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Benoy Kumar Sahas Roy Vs. Commr. of Income-tax, West Bengal - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 35 of 1952
Reported inAIR1954Cal225,[1953]24ITR70(Cal)
ActsIncome-tax Act, 1922 - Sections 2, 2(1), 4, 4(3), 33, 34, 66 and 66(1); ;Code of Civil Procedure (CPC) , 1908 - Order 47, Rule 1; ;Government of India Act, 1935 - Sections 138, 138(1), 292, 311 and 311(2); ;Government of India Act, 1915-19
AppellantBenoy Kumar Sahas Roy
RespondentCommr. of Income-tax, West Bengal
Appellant AdvocateJyotish Chandra Pal, Adv.
Respondent AdvocateE. Meyer and ;Balai Ch. Pal, Advs.
Cases ReferredBeoliar Singh v. Commr. of Income
- chakravartti, c.j. 1. this reference relates to a re-assessment under section 34, indian income-tax act and comprises two points taken by the assessee, one of which seeks to make out that the entire re-assessment proceedings were without jurisdiction and the other of which seeks to make out that, in any event, the income brought to tax under the re-assessment was not taxable. the contention in the first case is that the income-tax officer had no 'definite information' on which he could legallyproceed under section 34. in the second case, it is that the income concerned, is agricultural income.2. before dealing with the reference on the merits, it is necessary to dispose of a preliminary point. section 66(1), income-tax act provides that the commissioner or the assessee may, by an.....

Chakravartti, C.J.

1. This reference relates to a re-assessment under Section 34, Indian Income-tax Act and comprises two points taken by the assessee, one of which seeks to make out that the entire re-assessment proceedings were without jurisdiction and the other of which seeks to make out that, in any event, the income brought to tax under the re-assessment was not taxable. The contention in the first case is that the Income-tax Officer had no 'definite information' on which he could legallyproceed under Section 34. In the second case, it is that the income concerned, is agricultural income.

2. Before dealing with the reference on the merits, it is necessary to dispose of a preliminary point. Section 66(1), Income-tax Act provides that the Commissioner or the assessee may, by an application made within a certain time, require the Appellate Tribunal to refer to the High Court any question of law arising out of its order and further provides that 'the Appellate Tribunal shall, within ninety daysof the receipt of such application, draw up astatement of the case and refer it to the HighCourt.'

In the present case the reference was not made within ninety days from the receipt of the application. As this was happening in too many cases, it appeared to this Court that the statutory direction contained in Section 66(1) of the Act was being disregarded by the Tribunal and, accordingly, it was directed by an administrative order that references made after the expiry of the period prescribed by the Act, should be accepted only provisionaliy, subject to all just exceptions thab might be taken at the hearing on the ground of limitation. The order was directed to be incorporated in the Paper-Book of every case in which the question was involved so that the matter might be judicially examined.

The present case is the first in which the matter has come up for consideration and we have heard the learned counsel for the Commissioner of Income-tax and the assessee. Both contended that the provision contained in Section 66(1) as to the time within which the reference was to be made was not mandatory, but only directory and, therefore, although a reference might be made after the expiry of the period prescribed, the validity of the reference would not thereby be affected. We are of opinion that that contention is correct. The act which the statute enjoins to be done within a particular period is an act to be done by the Tribunal and it is a settled principle of construction that when the effect of construing such provisions as mandatory would be to affect the rights of individuals, they ought not to be so construed: -- 'Canadian Pacific Rail. Co. v. Parke', (1899) AC 535. The principle was stated by the Privy Council more elaborately in --'Montreal Street Railway Co. v. Normandin AIR 1917 PC 142, which is the leading case on the subject. As stated there, the principle is that where the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of that duty would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty, and at the same time would not promote the main object of the Legislature, such provisions should be construed as being directory only and not imperative.

It is true that the act which the Privy Council was considering was an act of a different kind, but it appears to us that the principle laid down is none the less applicable here, because the object of the Legislature is to provide that questions of law arising out of the order of the Tribunal shall be further considered by the High Court, if either of the parties so desires and it is in furtherance of that object that a duty has been laid on the Tribunal to place such questions before the High Court. The Tribunal is a judicial body and over its actings, the parties have no control. In those circumstances, to construe the time-limit for the submission of the case as mandatory mightin a case be to deprive a party of his right to have a question of law considered by the High Court which the Act intends to be so considered and in view of that possibility, the provision should be construed as only directory so that a party may not be deprived of a statutory right for no fault of his own, but for the fault of a public body over which he has no control.

