Rajasekhara Murthy, J.
1. The Income-tax Appellate Tribunal, Bangalore Bench, has referred the following question for the opinion of this court under s. 256(1) of the I.T. Act, 1961 ('the Act') :
'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in upholding the assessment of capital gains on sale of rosewood trees ?'
The assessee is a HUF. The assessment for the assessment year 1973-74 was reopened under s. 148 of the Act and the assessee's income from the sale of trees grown on his lands was sought to be taxed as capital gains. The assessee contended that he was a dealer in timber and that, therefore, his income from the sale of trees should be considered as income from business and the said income should not be brought to tax under the head 'Capital gains'.
2. The ITO, however, taxed the profit arising out of the sale of trees as capital gains. This finding of the ITO was affirmed both the AAC as well as by the Appellate Tribunal. Being aggrieved by the order of the Tribunal, the assessee has sought for an opinion on the question of law above mentioned.
3. In the assessment orders for the years 1969-70 and 1970-71, the Tribunal recorded a finding that the assessee had sold rosewood trees and that the sale was on capital account and the income therefrom would attract capital gains tax.
4. The only difference so far as this year is concerned is that the assessee did not sell the trees as such. The trees, after felling, were dressed and sold. The question is whether this mode of sale would make any difference as to the income therefrom. We do not think that it would make any difference.
5. It is not in dispute that the rosewood trees sold by the assessee were fixed assets owned by the assessee and it was held by this court in the case of Consolidated Coffee Estate (1943) Ltd., v. Commr. of Agrl. I.T. : 76ITR29(KAR) of the headnote :
'(2) Shade trees are absolutely essential for the protection of coffee bushes and shade trees existing in a coffee estate are as important as the coffee bushes which yield the coffee crop. Therefore, the shade trees in a coffee estate are part of the fixed assets of the planter. The payment made on the acquisition or creation of a fixed asset or a sum received on its realisation is usually a capital sum and the proceeds of sale of timber of the shade trees are a capital receipt and not taxable as income.'
6. We had occasion to consider similar of timber in a matter arising under the Sales Tax Act in STRP Nos. 86 to 89/1978 and 99 to 103/1979 - State of Karnataka v. Consolidated Coffee Ltd., (disposed of on 22-11-1983) 55 STC 363, wherein we have held :
'.... that the mere fact of sizing of the timber cut from the trees in order to facilitates easy transport would not make it a commercial article different from the logs of trees that were cut, so as to make the assessee a dealer in such articles.'
7. The Tribunal, in the instance case, has recorded a finding on a consideration of the facts that the transaction of sales by the assessee during the year was an isolated transaction of sale of capital asset and the extraction and sale of timber cannot be treated as the business of the assessee.
8. We must accept this finding recorded by the Tribunal. Merely because the trees were cut, dressed and sized into logs for the purpose of convenient sale, it cannot be construed as converting them into stock-intrade. The assessee has filed to prove that he was a dealer doing business in timber.
9. In the result, we answer the question in the affirmative and against the assessee.