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TMI Blog1964 (8) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... e owner of certain forest lands situate in villages Sadaddevi, Ranifalia and Vaghai which were gifted to him by his father in Samvat year 2006, that being the relevant previous year. He sold the trees and other forest produce existing on these lands for a sum of ₹ 72,611. The assessee claimed that he had spent during that year in the aggregate the sum of ₹ 22,950 for clearing the said forest which amount was allowed as expenses. The dispute, therefore, centered round the balance of ₹ 49,661. Before the Income-tax Officer, the assessee contended that the amount of ₹ 49,661 constituted capital receipt and, in the alternative, contended that the said sum of ₹ 49,661 was agricultural income. The Income-tax Officer rejected both these contentions and added this amount to the total income of the assessee. While negativing these two contentions, the Income-tax Officer remarked as follows: Besides, the income from sale of forest and forest produce of spontaneous growth worked out above is clearly not agricultural income within the meaning of section 2(1) of the Income-tax Act as the lands from which the said income is derived were not only not assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at affidavit that the main source of revenue of the then Bansda State was from forests and, therefore, those forests were very systematically and scientifically developed and maintained. These very contentions were urged before the Assistant Commissioner, but they were rejected, the Assistant Commissioner's finding being that the receipts from the forests amounted to ₹ 72,611 and the expenses to ₹ 22,950 and the net income arrived at, namely, ₹ 49,661, represented the produce of spontaneous growth from the forests owned by the assessee. Though he did not agree with the Income-tax Officer that these lands were not assessed to land revenue, he confirmed the finding of the Income-tax Officer that the amount of ₹ 49,661 represented the sale proceeds of the spontaneous growth from the forests for which no agricultural operations were performed. He also rejected the other contention that the forests being a gift from the assessee's father, they were capital assets in the hands of the assessee and, therefore, any income therefrom was capital accretion and was not a revenue receipt. As regards the contention that this amount constituted agricultural inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gift in favour of the assessee and that therefore what was sold were the capital assets and the sale proceeds therefore amounted to conversion of part of the capital assets of the assessee. It was further contended that the Tribunal was in error when it held that, out of the amount of ₹ 72,611, trees of the one-third value of it were the original trees while the rest, i.e., of the two-third value, were trees which had spontaneously grown since the date of the gift as there was no evidence before the Tribunal which would justify it to apportion the sale proceeds in the ratio of one-third and two-thirds. It is true that there was no evidence in the shape of any concrete data, such as any inventory of trees, from which the Tribunal could make such an apportionment and there, perhaps, Mr. Dwarkadas is to a certain extent right. But what the Tribunal appears to have done, and which it need not have done, was to say that since part of the proceeds of sale must have been from the trees which were the subject-matter of the gift, the assessee should be given the benefit of doubt by a somewhat ad hoc apportionment. From the findings by the Income- tax Officer and confirmed by the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dur Kamakshya Narain Singh v. Commissioner of Income-tax [1946] 14 I.T.R. 673, where the assessee was assessed for the assessment year 1942-43 on a total sum of ₹ 7,84,565 which included a sum of ₹ 84,993 on account of price realised by the sale of forest trees in his zamindari. The assessee's claim that the sale of the forest trees should be treated as sale of capital assets was rejected by the income-tax authorities, and one of the questions referred to the High Court was whether the assessee's net receipts from the sale of forest trees were his income liable to income-tax or were merely capital receipts. A Division Bench of the High Court of Patna consisting of Manohar Lal, Ag. C.J., and Das J. rejected this plea, observing that in Province of Bihar v. Maharaja Pratap Udai Nath Sahi Deo [1941] 9 I.T.R. 313, a Special Bench of that High Court had examined this question and had referred with approval to two decisions of the Madras High Court and a Full Bench decision of the Allahabad High Court and had rejected a similar plea of the assessees there. Another contention which was put forward before the Bench was that the sale of forest trees must necessarily resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome and that that proposition had been well-settled since the decision of the House of Lords in Coltness Iron Company v. Black[1881] L.R. 6 App. Cas. 315. The High Court also pointed out that this principle had been applied to profits derived from the working of mines and minerals in Raja Bahadur Kamakshya Narain Singh v. Commissioner of Income-tax [1943] 11 I.T.R. 513 (P.C.) and nitrate deposits in Alianza Company Limited v. Bell [1906] A.C. 18. The High Court also observed that it had been held both in that court as also in the Patna High Court that income derived from the sale of forest trees is not capital receipt and is liable to tax even though there is an exhaustion of capital assets in the shape of valuable and long standing trees. The fact that the amount of ₹ 22,950 was claimed as expenses incurred during the account year and was allowed as such, shows that that amount was expended for fostering the growth of forest on these lands. It is not even the case of the assessee that he was maintaining the forests merely for their own sake and, obviously, the object of spending such a considerable amount was to promote the growth of timber trees on these lands so that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amakrishna Deo [1959] 35 I.T.R. 312 ; [1959] Supp. 1 S.C.R. 176, where it was clearly stated that where an assessee claims that a certain income is agricultural income, the burden is upon him to show that it is so, that is, to establish that he had carried out an integrated agricultural activity as laid down in Raja Benoy Kumar Sahas Roy's case [1957] 32 I.T.R. 466 (S.C.). The question, therefore, is whether the assessee has discharged that burden. Now, it is not in dispute, and cannot be in dispute, that the only proof that the assessee tendered comprised of (a) the fact that he had spent ₹ 22,950 during the account year, and (b) the affidavit of Upadhyaya. But the fact that he had expended ₹ 22,950 in the account year on these forest lands is neither here nor there. As regards the affidavit, that also cannot help the assessee, for, a scrutiny of the affidavit would show that the only things that are stated there are, (1) that the principal income of the Bansda State was derived from forest, (2) that for that reason the State was maintaining a forest staff, (3) that the staff looked after the forests of the State including the forests in these villages, and, lastly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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