Apart from the true construction of Section 66(1), it is also settled law that a party cannot be made to suffer prejudice by any default or negligence on the part of the Court. It appears to us further that no question of limitation affecting the rights of the parties can really arise in circumstances like the present, because the basis of all rules of limitation is that a party, being required or being at liberty to do a certain thing within a certain time, fails to do it within the time limited, whereas, in the present case, the default or negligence is of a third party. We accordingly hold that Section 66(1), in so far as it provides that a reference shall be made by the Tribunal within ninety days from the date of the application, is only directory and we hold further that for that reason as also the other reasons we have given, the present reference is valid, although made after the expiry of ninety days.

3. We desire to add, however, that although the validity of a reference may not be affected by the expiry of the period prescribed by Section 66(1), it is not proper for the Tribunal to disregard that provision. The Act, although it may not command the Tribunal to make a reference within ninety days, at least directs it to do so. Proper respect to that direction should be shown. I am not unmindful of the fact that the Tribunal, having to deal with applications from all the States in India, must have its own difficulties in coping with them, but still it ought not to make it a habit to make belated references. Fortunately, the time-limit has been or is going to be extended by an Amending Act and we hope that hereafter we shall not come across any, or at least many, references made after the expiry of the prescribed period.

4. To turn now to the reference itself, the facts are extremely simple. The assessee owns an area of 6000 acres of forest land, assessed to land revenue and grown with Sal and Piyasal trees. The forest was originally of spontaneous growth, 'not grown by the aid of human skill and labour' and has been in existence for the last 150 years. A considerable income is derived by the assessee from sales of trees from this forest. The assessment year in which this forest income was last taxed under the Indian Income-tax Act was 1923-24, but thereafter and till 1944-45 which is the assessment year now in question, it was always left out of account. The assessment for 1944-45 also was first made without including therein any forest income, but the assessment was subsequently re-opened under Section 34 and a sum of Rs. 34.430/- was added to the assessable income as income derived from the forest. That amount was reached by deducting from the gross receipt of Rs. 51,798/- a sum of Rs. 17,548/-, allowed as expenditure.

5. The first of the two questions referred relates to the validity of the re-assessment proceedings and it has been framed in the following form : 'Whether on the facts and in the circumstancesof this case, Section 34 is applicable?'

6. Stated in those general terms, the question may be taken to compromise any question under Section 34, but it appears that all that requires to be considered is whether the Income-tax Officer had any 'definite information' in his possession within the meaning of Section 34. But even that does not remove all difficulties in dealing with the question-- for, although the Tribunal has referred to the 'facts and circumstances' of the case, what those facts and circumstances are, is extremely obscure. It certainly does not appear from any of the orders passed in the case or any other material on what information the Income-tax Officer had actually proceeded. The Tribunal has however stated that 'the only information that the Income-tax Officer received was derived, from the decision of the Kapurthala case, in -- 'Maharaja of Kapurthala v. Commr. of Income Tax Central and United Provinces', AIR 1945 Oudh 35 (C)' and that it had'not been submitted before the Tribunal that the Income-tax Officer did not know that the assessee had forest income.' The facts on which we must proceed, therefore, are that at the time of the original assessment, the Income-tax Officer was aware that the assessee had a forest income and that thereafter he came to know from the decision in the -- 'Kapurthala case (C)' that income derived from the sale Of forest trees of spontaneous growth was not agricultural Income and therefore not exempt from taxation under the Indian Income tax Act. The question is whether in that state of the facts, action under Section 34, as it stood before the amendment of 1948, was rightly taken.

