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TMI Blog1953 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal to refer to the High Court any question of law arising out of its order and further provides that the Appellate Tribunal shall, within ninety days of the receipt of such application, draw up a statement of the case and refer it to the High Court . In the present case the reference was not made within ninety days from the receipt of the application. As this was happening in too many cases, it appeared to this Court that the statutory direction contained in Section 66(1) of the Act was being disregarded by the Tribunal and, accordingly, it was directed by an administrative order that references made after the expiry of the period prescribed by the Act should be accepted only provisionally, subject to all just exceptions that might be taken at the hearing on the ground of limitation. The order was directed to be incorporated in the paper book of every case in which the question was involved so that the matter might be judicially examined. The present case is the first in which the matter has come up for consideration and we have heard the learned counsel for the Commissioner of Income-tax and the assessee. Both contended that the provisions contained in Section 66(1) as to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also settled law that a party cannot be made to suffer prejudice by any default or negligence on the part of the court. It appears to us further that no question of limitation affecting the rights of the parties can really arise in circumstances like the present, because the basis of all rules of limitation is that a party, being required or being at liberty to do a certain thing within a certain time, fails to do it within the time limited, whereas, in the present case, the default or negligence is of a third party. We accordingly hold that Section 66(1), in so far as it provides that a reference shall be made by the Tribunal within ninety days from the date of the application, is only directory and we hold further that for that reason as also the other reasons we have given, the present reference is valid, although made after the expiry of ninety days. We desire to add, however, that although the validity of a reference may not be affected by the expiry of the period prescribed by Section 66(1), it is not proper for the Tribunal to disregard that provision. The Act although it may not command the Tribunal to make a reference within ninety days, at least directs it to do so. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer had actually proceeded. The Tribunal has however stated that the only information that the Income-tax Officer received was derived from the decisions of the Kapurthala case (Maharaja of Kapurthala v. Commissioner of Income-tax, C.P. U.P.*), and that it had not been submitted before the Tribunal that the Income-tax Officer did not know that the assessee had forest income. The facts on which we must proceed, therefore, are that at the time of the original assessment, the Income-tax Officer was aware that the assessee had forest income and that thereafter he came to know from the decision in the Kapurthala case* that income derived from the sale of forest trees of spontaneous growth was not agricultural income and therefore not exempt from taxation under the Indian Income-tax Act. The question is whether in that state of the facts, action under Section 34, as it stood before the amendment of 1948, was rightly taken. Mr. Pal, who appears on behalf of the assessee, contended that, on the above facts, the true position was that the Income-tax Officer had merely changed his opinion as to whether the forest income was liable to tax under the Act and he could not be said to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation as to the state of the law and so information within the meaning of Section 34. Indeed, in the case of V.M. Raghavalu Naidu Sons v. Commissioner of Income-tax, Madras*, the Madras High Court, while preferring to follow the Bombay decision for the sake of uniformity, wished particularly not to be understood as holding that the information must relate to a pure question of fact. Information as to the state of the law, it was added, would equally bring Section 34 into operation. Cases where the Income-tax Officer merely changes his mind without any fresh information from an external source, as in Commissioner of Income-tax, Madras v. K.M.S. Lakshmana Iyer [1945] 13 I.T.R. 242, relied on by the assessee or where a successor proceeds on the view that his predecessor was wrong in law as in the case in V.M. Raghavalu Naidu Sons v. Commissioner of Income-tax, Madras [1945] 13 I.T.R. 194, referred to above, are wholly beside the point. So are cases where the Income-tax Officer gives effect to a decision of the High Court as regards the very assessee in respect of another assessment year. The position in the present case is that the Income-tax Officer, knowing of the existen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion on which he relied was not, to him, definite. Two subsidiary arguments remain to be noticed. Reference was made to Order XLVII, rule 1, of the Civil Procedure Code which speaks of discovery of new and important matter or evidence and with respect to which it has been held that an error of law is not a new matter as contemplated by the section nor analogous to any of the matters contemplated by it. I am unable to see how the construction put upon the words new matter of evidence read with the other occurring in Order XLVII, rule 1, can be of any assistance in construing the words definite information in Section 34 of the Income-tax Act. The reasoning on which the decision of the Privy Council in Chajju Ram v. Naki [1922] 49 I.A. 144, is based is wholly inapplicable to the case of Section 34, besides that the Privy Council had occasion to construe directly at least, only the words any other sufficient reason . It was further contended by Mr. Pal that mere information that income from a forest of spontaneous growth was not exempt from tax under the Act would not entitle the Income-tax Officer to proceed under Section 34, because before he could come to the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding of the trees against pest and other destructive elements and sowing of seeds after digging of the soil in denuded areas. The Tribunal held that except the sowing of seeds, the operations carried out were equally necessary for the maintenance and upkeep of any forest of spontaneous growth and therefore they did not constitute such expenditure of human labour and skill as would make them operations of agriculture. The sowing of seeds, it was held further, was few and far between and the normal process by which the forest grew again, after a part of it had been cut down, was by the growing out of offshoots from the stumps left. The operations were therefore in the main only operations for the maintenance, preservation, nursing and the rearing of the forest and consequently the income derived from the sale of trees from it was not agricultural income. In the view of the Tribunal, the word agriculture , as used in the Income-tax Act, contemplated employment of human skill and labour in actual cultivation of the soil and did not extend to the activities of a silviculturist. The Tribunal declined to follow the decision of this court in the case of Commissioner of Agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kill