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TMI Blog1948 (10) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... he part of the landlord cannot be called agricultural for the only reason that the landlord is inactive?" Before formulating the question the Income-tax Appellate Tribunal observed as follows:- "As regards the timber it is of a spontaneous growth and had been standing for a very long time without being planted or without any particular care being taken to promote its growth. Then as regards the pasture meadows the grass growing thereon was equally a spontaneous growth, no agricultural operation being undertaken upon the land." From that it would be clear that what we are called upon to decide is whether income derived from land upon which no human skill or labour has been expended is agricultural income or not. I may state here that it is common ground that the land in question is assessed to land revenue. The definition of "agricultural income" is contained in Section 2(1) of the Income-tax Act and is as follows:- "(1) 'Agricultural income' means- (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in British India or subject to a local rate assessed and collected by o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income was, within Section 2(1)(b), income derived from such land by agriculture. It appears to their Lordships that, whether exemption is sought under Section 2(1)(a) or Section 2(1)(b), the primary condition must be satisfied that the land in question is used for agricultural purposes: the expression 'such land' in (b) refers back to the land mentioned in (a) and must have the same quality. It is not then necessary to consider any other difficulty which may stand in the way of the assessee. His case fails if he does not prove that the land is 'used for agricultural purpose'. Upon this point their Lordships concur in the views which have been expressed not only in the Chief Court of Oudh but in the High Court of Madras (see Yuvarajah of Pithapuram v. Commissioner of Income-tax, Madras [1946] 14 ITR 92 (Mad.), and the High Court of Allahabad (see Benoy Ratan Banerji v. Commissioner of Income-tax, U.P., C.P. and Berar [1947] 15 ITR 98) and elsewhere in India. The question seems not yet to have been decided whether land can be said to be used for agricultural purposes within the section, if it has been planted with trees and cultivated in the regular course of arbori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra) , that these observations appear to have been made. In certain circumstances income derived from pasture lands would be agricultural income as, for instance, where that landisappurtenant to cultivated land; or again, where human skill or labour is expended upon it for obtaining a particular variety or quality of grass. In the present case it is admitted that nothing whatsoever was done upon the land by human agency. Therefore, the mere fact that the land is described as pasture land is not conclusive of the category in which income from it would fall. Now that their Lordships have laid down a definite test, the question whether income derived from a particular source is agricultural income or not must be decided primarily by applying that test. So, the mere circumstances that pasturing of cattle has come to be regarded as part and parcel of agriculture does not necessarily make income derived from that source agricultural. It has further to be shown that it answers the test laid down by their Lordships. If it satisfies that test, then the income derived from that source must be deemed to be agricultural income. Here it is conceded that no human skill or labour has been expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Their Lordships quoted with approval a passage from Ramesam, J.'s judgment in Hajee Muhammad Sadak Khoyee Sahib v. Commissioner of Income-tax, Madras [1934] 3 ITR 1: "If the mortgagor receives it (the rent) from the tenants it is agricultural income in his hands and when it passes from his hands it is not. Similarly if the mortgagee collects it from the tenants it is agricultural income". In confirmation of this view their Lordships also referred to Income-tax Commissioner, Bihar and Orissa v. Maharajadhiraja of Darbhanga [1935] 3 ITR 305 and quoted:- "The exemption is conferred indelibly on a particular kind of income and does not depend on the character of the recipient..... the result in their Lordships' opinion is to exclude 'agricultural income' from the scope of the Act howsoever or by whomsoever it may be received." That leaves the last condition. The income must be from land which is used for agricultural purposes. The only question therefore is, is pasturage an agricultural purpose? Now, I quite agree that that depends upon what is pastured. If the animals are elephants or polo ponies or circus horses then the pasturing of them would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nglish Finance Act of 1910 appears to take the above into consideration in Section 41 when it defines "agriculture" to include "the use of land as meadow or pasture land". In none of these cases would the grass be specially cultivated. It is true this point was not decided in Emperor v. Probhat Chandra Barua [1924] ILR 51 Cal. 504, and that the observations of the learned Judges there are obiter. But one of them was a Judge of great eminence, and both were agreed in placing the same construction on the section as I do. Rankin, J., said at page 507:- "I agree with the Commissioner and the learned Vakil who appears for the Crown in thinking it to be reasonably plain that income from pasturage is 'derived from land which is used for agricultural purposes.' " Page, J., also agreed at page 527. So also in the case which Hemeon, J., and I decided, Beohar Raghubir Singh v. Commissioner of Income-tax, U.P., C.P. and Berar [1947] 16 ITR 433 (Nag.). Our remarks were obiter, but they were not made without considerable thought for the purpose of distinguishing pasturage from forests. We were clear there that pasture land was agricultural land, and as I w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be drawn between the land and the purpose for which the land is used. The land need not be agricultural land in the sense that it must grow a crop. It can be any land which is used for an agricultural purpose, and the income can be any rent or revenue derived from such land. When the agricultural purpose is the growing of a crop then there must be some element of skill and labour expended upon it, but when the purpose is the management of livestock we are not concerned with the product of the soil. The human agency element must still be there. There must be skill and labour in the management of the stock but not upon the land. The land in such a case is incidental to the main purpose. With all respect to my learned brother, I would answer this part of the question as follows, namely, that the income derived from the letting out of pasture meadows is "agricultural income" within the meaning of Section 2(1), whether the grass thereon is cultivated or of