7. Mr. Pal, who appears on behalf of the asses-see, contended that, on the above facts, the true position was that the Income-tax officer had merely changed his opinion as to whether the forest income was liable to tax under the Act and he could not be said to have acted on any information that had come into his possession. The information contemplated by Section 34, it was said, must be information as to a fact. In aid of those contentions, reliance was placed on the decision in-- 'Commr. of Income-Tax, Bombay v. Mohamed Yusuf Ismail, AIR 1944 Bom 160 (D). It was contended in the second place that, in any event, the decision in the Kapurthala case (C), even if it was information, was not 'definite' information, because a judicial decision was liable to be overruled and also because in the present case there was in fact another decision in the contrary sense, reported in -- 'Secy, to the Chief Commr. of Income-Tax, Madras v. Zamindar of Singampatti AIR 1922 Mad 325 .

8. I am entirely unable to see why information as to the true state or meaning of the law, derived freshly from an external source of an authoritative character cannot be information as contemplated by Section 34. Under the terms of the section, the information should be such as is capable of leading to a discovery that income has escaped assessment or has been under-assessed or has been assessed at too low a rate or has been subject of excessive relief. Although it may be possible to construe the section by limiting the information to purely factual information in the first, second and fourth cases, the third case clearly suggests that the error may be an error in the application of the appropriate rate and so an error of law and therefore the information may be an information as to that error. The third case does not contemplate the contingency where a lower rate was applied for the reason that the amount of the assessable income was determined at a lower figure, because that contingency is covered by the second case. If information as to the correct law is proper information in the third case, it must be so in all the four cases.

Indeed, in the very case relied on by the asses-see, the Bombay High Court, while saying that the information must be information as to a fact, added that'the fact may be as to the state of the law, for instance, that a case has been overruled or that a statute has been passed which had not been brought to the attention of the Income-tax officer'.

I am unable to see why under that elastic definition of 'fact', a Chief court decision as to the chargeability of a particular type of income cannot equally be an information as to the state of the law and so 'information' within the meaning of Section 34. Indeed, in the case of -- 'Raghavalu Naidu & Sons v. Commr. of Income-tax, Madras AIR 1945 Mad 311 (F), the Madras High Court, while preferring to follow the Bombay decision for the sake of uniformity, wished particularly not to be understood as holding that the information must relate to a pure question of fact. Information as to the state of the law, it was added, would equally bring Section 34 into operation.

9. Cases where the Income-tax Officer merely changes his mind without any fresh information from an external source, as in -- 'Commr. of Income-tax, Madras v. Lakshrnana Iyer', AIR 1945 Mad 329 (G), relied on by the assessee or where a successor proceeds on the view that his predecessor was wrong in law, as in the case in AIR 1945 Mad 311 (F), referred to above, are wholly beside the point. So are cases where the Income-tax Officer gives effect to a decision of the High Court as regards the very assessee in respect of another assessment year. The position in the present case is that the Income-tax Officer, knowing of the existence of the forest income, did not include it in the original assessment in the belief that it was not assessable, just as it had not been included in the preceding twenty assessment years. Then he came across the decision in the -- 'Kapurthala case (C)' from which he learnt that such income was assessable under the Act and as a consequence he discovered that the forest income of the assessee received during the relative accounting year, being 'chargeable to income-tax', had escaped assessment in the original assessment he had made. I am unable to see why the decision could not serve as 'information' within the meaning of Section 34.

10. Mr. Pal contended that it could not so serve, because it was at least not definite information. It might be overruled and therefore could not be taken as declaring finally and definitely the assessability of income from a forest of spontaneous growth. It was also not definite, because there was another decision of equal authority which spoke in a contrary sense. That argument disregards the primary fact that Section 34 is a practical rule of procedure which was intended to be applied in order that the object mentioned in the section might be achieved and that it could not have been so devised as to make its practical application impossible. It is not possible to conceive of any information which might not afterwards be found to be incorrect and therefore if it be insisted that the Income-tax Officer could act under the old Section 34 only on information which could never turn out to be incorrect or untrue, he could not possibly have acted under the section at all.

I am quite certain that by the expression 'definite information', one or another, of the eternal varieties was not contemplated. A decision as to the true import of an existing provision of law is undoubtedly liable to be overruled, but the view taken in it is not, so long it is not overruled, anythe less definite than a clear provision in the statute itself, because the latter also is liable to be superseded with retrospective effect. As regards the argument that there were conflicting decisions, it overlooks the fact that the section has reference to the state of the Income-tax Officer's knowledge and unless it is shown that he was aware of the decision in which a contrary view had been taken, it cannot be said that the information conveyed by the decision on which he relied was not, to him, definite.

