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TMI Blog2020 (12) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee would be earning revenue by utilizing these trees. Had the trees not been cut, the assessee would have earned more revenue from the trees. Any compensation received in lieu of loss thereof would form part of assessee s trading operations. The same is evident from the fact that cut trees sold by the assessee constituted its trading income and the same were accepted to be agricultural income. Similar treatment was to be given to the compensation received for loss of trees. It would akin to a situation where the assessee lost its trading stock and received compensation for loss of the stock. The same would certainly be trading income for the assessee. Since, the income was earned from trees; the same would constitute agricultural in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 22.22 Lacs was reduced to ₹ 12.08 Lacs in view of addition of ₹ 10.14 Lacs under the head Income from other sources. The said sum of ₹ 10.14 Lacs was received by the assessee from Assam Electricity Grid Corporation for cutting of trees on assessee s land for heavy electric lines. The Agarwood trees weighting 4100 Kgs. as obtained from cutting of trees were sold for ₹ 2.05 Lacs which has been claimed as well as accepted to be an agricultural income. The assessee pleaded that the compensation so received shall either be capital receipt not chargeable to tax or alternatively, it would be in the nature of agricultural income exempt u/s 10(1). 3.2 The Ld.AO opined that the agriculture would involve cult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as agricultural income. The appellant contended before the AO that the said compensation was received from Assam Electricity Grid Corporation Ltd for cutting Agarwood Trees at their Modertoli, Miktrgaon Garden and since the same was received in lieu of cutting trees ,the income from such trees is to be assessed as agricultural income u/s 10(1) of the Act The AO rejected the explanation of assessee and made addition of ₹ 10,14,100/- as income from other sources. 3.1.3 During the appellate proceedings, the appellant has reiterated its explanation which was put forward by it before the AO. The appellant has also relied upon the decision of Hon'ble Apex Court in the case of CIT Bombay City vs Bumrah Trading, 1987 AIR 500, 1986 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed analysis of the principle underlying the decisions and to resolve the conflict. On the finding in the present case, it is clear that the trees were not removed with roots. The stumps of the trees were allowed to remain in the land so that the trees may regenerate. If a person sells merely leaves or fruit of the trees or even branches of the trees it would be difficult (subject to the special exemption under s. 4(3)(viii) of the Income-tax Act, 1922) to hold that the realization is not of the nature of income. Where the trunks are cut so that the stumps remain intact and capable of regeneration, receipts from sale of the trunks would be in the nature of income. It is true that the tree is a part of the land. But by selling a pan of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the hire tension wires of the Electricity Company. For the same, the assessee was compensated for ₹ 10.14 Lacs during the year. We observe that the assessee was engaged in the business of manufacturing and trading of essential oil, plantations extraction of essential oils. Therefore, the trees so cut by the assessee would form part of its trading operations since the assessee would be earning revenue by utilizing these trees. Had the trees not been cut, the assessee would have earned more revenue from the trees. Therefore, any compensation received in lieu of loss thereof would form part of assessee s trading operations. The same is evident from the fact that cut trees sold by the assessee constituted its trading income and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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