spontaneous growth, provided the animals pastured are agricultural animals. I am not in a position to say whether the ₹ 1,275 derived from the letting out of the pasture land is agricultural income "on the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y income derived from such land by- (i) (i)agriculture, or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii); (c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator, or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any operation mentioned in sub-clauses (ii) and ( iii) of clause (b) is carried on." The learned Judges have differed upon the interpretation of a Privy Council case, Raja Mustafa Ali Khan v. Commissioner of Income-tax, United Provinces, Ajmer and Ajmer-Merwara [1948] 16 ITR 330. The question that was referred to the Chief Court of Oudh by the Tribunal in that case read as follows:- "Whether income from the sale of forest trees growing on lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their Lordships express no opinion. It is sufficient for the purpose of the present appeal to say (1) that in their opinion no assistance is to be got from the meaning ascribed to the word 'agriculture' in other statutes and (2) that, though it must always be difficult to draw the line, yet, unless there is some measure of cultivation of the land, some expenditure of skill and labour upon it, it cannot be said to be used for agricultural purposes within the meaning of the Income-tax Act. In the present case their Lordships agree with the High Court in thinking that there is no evidence which would justify the conclusion that this condition is satisfied." Before I take up the consideration of the question whether this observation of their Lordships is obiter or not I wish to review some cases that had arisen in the High Courts of India in connection with the section expounded in the Privy Council case. These cases fall into two categories. On the one side there are cases in which a wide meaning is given to the phrase "agricultural purposes", and on the other side are those cases in which a narrow interpretation is placed upon these words. In Emperor v. Prob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jungle land not actually cultivated. A few forest guards appear to have been employed to protect the property, but it cannot be said that the trees have grown as the result of cultivation. They appear to have grown naturally in the jungles without the intervention of human agency, and in my view the growth of these trees cannot be said to result from the cultivation of the soil. In fact, it was the absence of cultivation that permitted the area to develop into a jungle". In Raja Pratap Bikram Shah v. Commissioner of Income-tax [1946] 14 ITR 788, it was observed as follows:- "The learned counsel for the applicant has strenuously contended that the grass growing on land, which is used by the agriculturists for grazing their cattle, and which, according to him, forms part of agriculture, or phus and jhau which are used indirectly for agricultural puposes, the land upon which such grass or phus or jhau grow should be deemed to be land used for agricultural purposes. There is, in our opinion, a fallacy in this contention. If income from sale of commodities which agriculturists use in order to carry on their trade or business were to be included in the definition of agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivy Council in the case which has given rise to this difference of opinion, as also the Oudh cases and the case reported in Yuvarajah of Pithapuram v. Commissioner of Income-tax, Madras [1946] 14 ITR 92 (Mad.), which also is to the same effect. It cannot now be doubted that the income, from the sale of forest trees growing naturally and without any human effort is not agricultural income. It will be seen that in none of these cases was there any question about the use to which the timber from the trees was to be put. I have no doubt that the sale of forest trees to a person who merely cuts the trees and removes the timber cannot by any stretch of imagination be connected with either agriculture or any agricultural purpose. The question that arises is whether the rent or revenue derived from agriculturists who are allowed to pasture their agricultural cattle upon grass growing naturally can be put in the same category. It is plain upon a reading of the judgment of their Lordships in Raja Mustafa Ali Khan v. Commissioner of Income-tax, United Provinces, Ajmer and Ajmer-Merwara [1948] 16 ITR 330, that their Lordships never intended that the case was to be an authority for any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure of skill and labour upon the land. It is not necessary that the expenditure of labour and skill should be in the direction of cultivation in the sense in which Braund and Pathak, JJ., have expressed themselves in Benoy Ratan Banerji v. Commissioner of Income-tax, U.P., C.P. and Berar [1947] 15 ITR 98. The words "agricultural purposes" mean something more than mere agriculture and cannot be taken to be an equivalent of cultivation though agriculture implies something which is achieved with the aid of human agency. In Yuvarajah of Pithapuram v. Commissioner of Income-tax, Madras [1946] 14 ITR 92 (Mad.), Leach, C.J., quoted the dictionary meaning of the word "agriculture" as the science and art of cultivating the soil including the allied pursuits of gathering crops and rearing livestock, tillage, husbandry, farming in the widest sense. All these pursuits require human agency, and any expenditure of labour and skill in this direction would satisfy the meaning of the word "agriculture". This case was approved by their Lordships of the Privy Council. I may give an example. If a person tills the soil and sows herbs upon it that would be cultivatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of cream and butter. I feel, therefore, that in determining what is meant by agricultural purpose we are not to consider only the word "agricultural" and ignore the other word "purposes". The phrase has to be expounded as a whole. It is quite true that whether there be cultivation or no, some effort has to be made, but that effort may take different shapes. If the notion of cattle-breeding is part and parcel of agriculture then the expenditure of skill and labour would be found not directly in relation to the land but indirectly in the rearing of cattle upon it. The opinion of the learned Acting Chief Justice is therefore in consonance with the spirit underlying the decision of their Lordships of the Privy Council. In the case before their Lordships there was no evidence whatever of any cultivation or any expenditure of skill and labour which could be called agricultural purpose, and therefore it was held that the land was not being used for agricultural purposes. The matter is different here where by reason of the breeding of cattle and their pasturing, agriculture in its wide meaning is promoted. I need not traverse the ground which has already been covere ..... 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