11. Two subsidiary arguments remain to be noticed. Reference was made to Order 47, Rule 1, Civil P. C. which speaks of 'discovery of new and important matter or evidence' and with respect to which it has been held that an error of law is not a 'new matter' as contemplated by the section, nor analogous to any of the matters contemplated by it. I am unable to see how the construction put upon the words 'new matter or evidence', read with the other words occurring in Order 47, Rule 1, can be of any assistance in construing the words 'definite information' in Section 34, Income-tax Act. The reasoning on which the decision of the Privy Council in -- 'Chajju Ram v. Neki AIR 1922 PC 112, is based is wholly inapplicable to the case of Section 34, besides that the Privy Council had occasion to construe, directly at least, only the words 'any other sufficient reason'.

It was further contended by Mr. Pal that mere information that income from a forest of spontaneous growth was not exempt from tax under the Act would not entitle the Income-tax Officer to proceed under Section 34, because before he could come to the conclusion that the forest income of the assessee in the present case was assessable and had escaped assessment, he would have to consider a great many questions of fact. That argument, again, disregards the scheme and object of the section which is not to authorise the Income-tax Officer to proceed only after he has finally decided that assessable income has escaped assessment but to authorise him to do so if he has bona fide reason to believe that some income has escaped tax and that the matter requires to be looked into. See -- 'Commissioner of income-tax, Bengal v. Mahaliram Ramjidas . Indeed a section which only provides for an enquiry and directs the initiation of a full-scale assessment proceeding, with all the opportunities allowable to the assessee under the law to disprove the Income-tax Officer's case, given to him, cannot in the nature of things require a considered decision as a condition precedent.

12. For the reasons given above, I am of opinion that all the objections urged against the initiation of the proceedings under Section 34 must be overruled.

13. The second question, which is the substantial question in the reference, relates to the correctness of the assessment of the assessee's forest income. It has been framed in the following form :

'Whether on the facts and in the circumstances of the case, the sum of Rs. 34,430 is 'agricultural income' & as such is exempt from payment of tax under Section 4(3)(viii), Indian Income-tax Act?'

14. The facts are that the forest is one of spontaneous growth, not a forest grown by the aid of human skill and labour, and it has been in existence for about 150 years. It is occasionally parcelled out for the purposes of sale, but the trees sold are so cut as to leave stumps of about 6 inches in height, from which spring fresh off-shoots which grow into fresh trees in course of time. When trees are cut down from a particular section of the forest, the area is guarded by forest guards in order to protect the off-shoots. 'A considerable amount of human labour and skill is being applied year after year for keeping the forest alive as also for reviving the portions that get denuded as a result of destruction by cattle and other causes.'

The operations performed by the staff maintained by the assessee are

'pruning, weeding, felling, clearing, cutting of channels to help the flow of rain water, guarding of the trees against pests and other destructive elements and sowing of seeds after digging of the soil in denuded areas.'

15. The Tribunal held that except the sowing of seeds, the operations carried out were equally necessary for the maintenance and upkeep of any forest of spontaneous growth and therefore they did not constitute such expenditure of human labour and skill as would make them operations of agriculture. The sowing of seeds, it was held further, was few and far between and the normal process by which the forest grew again, after a part of it had been cut down, was by the throwing out of off-shoots from the stumps left. The operations were therefore in the main only operations for the 'maintenance, preservation, nursing and the rearing' of the forest and consequently the income derived from the sale of trees from it was not agricultural income.

In the view of the Tribunal, the word 'agriculture', as used in the Income-tax Act, contemplated employment of human skill and labour in actual cultivation of the soil and did not extend to the activities of a sylviculturist. The Tribunal declined to follow the decision of this court in the case of -- 'Commr. of Agricultural Income-tax, West Bengal v. Jagadish Chandra Deo : [1949]17ITR426(Cal) , on the grounds that it was not a decision under the Indian Income-tax Act, that the Indian Income-tax authorities were not represented at the hearing and that it was to the interest of the assessee in that case to submit to assessment under the Provincial Act than to one under the Central Act.

