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TMI Blog1954 (1) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was horticultural produce within the meaning of Section 2(i) of the Act. The question that remains was whether that arecanut was "grown on any land in which the assessee had an interest whether as owner, usufructuary mortgagee, tenant or otherwise." That question was answered in the negative by the Tribunal, and the correctness of that decision was challenged before us by the assessees. In each case the assessee entered into a contract with the owner of the tope, that is, the land which contained arecanut palms among others, under which the assessee became entitled to collect the usufruct of the trees in that tope. The period of the contract was one year, and even when renewed it was only on an annual basis. In many of the cases before us, the contracts were oral and not written, but that in no way affected the determination of the real question at issue, whether the assessee acquired an interest in the land under the terms of his contract. Mr. Nambiar, the learned counsel for the assessees, invited us to construe the terms of the written contract which the assessees, Venkatarama Goundar and Sahib Rowther entered into as fairly typical, and the learned counsel concede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id down in this decision have been quoted and followed a number of times in subsequent decisions both in India and in England, it may be desi- rable to set them out at some length. Lord Coleridge, C.J., quoted with approval the notes of Sir Edward Vaughan Williams on Duppa v. Mayo(2): "The principles of these decisions appear to be this, that wherever at the time of the contract it is contemplated that the purchaser should derive a benefit from the further growth of the thing sold from further vegetation and from the nutriment to be afforded by the land, the con- tract is to be considered as for an interest in land; but where the process of vegetation is over, or the parties agree that the thing sold shall be immediately withdrawn from the land, the land is to be considered as a mere warehouse of the thing sold, and the contract is for goods. This doctrine has been materially qualified by later decisions, and it appears to be now settled that, with respect to emblements or fructus industriales, etc., the corn and other growth of the earth which are produced not spontaneously, but by labour and industry, a contract for the sale of them while growing, whether they are in a state of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not for an interest in the land, but relates solely to the thing sold itself. Here the trees were timber trees, and the purchaser was to take them immediately; therefore, applying the test last mentioned, the contract was not within the fourth section." In Kauri Timber Co. Ltd. v. Commissioner of Taxes(1), their Lord- ships had to consider contracts for the purchase of timber with a right to cut and remove the same at any time within the stated period; and their Lordships pointed out that the fact that the lease was for a period of 99 years was the first salient feature of the case. Their Lordships held at page 776: "..........the transaction under which these timber rights were acquired was not one under which a mere possession of goods by a con- tract of sale was given to the appellant company, but was one under which they obtained an interest in, and possession of, land. So long as the timber, at the option of the company, remained upon the soil, it derived its sustenance and nutriment from it. The additional growths became ipso jure the property of the company. All rights of possession necessary for working the business of cutting or even for preserving uninjured the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contracts it is the tendu leaves and nothing but the tendu leaves that are acquired. It is not the right to pick the leaves or to go on the land for the purpose-those rights are merely ancillary to the real purpose of the contract, and if not expressed would be implied by law in the sale of a growing crop." Their Lordships referred to the Kauri Timber Co., Ltd., case(3), and after pointing out that the leases in that case were for 99 years, they observed: (1) [1875] L.R. I.C.P.D. 35. (3) [1913] A.C. 771. (2) [1949] A.C. 521; 17 I.T.R. 473. "In the case of the purchase of the standing timber what was acquired was an interest in land." Lord Greene recorded: "The two cases can, in their Lordships' opinion, in no sense be regarded as comparable. If the tendu leaves had been stored in a mer- chant's godown and the appellants have bought the right to go and fetch them and so reduce them into their possession and ownership, it could scarcely have been suggested that the purchase price was capital expen- diture. Their Lordships see no ground in principle or reason for differentiating the present case from that supposed." That was consistent with the principle laid down in Marshall v. Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the transaction was not a lease." At page 66 the learned Judge stated: "Taking all the provisions of the document together, I think there was here more than a sale of mere standing timber and that, in the words of Sir Edward Vaughan Williams quoted with approval in Marshall v. Green(2), cited for the plaintiff 'it was contemplated that the purchaser should derive a benefit from the further growth of the thing sold, from further vegetation and from the nutriment to be afforded by the land.' The fact that the comparatively long period of little more than four years was granted to the defendant for cutting and removing the trees is, to my mind, strongly in favour of the above view. I am therefore of opinion that the document in question did create an interest in immoveable property....." The contract in Mammikutti v. Puzhakkal Edom(3) was for removal of standing trees for a period of six years. The court held that the docu- ment did not create a mortgage or charge on immoveable property. It was no more than an exclusive licence to cut trees. The learned Judges referred to Seeni Chettiar v. Santhanathan Chettiar(4), and held that the contract in question did not amount to a lease. