9911796707
TMI Blog1991 (9) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... aid agreement was said to be oral in the first instance which was later reduced in a stamp paper on August 19, 1981. The petitioner has stated that apart from the advance, he had received a sum of Rs. 1,02,942 during the accounting period April 1, 1981, to March 31, 1982, the corresponding assessment year being 1982-83. The petitioner was of the view that the sale consideration of the rubber trees was not agricultural income and, consequently, the petitioner did not include the said amount in the statement of income and expenditure of the estate furnished to the assessing authority for the year in question. In response to the notice issued by the assessing authority under section 17(2) of the Tamilnadu Agricultural Income-tax Act, 1955 (hereinafter referred to as "the Act"), the accountant of the petitioner appeared before the Agricultural Income-tax Officer-I, and produced the accounts. The Agricultural Income-tax Officer-I stated that the accountant of the petitioner deposed about the factum of the sale under the agreement with a condition that the trees should be cut and removed within a period of three years from March 20, 1981, to April 19, 1984, with permission to " slaughter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), dated December 17, 1982, of the third respondent herein and the order in R. P. No. 34 of 1983, dated April 22, 1983, of the second respondent herein. Mr. Sundararajan, learned counsel for the petitioner, represented that what was sold under the deed of agreement of sale is only trees and that the consideration received as a result of the sale of the rubber trees will constitute only a capital receipt and that cannot be construed as agricultural income. The assessing authority proceeded to determine the income by bifurcating the consideration received by the sale of the rubber trees contrary to the terms contained in the agreement and that, in the absence of any evidence that the petitioner carried on operations of slaughter tapping or that the petitioner had derived any benefits by receiving any income as a result of the slaughter tapping, the determination of the tax liability by the assessing authority is not sustainable. Learned counsel for the petitioner strenuously contended that what was received by the petitioner under the deed of agreement represented capital receipt and that cannot be construed as a revenue receipt and that the petitioner had not derived any interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the petitioner also cited the decision of the Supreme Court in A. K. T. K. M. Vishnudatta Antharjanam v. Commr. of Agrl. I. T. [1970] 78 ITR 58, wherein the Supreme Court had occasion to consider whether the sale proceeds of teak trees constituted a capital or revenue receipt. The Supreme Court has considered as follows (at page 60): "The principal point that has to be determined is whether the sale proceeds of the teak trees constituted capital or revenue. It appears to have been common ground before the High Court that the assessee planted the teak trees some time in the year 1946-47. The form of the question itself showed that the trees were cut and completely removed from the land together with their roots for the purpose of planting rubber. There was no question of any further regeneration or growth of the trees which had been cut and removed. In other words, there was no possibility of recurring income from these trees. In V. Venugopala Verma Rajah v. CIT (C. A. No. 810 of 1967 decided on September 24, 1969-since reported in [1970] 76 ITR 460, 466 (SC)), the question before this court was whether trees which had not been removed with the roots and the stumps of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit motive is not decisive of the question whether a particular receipt is capital or income. An accretion to capital does not become taxable income merely because an asset is acquired in the hope that it may be sold at a profit. It must also be remembered that trees so long as they are uncut form a part of the land. If they are cut with roots once and for all a part of the assets is disposed of. The sale proceeds on account of their disposal cannot constitute revenue because by removing the roots the source from which fresh growth of trees can take place is also removed. The sale of such trees, thus affects capital structure and cannot give rise to a revenue receipt." In Commr. of Agrl. I. T. v. George Varghese and Co. [1973] 90 ITR 496 (Ker), the assessee entered into a contract with a rubber estate which stated that the rubber trees on a specified 303 acres of land had become old and uneconomical, that with a view to replant rubber in the said 303 acres, the vendor had agreed to sell and the purchaser had agreed to purchase all the said rubber trees with their roots standing on the assessee's said properties with rights to do with the trees whatever the purchaser considered fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... What is the nature of the receipts by the assessee depends on the terms of his contract with the owner of the land. Construing it we have to hold that there has been no transfer of an interest in land. And so the amounts received will not fall within the definition of the term "agricultural income" in the Act.'" Learned counsel for the petitioner further cited the decision in Commr. of Agrl. I. T. v. Pullangode Rubber and Produce Co. [1979] 120 ITR 84, wherein one Messrs. E. J. A. and Co. entered into three agreements with the assessee, Messrs. Pullangode Rubber and Produce Co. Ltd., undertaking to pay Rs. 3,44,108.70 to the assessee for cutting and removing rubber trees belonging to the assessee-company. The amount was payable in the assessment year 1970-71. While considering as to whether the amount paid by the purchaser would constitute taxable agricultural income, the Kerala High Court held that, on the terms of the documents and the circumstances of the transaction as disclosed by the records, there was no justification for splitting up the amount of consideration received as representing the value of the trees sold and the price of the latex to be extracted by way of earnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing rubber latex from the trees. In that case, the assessee included the income realised therefrom in the return submitted by him before the assessing authority, who determined and computed the total taxable turnover by including the income, included in the return. Later on, the assessee contended that the income received by realisation of the rubber latex should not be treated as agricultural income for the purpose of determination of the total income liable for agricultural income-tax. In that case, the High Court held that the income realised from rubber latex, while granting licence to the said Messrs. Kanthimathi Plantation, would constitute agricultural income and would be liable for assessment under the Agricultural Income-tax Act, 1955. In the face of the rival contentions put forth by both the parties, it may be relevant to consider the agreement which is extracted ubi infra. " This agreement executed on this Nineteenth day of August, one thousand nine hundred and eighty-one between Abraham Taliat, son of late Dr. Jacob Taliat, aged 57, residing at Carmelyn, Gandhi Nagar, Cotton Mill, Trivandrum-14, hereinafter referred to as the Vendor and Mrs. Lilly Abraham, daughter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uildings and power lines. The purchaser paid an advance of Rs. 1,00,000 on March 23, 1981, and the balance amount of Rs. 3,26,000 was agreed to be paid by the purchaser in 18 instalments at the rate of Rs. 17,157 from March 20, 1981, to March 20, 1983, and the balance of Rs. 17,174 was agreed to be paid as the 19th instalment on April 20, 1983. It is also provided that if the purchaser violates any of the terms and conditions, the agreement shall automatically stand cancelled. Having due regard to the terms contained in the aforesaid agreement, it is explicit that what is sold under the agreement is only 3,000 rubber trees and that the consideration specified thereon is attributable to the value of the trees and there is no indication whatsoever that any portion of the consideration can be attributed with reference to slaughter tapping. While so, the observations of the assessing authority that the trees were sold with permission for slaughter tapping is not correct. There is no permission whatsoever granted in favour of the agreement holder for slaughter tapping the trees sold under the agreement. On a reading of the agreement, it is clear that the purchaser shall cut and remove t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he person concerned to determine the amount realised as a result of extraction of latex and make an assessment. In so far as the amount received towards the sale consideration under the agreement is concerned, it cannot be construed as agricultural income but has to be construed as a capital receipt and if it is so construed, the impugned orders treating a portion of the amount received by the assessee-petitioner towards the sale consideration of the sale of property as income realised as a result of slaughter tapping is not correct. Having construed as such, the decision referred to by the learned Additional Government Pleader which relates to the consideration received for realisation of rubber latex which was construed as agricultural income is not applicable in the instant case. The petitioner-assessee has not received any amount towards the realisation of rubber latex. Since the amounts covered as sale consideration of the trees sold under the agreement are construed as a capital receipt, the inclusion of the portion towards agricultural income during the accounting period of the assessee cannot stand. In view of the aforesaid reasons, the impugned orders of the assessing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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