16. In support of its conclusion, the Tribunal gave two further reasons. It was said that 'agriculture' and 'forests' were separate items in the Provincial Legislative List, both under the Government of India Act, 1935 and the Constitution of India and the fact that the Provincial or the State Legislature had been given power to make laws with respect only to 'Tax on agricultural income', without any mention of tax on forest income, indicated that

'when the Legislature were contemplating income from agriculture, they had a reservation which would show that income from forests could not be included.'

It was said further that the use of the word 'raised' in Clauses 2(1)(b)(ii) and (iii) of the definition section showed that only income from what was produced as a result of cultivation was contemplated.

17. The findings of the Tribunal are to be collected not only from the statement of the case but also from the appellate order which has been made a part of the statement. It is greatly to be regretted that in spite of observations repeatedly made by this and other High Courts, the Tribunal should still neglect to draw up a clear and self-contained statement of the case, giving the facts as found, the question or questionsI arising, the contentions of the parties and its own conclusions. In the present case, the findings are also not very definite. Some of them lie in the contentions of the Departmental Representative, accepted only by implication.

18. Before us, Mr. Pal did not advance any arguments of his own on behalf of the assessee. He was content to rely on the decision in --'Commr. of Agricultural Income-tax, West Bengal v. Jagadish Chandra Deo (J)' (ante) & to submit that in the present case the facts were far stronger in favour of the assessee. On behalf of the Commissioner, Mr. Meyer cited a large number ofdecisions and contended that in order that there might be agriculture, some cultivation was essential or, at any rate, there had to be some expenditure of human skill and labour on the land itself.

19. Before taking up the question on its merits, I feel bound to observe that the action of the Tribunal in declining to follow the decision in --Jagadish Chandra Deo Dhabal Deb's case (J)' was highly improper. As was to be expected, Mr. Meyer made no attempt to defend it. The definition of 'agricultural income' in the Indian Income-tax Act is precisely the same as in the West Bengal Act. It is precisely the income which the latter Act brings to charge that the former Act exempts. In those circumstances, the Tribunal had no option to disregard the decision in a case arising in this State for which the referee Court was this Court. Its clear duty was to follow it, irrespective of what views it might itself hold and leave it to the Commissioner to bring up the matter on a reference to this Court, if he was so advised. Mr. Meyer admitted that the obvious course for the Tribunal was to follow the decision and the grounds on which it had refused to do so were wholly improper and unsound.

20. Turning now to the merits of the question,I may first dispose of the two subsidiary reasons given by the Tribunal in support of its decision. Mr. Meyer did not adopt them for the purpose of his argument and only said that he did not wish to give them up, but would leave them to be dealt with by us as we liked. Clearly, he did not believe in them. As regards the reason drawn from the Constitution Act, the Tribunal seems to haveforgotten that the Income-tax Act was passed even before the Government of India Act, 1935, andat a time when the particular division of thesubjects of legislation on which it relies, did not exist. It seems also to have forgotten that what it was required to find was not whether a Provincial Legislature had been given the power to tax forest income, but whether the central Legislature had, in imposing a tax on income by the Indian Income-tax Act, exempted it from taxation. It is true that the Central Act exempts only agricultural income, but the argument that 'agricultural income' does not include forest income cannot be established by pointing to the three separate items 'Agriculture', 'Forests' and Tax on agricultural income' in List II in the Seventh Schedule to the Government of India, Act, 1935, because the third item found no place in ScheduleII to the Devolution Rules framed under the Government of India Act, 1915-19, which was in force at the time the Income-tax Act was passed. It is true that by Section 292, Government of India Act of 1935, the laws in force at the time werecontinued in force only subject to the provisions of the Act and if the new Government of India Act could be said to exclude forest income fromagricultural income, it could perhaps be argued that thenceforward the exclusion of agricultural income from the ambit of the Indian Income-taxAct was to be construed as not comprising the exclusion of forest income as well.But while Section 138(1), Government of India Act empowered the Federation to levy and collect taxes on income other than agricultural income and such power was again more specifically given by Item No. 54 in List I, Section 311(2) provided that 'agricultural income' meant agricultural income as defined for the purposes of the enactments relating to Indian Income-tax. One is thus thrown back on the definition in the Income-tax Act. To explain agricultural income as contemplated by the Income-tax Act by reference to the provisions of the Government of India Act, 1935 is thus to argue in a circle. Nor do I think is the mention of the three separate items, agriculture (Item 20), Forests (Item 22) and tax on agricultural income (Item 41) in List II of the Seventh Schedule of any help, because Item No. 22 obviously contemplates forests as such, their conservation or management or it may even be income from forest products, but a forest area may be made the subject of agriculture, directed to either growing or tending the forest, and if it is, such treatment of forest lands may quite clearly come under agriculture and the income from forest lands, so treated, will be agricultural income.