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That decision turned upon the definition of moveable property in the Registration Act of 1871 which included juice in trees. White, C.J., observed: "The instrument in question in the present case only gives the right to take toddy and fruit for two years. No doubt any licence under which a person is entitled to take toddy in a sense creates an interest in land since without land there would be no tree and without tree there would be no toddy.....But having regard to the definition to which I have referred it seems to me the right view is that the instrument in question is not a lease of immoveable property and that the interest conveyed by the document is not for the purposes of the Registration Act, an interest in immoveable property." Oldfield, J., referred to Marshall v. Green(4), and the test postulated therein, "the nutriment afforded by the land", and observed: "This benefit however is not in my opinion such an interest in land as Section 17(1)(b) of the Registration Act contemplates. For it involves only a stipulation that the trees are to remain available during the currency of the contract for the use specified in it, not any limitation on the transferor's enjoyment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Property Act. In each of the three cases, it was held that the right to tap toddy did not bring the transaction within the scope of a lease of the land itself. From the point of view of the Income-tax Act, that right created no interest in the land, Commissioner of Income-tax v. Yagappa Nadar(5). From the point of the Registration Act, it created no interest in (1) (1948) 2 M.L.J. 155. (4) (1915) 38 Mad. 883. (2) (1875) L.R. 1 C.P.D. 35. (5) (1927) 50 Mad. 923. (3) (1897) I.L.R. 20 Mad. 58. immoveable property, Natesa v. Thangavelu(1). From the point of view of the Transfer of Property Act, it created an interest in immoveable pro- perty, though it did not amount to a lease of the land as such. The question at issue before us, whether the contract created any interest in land, cannot obviously be decided on the basis of the defini- tion of immoveable property or moveable property in the Registration Act or in the Transfer of Property Act. What Section 2(i) of the General Sales Tax Act requires is "interest in land" and not "interest in immoveable property. "The definition of immoveable property in the General Clauses Act therefore cannot be made applicable in construing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther vegetation and from the nutriment to be afforded by the land, the contract is to be considered as for an interest in land, were fully explained by Lord Coleridge, C.J., and Brett, J., in that decision. That test was satisfied in the Kauri Timber case(1), because the period of the contract was 99 years, and the additional growth during that period, as their Lordships pointed out, became ipso jure the property of the lessee. In Mohanlal Hargovind's case(2), with reference to the tendu leaves which the lessee had the right to collect, their Lordships held in the words of Marshall v. Green(3), "the land is to be considered as a mere warehouse of the things sold and the contract was for goods." In our opinion the present case falls within the scope of the rule in Mohanlal Hargovind's case(2). The arecanut tope was just analogous to a warehouse wherefrom the arecanut could be removed by the assessees during the period of their contract, a short term contract of one year. The fact that there were three or four pickings during that period of one year, in no way affected the real position of the assessees. It would not make it any better than the position of the assessee in Mohanlal H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endently of the other requirements, ownership, usufruc- tuary mortgage, or tenancy, and that any kind of interest would be suffi- cient to bring the dealer within the scope of the proviso. We are unable to accept that contention. It seems obvious to us that the expression "otherwise" after enumerating the three classes of interest, should be construed on the application of the principle of ejusdem generis. The one feature that runs through the three classes of interest specified, ownership, usufructuary mortgage or tenancy, is the right to the exclu- sive possession of the land. Any interest to be brought within the scope of the term "otherwise" in Section 2(i) of the Act must satisfy that generic requirement, the right to exclusive possession of the land itself. All that the assessees got under the contract was only an exclusive right to the usufruct, and that, in our opinion, can by no stretch of language be deemed to be an interest in land within the meaning of Section 2(i) of the Act. The Appellate Tribunal was right in holding that the assessees in this case were not entitled to exclude from the turnover the sale proceeds of arecanuts, because the assessees had no interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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