949.

Detailed Analysis:
1. The judgment by the High Court of Kerala involved a reference by the Income-tax Appellate Tribunal regarding the taxability of income from felling trees in a forest. The primary issue was whether the amount received for felling trees should be treated as a capital or revenue receipt for income-tax purposes for the assessment year 1959-60.

2. The Court considered the contention of the department that the amount received for felling trees should be treated as a capital transaction. However, the Court analyzed the nature of the income received and concluded that if the amount was for the regeneration and future growth of trees, it should be considered a revenue receipt subject to income-tax, rather than a capital receipt.

3. The Court examined the specific conditions under the Madras Preservation of Private Forests Act, 1949, related to the clear felling method. It noted that under this method, trees were to be felled in a way that ensured regeneration and future growth, rather than complete removal with roots. The conditions specified in the Act emphasized leaving the roots intact to allow for future growth, indicating a revenue nature of the income received from such activities.

4. The Court determined that the income of Rs. 75,000 from the felling of trees under the clear felling method should be considered as revenue income, not capital income. The judgment was made against the assessee and in favor of the department, emphasizing that the income was for future growth and regeneration, aligning it with revenue nature rather than capital.

5. Additionally, the Court addressed a submission regarding a lease deed dated September 11, 1957, stating that it should not be considered as additional evidence. The Court clarified that the judgment was not based on the lease deed but on the nature of the income received from the felling of trees under the clear felling method.

6. Finally, the Court directed that a copy of the judgment be sent to the Appellate Tribunal as required by the Indian Income-tax Act, 1922. The judgment provided a detailed analysis of the income tax implications of revenue received from felling trees in private forests under specific statutory rules, emphasizing the distinction between capital and revenue receipts.