The real question is what agriculture means. To say that since the Central Act exempts only agricultural income and since it is as such income that the exemption of forest income is claimed, the mention of agriculture, agricultural income and forests as separate items in the Constitution Act indicates that forest income is not agricultural income is, in my view, to oversimplify the problem and also to forget that the Constitution. Act took over the definition of agricultural income from the Income-tax Act itself.

Primarily, we are not concerned with the intention of the Constitution Act but with that of the Income-tax Act, but the definition in the Income-tax Act might have had to be read in the light of the definition in the Constitution Act if the latter was different, because the Legislature was to be presumed to have legislated only with respect to matters for which it was competent to legislate under the Constitution Act. But here the order was the reverse and the Constitution Act borrowed from the Act of the Legislature. I am not setting out separately the relevant Articles and Items in the present Constitution to which also the Tribunal refers, because the position under those provisions is exactly the same. I asked Mr. Meyer to supply the steps of the Tribunal's reasoning, but he frankly confessed his inability to do so. In my opinion, the constitutional reason relied on by the Tribunal in support of its view is a wholly unreliable reason.

21. The argument founded on the use of the word 'raised' in Clauses (ii) and (iii) of Section 2(1)(b) of the Act is equally unhelpful. In the first clause, it is not used in connection with the produce Which is processed and the income from which, arising out of the processing, is to be regarded as agricultural income, but it is used in the course of the general description given of the process itself. In the second clause, the word does describe the produce which yields an agricultural income from its sale, but there are several reasons why such use of the word is conclusive of nothing. 'Raised' does not necessarily imply raised by cultivation and, secondly, even if it does, it by no means follows that in the case of all agricultural income, cultivation is essential. We are considering the meaning of the expression 'income derived from such land (i.e. land used for agricultural purposes) by agriculture' which is Clause (i) of Section 2(l)(b).

Clause (iii), when fully written out, reads as 'income derived from such land (i.e. land used for agricultural purposes) by sale by a cultivator or receiver of rent in kind of the produce raised or received by him'. It is obvious that the two clauses must be taken as contemplating different varieties of agricultural income, or there could be no reason for setting them out separately. The use of the word 'raised' in Clause (iii) where the word 'agriculture' does not occur, cannot therefore be conclusive or even indicative of the meaning of the latter word in Clause (i).

22. I have now cleared the ground for approaching the main question which is whether the operations found by the Tribunal amount to agriculture. If the original trees or some of them had still been standing, it could not have been said that the whole of the income was derived from the land by the operations carried out by the assessee, because those trees would not be the product of such operations. But as the forest has been in existence for 150 years, and as the trees standing on sections of it are sold periodically by rotation, it can safely be presumed that the trees of which the forest now consists are mostly offshoots sprung and grown from stumps of the original trees after they had been cut down and that some have sprung from the seeds sown.

It follows that whether or not the operations of the assessee amount to agriculture, the whole of the income is derived from the land by those operations. The only questions therefore are whether the particular forest land is 'land used for agricultural purposes' and whether the operations carried on in the forest are 'agriculture'. In the particular facts of the present case and, indeed, in all such cases of forest income, the two questions are the same, because besides the use if any, constituted by the operations, the land is not used in any other manner or for any other purpose.

23. It will be wearisome to review in detail all the cases cited at the Bar and it will also not be profitable to do so for two reasons. In none of the cases were the facts precisely similar and no case which goes beyond or falls short of the decision of the Privy Council in -- 'Mustafa Ali Khan v. Commr. of Income-tax (K), can now be regarded as good authority or a reliable guide.

