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TMI Blog1983 (11) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... ed fact that a coffee estate requires shade trees and for the purpose of new plantation the forest area must be cleared. The company in order to facilitate new plantation cleared the forest growth with shade trees. Some trees were cut and sold as logs, timber, charcoal or firewood. In each of the assessment years, the company realised substantial amounts by the sale of such items. 3.. For the assessment years 1961-62 and 1963-64 the question arose whether the sale amount of the shade trees was liable to be brought to tax under the Karnataka Agricultural Income-tax Act. The controversy ultimately reached this Court. The decision of this Court is reported in Consolidated Coffee Estates Ltd. v. Commissioner of Agricultural Income-tax, Mysore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p to maintain an even temperature. They increase the fertility of the soil because the fallen leaves add the much desired muck to the soil. Shade trees also protect the coffee plants from the direct beat of the rain and desiccating winds. They also transport from the lower layers of the soil the necessary minor and trace elements. According to the pamphlet published by the Coffee Board Research Department, the object of maintaining shade trees is to give filtered light, free passage of air and to minimise variations in day and night temperatures. They also help in avoiding the direct impingement of the sun's rays on the foliage. Thus, it will be seen that shade trees existing in a coffee estate are as much important as the coffee bushes whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee received the proceeds of sale of rosewood not in a lump sum in one year but in the course of more than one year is immaterial for the purpose of determining its nature. An income receipt is not necessarily recurring nor a capital receipt necessarily single. A single receipt may be an item of income and an annual receipt recurring over a number of years may be capital." 4.. It is thus seen that the shade trees which were sold by the company formed part of the capital assets to the company. 5.. The above view gets full support from the decisions of the Supreme Court. In Deputy Commissioner of Agricultural Income-Tax and Sales Tax, Central Zone, Ernakulam v. Palampadam Plantations Ltd. [1969] 24 STC 231 (SC), the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Agricultural Income-tax, Trivandrum [1970] 78 ITR 58 (SC), the Supreme Court bad an occasion to consider the sale proceeds of teak trees. Those trees were cut and completely removed from the land and sold for the purpose of planting the areas with rubber. While considering the nature of the realisation made by the assessee therein, the Supreme Court observed: "that the sale of the trees affected the capital structure, because by removing the roots the source from which fresh growth of trees could take place was removed, and the sale could not, therefore, give rise to a revenue receipt. The receipt from the sale of the teak trees was capital in nature." From these decisions, it will be clear that the sale proceeds of the shade t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital assets had been converted into stock-in-trade. Unless there is a proof of such conversion, it is not possible to hold that the company was doing business in the shade trees. Unserviceable or unwanted property or goods have to be disposed of in one manner or the other. If the company resorted to a most advantageous method of disposal of those capital assets and incidentally made profits in so disposing, we cannot infer that the company was engaged in the business in such goods. The method or the manner of disposal of unwanted or unsuitable assets cannot be conclusive of the matter. 9.. In Deputy Commissioner (C.T.), Coimbatore Division, Coimbatore v. Sree Shanmuga Estate [1979] 43 STC 226, the Madras High Court had to consider al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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