1. The question that arises in this case is as to whether the turnover representing the value of the coconuts sold by the respondent during the assessment year 1963-64 is entitled to exemption under the proviso to Section 2(r) of the Madras General Sales Tax Act, 1959. It is common ground that the respondent in this case took an annual lease of a coconut thope and that under the terms of the lease he had only a right to the usufruct from the coconut trees. The assessing authority as well as the appellate authority proceeded on the basis that the assessee is not entitled to the exemption under the proviso to Section 2(r) of the Act. But the Tribunal has taken the view, following the decision of this court in Jamal Mydeen v. State of Madras  22 S.T.C. 45, that the assessee is entitled to such exemption.
2. Before us, the learned Government Pleader contends that the view of the Tribunal cannot be legally sustained and that the Tribunal has not properly appreciated the scope of the proviso to Section 2(r) of the Act. According to him, a mere right to collect the usufruct will not amount to an interest in land so as to entitle the assessee to claim the benefit of the proviso to Section 2(r). Our attention has been drawn to the decisions in Sultan Ahmed Rowther v. State of Madras  5 S.T.C. 166 and Palaniappa Pillai v. Deputy Commercial Tax Officer  28 S.T.C. 502. In Palaniappa Pillai v. Deputy Commercial Tax Officer  28 S.T.C. 502, after referring to the earlier decision in Sultan Ahmed Rowther v. State of Madras  5 S.T.C. 166, Ramaprasada Rao, J., has considered an identical question and held that an agriculturist, who obtained a lease which conferred on him a right to the usufruct of the coconut trees in a thope cannot claim the benefit of the proviso to Section 2(r), as he cannot be said to have any interest in the land itself. The learned Judge had expressed the view that in order to claim the benefit of the first limb of the proviso to Section 2(r), two essential pre-requisites have to be satisfied-(1) that the produce should be grown within the State and that growth must be by the assessee himself; and (2) the person claiming exemption should establish that he has an interest in the land over which the agricultural produce is grown and that such an interest must be substantial and not a formal one. Reference is also made to the decision in Commissioner of Income-tax v. K. S. Imam Saheb : 71ITR742(Mad) , wherein a question arose as to whether the income derived by sale of the coconuts gathered from thopes, which have been taken on lease by the assessee was 'agricultural income' as defined in Section 2(l)(a) of the Indian Income-tax Act, 1922 and the court had expressed the view that having regard to the definition of 'agricultural income' in Section 2(1 )(a) of the Act, an income to be 'agricultural income' should be derived from land and the land should be used for agricultural purposes and that where under the terms of a lease, the assessee was allowed to enjoy the fruits of the coconut trees for a stipulated period on payment of a fixed annual sum it cannot be said that the assessee was carrying on any agricultural operation as a result of which the income has been derived. If the principle of the said decision is applied to the facts of the present case, it cannot be said that the assessee in this case was carrying on the agricultural operation himself so that it could be said that the turnover in question represents the sale proceeds of the produce grown by himself on the land in which he had an interest.
3. The Tribunal has, however, purported to follow the decision of Venkatadri, J., in Jamal Mydeen v. State of Madras  22 S.T.C. 45. The learned Judge has of course held therein that the usufruct of the coconut trees is a horticultural produce and, therefore, sale of coconuts by a lessee of coconut thopes is not liable to tax by virtue of the proviso to Section 2(r) of the Madras General Sales Tax Act. With due respect, we are not inclined to agree with the view expressed by the learned Judge in that case. The usufruct of the coconut trees may be horticultural produce. But horticultural produce as such is not exempt under the Act. We are of the view that the mere fact that the usufruct of the coconut trees is horticultural will not automatically attract the proviso to Section 2(r). As pointed out by Ramaprasada Rao, J., in Palaniappa Pillai v. Deputy Commercial Tax Officer  28 S.T.C. 502, the exemption provided for in the proviso to Section 2(r) has to be strictly construed and the conditions laid down in that section have to be satisfied before an assessee claims exemption. In this case, it has been found by the Tribunal that the lease is annual and the only right which the assessee got under the said lease is the right to get the usufruct. In such circumstances, we are not inclined to agree with the view taken by the Tribunal that the assessee is entitled to exemption of the sale proceeds of the coconuts. The tax case is, therefore, allowed but in the circumstances, no costs.