In the case decided by the Privy Council, 'there was nothing to show that the assessee was carrying on any regular operations in forestry' and 'the jungle from which trees had been cut and sold was a spontaneous growth'. In the question referred in that case the trees were described as 'forest trees growing on land naturally and without the intervention of human agency'. Dealing with a forest and forest trees of that kind and proceeding to consider whether the sale proceeds of such trees could be 'agricultural income' within the meaning of Section 2 of the Act, their Lordships pointed out that the primary requirement under all the clauses of the section was that the income must be derived from land 'used for agricultural purposes' and consequently wherever that basic condition was not satisfied, the assessee's case must fail for that reason alone.

Their conclusion in the case before them wasthat the condition was not satisfied and theystated their reason in the following words :

'It is sufficient for the purpose of the presentappeal to say (1) that in their opinion noassistance is to be got from the meaning ascribedto the word 'agriculture' in other statutes and(2) that, though it must always be difficult to draw the line, yet, unless there is some measure of cultivation of the land, some expenditure of skill and labour upon it, it cannot be said to be used for agricultural purposes within the meaning of the Income-tax Act.'

23a. In all subsequent expositions of 'agricultural income' the passage quoted above has been taken as the test of the law & judicial decisions have been but commentaries upon it. Commentators have differed, as they usually do, but they seem to be in agreement in thinking that it is not said or implied in the text that in order to constitute agriculture, some actual tillage of the land is required. In the Calcutta case of -- 'Jagadish Chandra Deo Dhabal Deb (J), (ante)', it was said that the view that tilling of the soil was the sine qua non of agriculture, had been exploded. The Assam High Court, in the case of -- 'Jyotindra Narayan v. State of Assam', AIR 1951 Assam 2 (L), said that the Privy Council had not laid it down that tillage or actual cultivation was 'an essential prerequisite of agriculture'. In the case of -- 'Pratap Singh Balbeer Singh v. Commr. of Income-tax', AIR 1952 AH 845 (M), the Allahabad High Court, said, somewhat grudgingly it would appear, that according to the Privy Council, the essential element of agriculture was that there must be 'some measure of cultivation of the land' or 'some expenditure of skill or labour upon it'. The Madras High Court, or at least one of the Judges, went the farthest in the case of -- 'Commr. of Income-tax, Madras, v. Sundara Mudaliar', (N), and observed that whatever was grown on land, aided by human labour and effort, the-process of producing it would be agriculture.

24. I venture to think, as I have often said, that a judicial decision is not to be construed like a statute. It is also important to remember that on the facts of the case before it, the Privy Council was concerned not so much with what agriculture or agricultural income was as with what it was not. Since the assessee in that case had done nothing to grow or tend the trees, but had merely sold them as they grew in the forest by themselves, there was really no question of his having carried on agricultural or any other land of operations. The observations of their Lordships were expressly made 'for the purpose of the-present appeal'. It is clear to my mind that when they said that there could not be any agriculture unless there was some measure of cultivation of the land, some expenditure of skill and labour upon it, they were merely emphasising the total absence in the case before them of any operations on which a claim of agriculture could be founded and not making a complete statement of the law as to what agriculture was.

When they spoke of the necessity of 'some expenditure of skill and labour upon it', they were, I believe, thinking of the statement contained in the question referred that the trees sold were trees 'growing on land naturally and without the intervention of human labour'. It was with reference to that statement that the Privy Council said that in order that anything could be said, to be derived from land by agriculture, 'some expenditure of skill and labour upon it' was necessary. Their Lordships were concerned with the-negative aspect of agriculture in relation to forest trees and it was therefore that as regards its positive aspect, viz., cultivation of land and plantation of trees upon it in the regular course of arboriculture, they preferred to say nothing. I should therefore think that in considering what agriculture is, it is not necessary to confine oneself tothe strict words of what the Privy Council said or to seek the whole definition there, although what their Lordships said, must not be disregarded.