and labour on the land itself. Before taking up the question on its merits, I feel bound to observe that the action of the Tribunal in declining to follow the decision in Jagadish Chandra Deo Dhabal Deb's case [1949] 17 I.T.R. 426 was highly improper. As was to be expected, Mr. Meyer made no attempt to defend it. The definition of agricultural income in the Indian Income-tax Act is precisely the same as in the West Bengal Act. It is precisely the income which the latter Act brings to charge that the former Act exempts. In those circumstances, the Tribunal had no option to disregard the decision in a case arising in this State for which the referee Court was this Court. Its clear duty was to follow it, irrespective of what views it might itself hold and leave it to the Commissioner to bring up the matter on a reference to this Court, if he was so advised. Mr. Meyer admitted that the obvious course for the Tribunal was to follow the decision and the grounds on which it had refused to do so were wholly improper and unsound. Turning now to the merits of the question, I may first dispose of the two subsidiary reasons given by the Tribunal in support of its decision. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the three separate items, agriculture (Item 20), forest (Item 22) and tax on agricultural income (Item 41) in List II of the Seventh Schedule of any help, because Item No. 22 obviously contemplates forests as such, their conservation or management or it may even be income from forest products, but a forest area may be made the subject of agriculture, directed to either growing or tending the forest, and if it is, such treatment of forest lands may quite clearly come under agriculture and the income from forest lands, so treated, will be agricultural income. The real question is what agriculture means. To say that since the Central Act exempts only agricultural income and since it is as such income that the exemption of forest income is claimed, the mention of agriculture, agricultural income and forests as separate items in the Constitution Act indicates that forest income is not agricultural income is, in my view, to oversimplify the problem and also to forget that the Constitution Act took over the definition of agricultural income from the Income-tax Act itself. Primarily, we are not concerned with the intention of the Constitution Act but with that of the Income-tax Act, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the ground for approaching the main question which is whether the operations found by the Tribunal amount to agriculture. If the original trees or some of them had still been standing, it could not have been said that the whole of the income was derived from the land by the operations carried out by the assessee, because those trees would not be the product of such operations. But as the forest has been in existence for 150 years and as the trees standing on sections of it are sold periodically by rotation, it can safely be presumed that the trees of which the forest now consists are mostly offshoots sprung and grown from stumps of the original trees after they had been cut down and that some have sprung from the seeds sown. It follows that whether or not the operations of the assessee amount to agriculture, the whole of the income is derived from the land by those operations. The only questions therefore are whether the particular forest land is land used for agricultural purposes and whether the operations carried on in the forest are agriculture . In the particular facts of the present case and, indeed, in all such cases of forest income, the two questions are the same, bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture, some actual tillage of the land is required. In the Calcutta case of Jagadish Chandra Deo Dhabal Deb [1949] 17 I.T.R. 426 it was said that the view that tilling of the soil was the sine que non for agriculture had been exploded . The Assam High Court, in the case of Jyotirindra Narayan Sinha Chowdhury v. The State of Assam [1951] 19 I.T.R. 379, said that the Privy Council had not laid it down that tillage or actual cultivation was an essential pre-requisite of agriculture . In the case of Pratap Singh Balbeer Singh v. Commissioner of Income-tax, U.P., C.P. [1952] 22 I.T.R. 1, the Allahabad High Court said, somewhat grudgingly it would appear, that according to the Privy Council, the essential element of agriculture was that there must be some measure of cultivation of the land or some expenditure of skill and labour upon it . The Madras High Court, or at least one of the Judges, went the farthest in the case of Commissioner of Income-tax, Madras v. K.E. Sundara Mudaliar and Others [1950] 18 I.T.R. 259, and observed that whatever was grown on land, aided by human labour and effort, the process of producing it would be agriculture. I venture to think, as I have often ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e original, but I think it is implied. The idea, it seems to me, is that if the land has been left to the forces of nature to grow what products such forces could, there is no agriculture and that there can be agriculture only if the labour and skill of man has operated on the land to cause or aid the growth of certain products. All that is necessary is that the land should be actively exploited with a view to procuring growths or better growths from the soil, but it does not seem to be also necessary that the exploitation should be by tillage. Mr. Meyer referred to the decision of the Nagpur High court in the case of Beohar Singh Raghubir Singh v. Commissioner of Income-tax, U.P., C.P. and Berar [1948] 16 I.T.R. 433, where the learned Judges after an extensive review of previous decisions, laid it down as a test that the land should be tilled, but the decision was given two years before the decision of the Privy Council. But though tillage is not essential, Mr. Meyer was right in contending that the human skill and labour must be expended on the land itself and not merely on the growths from the land. It is clear that in order that there may be agriculture, it is the ager, the fie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumed in Jagadish Chandra Deo's case [1949] 17 I.T.R. 426, that if there were operations in forestry, there would be agriculture. The real and the proper reason for disregarding many of the operations in the present case would be that they do not involve culture of the land. But three of the operations are, in my opinion, vital. They are weeding , cutting of channels to help the flow of rain water and sowing of seeds after digging of the soil in denuded areas . I am aware that in some of the decisions weeding has been held to be not an agricultural operation, but I can see no reason for taking that view, because it is certainly an operation carried out on the land in order to free the soil of their burden and make it a better feeder of the trees or plants, preserved or grown. In my opinion if a forest of natural growth is taken over and then the land is regularly weeded and cleared, if it is supplied with moisture, necessary for the nourishment of the trees, by the cutting of channels across it and by the distribution of rain water through them and if the land is dug and sown with seeds whenever bare patches appear and while all this is done, if elaborate subsidiary arrange ..... X X X X Extracts X X X X X X X X Extracts X X X X
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