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TMI Blog1990 (1) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Income-tax Officer completed the assessment on the assessee, it came to the notice of the Commissioner on perusal of the assessee's records, that the assessee had sold certain timber on which it had made a profit of Rs. 4,80,744. The assessee had pleaded before the Income-tax Officer that the above profit of Rs. 4,80,744 represented its agricultural income and was not liable to be included in the computation of its total income from tea business. The Commissioner held that as the sale proceeds did not represent agricultural income, the Income-tax Officer had not applied his mind to the issue and, therefore, the Commissioner considered that the order passed by the Income-tax Officer was erroneous in so far as it was prejudicial to the interests of the Revenue. The Commissioner accordingly served on the assessee a notice under section 263 of the Act for hearing. M/s. James Finlay and Co. Ltd., the assessee's agents, attended and made oral as well as written submissions. On consideration of the submissions made by the assessee, the Commissioner formed a view that apart from the erroneous decision taken by the Income-tax Officer to treat the amount of Rs. 4,80,744 as agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account in computing the total income of an assessee of any previous year. "Agricultural income" has been defined in section 2(1) of the Income-tax Act. Clauses (a) and (b) of sub-section (1) of section 2 are material for the purpose of this case and are as follows:- "2. In this Act, unless the context otherwise requires, (1) 'agricultural income' means- (a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes; (b) any income derived from such land by (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 paragraph (ii) of this sub-clause. The definition goes to show that not only any income derived from land by agriculture will be treated as agricultural income but any income derived from any process by a cultivator to render the produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the Punjab Chief Court to the effect that land used as a tea garden was used for " agricultural purposes In fact, there is no dispute in this case that the activity relating to planting, growing and nurturing of the tea bushes will come within the ambit of the expression " agricultural The planting of trees to protect the tea bushes must be regarded as part of the agricultural activity. The purpose of the planting of the trees was to protect the tea bushes from damage that may be caused by high winds. The planting of the trees in this case was part of the agricultural process of growing the crop of tea. Therefore, the income derived from sale of the trees will clearly come within the ambit of the expression "any, income derived from such land by agriculture". In the case of CIT v. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466 (SC), the assessee owned an area of 6,000 acres of forest land. The forest was originally of spontaneous growth which had been in existence for about, 150 years. A considerable income was derived ,by the assessee from sale of Sal and Piyasal trees. The question was whether the income derived from sale of timber was " agricultural income " or not withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of State of Kerala v. Karimtharuvi Tea Estate Ltd. [1964] 51 ITR 129. That was a case under the Kerala Agricultural Incometax Act. The question was whether the amount realised from sale as firewood of old and useless gravelia trees grown and maintained in the tea gardens for the purpose of affording shade to tea plants was a capital receipt or revenue receipt. There was no dispute that the income derived from sale of the trees was agricultural income' In fact, it was observed by the Kerala High Court that (at page 465 of 76 ITR ), " the gravelia trees were grown and maintained for the sole purpose of providing shade to the tea bushes in the tea estates of the assessee. That such shade is essential for the proper cultivation of tea cannot be disputed and the trees should hence be considered to be as much a part of the capital assets of the company as the tea bushes themselves If the ratio of the judgment of this case is to be applied, then the trees which have been planted to protect the tea bushes will have the same character as that of the tea bushes themselves. If income derived from the sale of tea or the tea bushes will be agricultural income, then the income de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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