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TMI Blog1979 (1) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... e, M/s. Pullangode Rubber and Produce Company Ltd., Calvetty, returned before the Agrl. ITO for the assessment year 1970-71, an agricultural income of Rs. 2,18,013. On verification of the books of accounts and records the IAC found that the income should not be accepted as it did not include the income received by them from M/s. E. J.Abraham and Company who had executed three agreements dated March 25, 1965, November 8, 1968, and August 4, 1969, undertaking to pay an amount of Rs. 3,44,108.70 for cutting and removing trees belonging to the assessee. On going through these agreements, executed by the assessee, the IAC found that M/s. E. J. Abraham and Company had agreed to pay the aforementioned amount during the year under assessment towards sale proceeds of old rubber trees. An amount of Rs. 2,97,716 was to be treated as agricultural income received by the assessee towards the value of the latex extracted by M/s. E. J. Abraham and Company. We are concerned only with this aspect of the finding. On appeal the Deputy Commissioner of Agrl. I.T. S.T., Kottayam, concurred with the IAC and dismissed the appeal. On further appeal, the Agricultural Income-tax Appellate Tribunal took the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 383 acres and 25 cents of land comprised in the three sub-divisions of Pullangode Division of the Pullangode Rubber Estate belonging to the vendor and more particularly described in the Schedule hereunder have become old and uneconomic : " The preambulary part in the other two agreements is practically on the same lines. We, therefore, think it unnecessary to quote the same. The preamble purports to be only sale of rubber trees which have become old and uneconomic for the purpose of being replanted with rubber. The first agreement covers an extent of 383 acres, the second, an extent of 105 acres, and the third, an extent of 205 acres. This, and the difficulties in the matter of communication, transport, labour and other factors in the region in which the trees were situate, should sufficiently explain the comparatively long time allowed for the purpose of felling and clearing the old trees and replanting the same with new ones. Clause (3) of the said agreement contained the provision that the purchaser should remove from the vendor's property, as soon as possible, all rubber trees agreed to be sold, so that the land may lie fallow for as long a period as possible, prior to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal. We are not satisfied that the conclusion come to by the Tribunal discloses any error of law. The learned Government Pleader strongly contended that the Tribunal has not taken into account cls. 7 to 9 of the second agreement dated November 8, 1968, and had merely extracted those clauses without separately and independently discussing them and considering their effect and the nature of the transaction effected by the agreements. We find it difficult to accept this argument of the learned Government Pleader. The Tribunal had, in para. 8, extracted the three clauses. In para. 9 it noticed that from these clauses the assessing authority had taken the view against the assessee and that the said view was being disputed before the Tribunal by the assessee. It was, thereafter, in the subsequent paragraphs, that the Tribunal discussed the position in regard to the law as laid down in the judicial decisions and eventually recorded its conclusion in para. 14. In the circumstances, we cannot say that there was a non-advertence of the mind of the Tribunal to the effect and the operation of cls. 7 to 9 of the agreement dated November 8, 1968, on the nature of the transaction. Attention w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsiderable time and the provisions in the agreement that the assessee had three years' time to remove them does not at all imply any intention that the trees should continue to receive nourishment from the land and afford agricultural income to the assessee ............ We must refer to one other aspect. When the owner of the land who by undertaking agricultural operations had cultivated trees and when he derived income by slaughter-tapping and finally sold the trees, the question might arise as to whether the entire amount received by slaughter-tapping and sale of the trees later is agricultural income. The question has been answered by this court in the decision in I.T.R. Nos. 76 and 77 of 1965 (E. J. John v. State of Kerala). We wish to make it clear that the question arising in this decision is different. 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. " In Agrl. ITO v. C. P. A. Yoosuf [1973] 90 ITR 501 (Ker), it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated amount is provided for the two, though payments are to be made in instalments. There can be no doubt that in every payment pursuant to these agreements, there is an element of payment towards the capital, namely, the value of the trees which were ultimately to be cut down. No doubt there is also a payment towards the latex which on the terms and conditions, according to the two documents, we think, represents agricultural income. The Tribunal, however, has treated the entirety of the payment as agricultural income. This is not correct. That part of the amounts, Rs. 32,250, and Rs. 45,750 which represents the value of the trees, can only be a capital receipt and is not agricultural income. That part of these amounts will have, therefore, to be deducted from these amounts for determining the agricultural income received by the assessee pursuant to the two agreements, annexures 'D' and 'D-1'. In the light of the above, we answer the question referred to us in the following manner. The documents are composite ones. The entire amounts received as per the agreements, annexures ' D ' and ' D-1 ', are not liable to agricultural income-tax. These amounts must be bifurcated, that pert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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