25. I do not think that when the Privy Council said that there must be 'some measure of cultivation on the land, some expenditure of skill and labour upon it', their Lordships intended to say that the expenditure of skill and labour must always be in the form of cultivation. The word 'or' introduced by the Allahabad High Court between the two phrases does not occur in the original, but I think it is implied. The idea, it seems to me, is that if the land has been left to the forces of the nature to grow what products such forces could, there is no agriculture and that there can be agriculture only if the labour and skill of man has operated on the land to cause or aid the growth of certain products. All that is necessary is that the land should be actively exploited with a view to procuring growths or better growths from the soil, but it does not seem to be also necessary that the exploitation should be by tillage.

Mr. Meyer referred to the decision of the Nagpur High Court in the case of -- 'Beoliar Singh v. Commr. of Income-tax', AIR, 1948 Nag 228 (O), where the learned Judges, after an extensive review of previous decisions, laid it down as a test that the land should be tilled, but the decision was given two years before the decision of _the Privy Council. But though tillage is not essential, Mr. Meyer was right in contending that the human skill and labour must be expended on the land itself and not merely on the growths from the land. It is clear that in order that there may be agriculture, it is the agar, the field which must be cultured. That requirement is implicit in the term itself and the Privy Council referred to it expressly, because their Lordships said that there must be 'expenditure of labour and skill on it', that is to say, the land. The true position therefore is that when income is derived from natural growths from the soil, it is derived from land, but not derived from land by agriculture. It is derived from land by agriculture, as the definition requires, when the land is subjected to the labour and skill of man, whether in the form of cultivation or otherwise, in order to the production or the improvement of the produce which yields the income.

26. Judged by that test, it must, with respect, be doubted whether the case of (1949) 17 ITR 423 ', on which Mr. Pal relied, was rightly decided. Save and except occasional removal of the undergrowth by third parties with the permission of the assessee, there were no operations on the land at all. The rest of the operations were all for the protection and management of the forest or operations carried out on the trees which could not be said to be agriculture in any form. If Mr. Pal were to rely solely on the authority of that decision, he would, I am afraid, fail.

27. But the facts of the present case are far stronger. I have already pointed out that the trees, now standing on the land, must be mostly off-shoots from old stumps, but although the trees, when sold, are felled by the assessee himself and new shoots spring from their stumps because they are so felled, it cannot be said that such new trees are products of agriculture. To produce them, nothing is done to the soil. I do not think that the reason given by the Tribunal for disregarding all the operations except sowing of seeds, viz., they are equally necessary for the maintenance and upkeep of any forest of spontaneous growth, is sound -- because if such a forest is taken over and subjected to operations offorestry which involve agriculture, the fact that the forest was originally of spontaneous growth, would, not prevent the income from it being agricultural income. The Privy Council appears to have distinguished a forest of spontaneous growth, from a forest in which regular operations of forestry were carried on, although it did not say, as appears to have been assumed in -- 'Jagadisb, Chandra Deo's case, (J)', that if there were operations in forestry, there would be agriculture.

The real and the proper reason for disregarding many of the operations in the present case would be that they do not involve culture of the land. But three of the operations are, in my opinion, vital. They are 'weeding', 'cutting of channels to help the flow of rain water' and 'sowing of seeds after digging of the soil in denuded areas'. I am aware that in some of the decisions weeding has been held to be not an agricultural operation, but I can see no reason for taking that view, because it is certainly an operation carried out on the land in order to free the soil of their burden and make it a better feeder of the trees or plants, preserved or grown.

In my opinion, if a forest of natural growth is taken over and then the land is regularly weed ed and cleared, if it is supplied with moisture, necessary for the nourishment of the trees, by the cutting of channels across it and by the distribution of rain-water through them and if the land is dug and sown with seeds whenever bare patches appear and while all this is done, if elaborate subsidiary arrangements are also maintained for the protection of the trees and the tending of new shoots springing from the stumps of old trees; cub down till they themselves grow into new trees, it may well be said that operations in forestry, involving agricultural operations are carried on on the forest land and that the income derived from the land is derived from agriculture. I would therefore hold that the view taken by the Tribunal was erroneous.

28. For the reasons given above, the answers to the questions referred should be as follows : Question 1. Yes. Question 2. Yes.

29. As the assessee succeeds on the main question, he will have the costs of this Reference, but as the success is divided, though unequally, I shall not certify for two counsel, as I would otherwise have done.

Lahiri, J.

30. I agree.

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