Appeal Nos
4026 27 of 1987
From the judgment and order dated 1091986 of the Madhya Pradesh High Court in MP No 2191 and 413 of 1985
AK Sanghi for the Appellant in CA No 4026 of 1987
GL Sanghi and JR Das for the Appellant in CA No 4027 of 1987
SN Khare RK Sharma and TC Sharma for the Respondents
The Judgment of the Court was delivered by VENKATACHALIAH J
In these petitions under Article 136 of the Constitution of India petitioners seek special leave to appeal from the Judgment and order dated 1091986 of the Madhya Pradesh High Court in Misc
Petition 2919 of 1985 and Misc
Petition No 413 of 1985 respectively
The appeals raise a short and interesting question whether stacks of eucalyptus wood  sold by the forest department after separating the Ballies and poles constitute and answer the description of Timber  under entry 32 A of Part 11 of Schedule II to the Madhya Pradesh General Sales Tax Act 1958 The Act 
The High Court rejecting the appellant s contention that what was sold being left overs after the extraction of poles and Ballies of Eucalyptus  Nilgiri Trees was merely fire wood  within the meaning of and attracting entry No 12 of Part V of Schedule II of the Act held that the goods were Timber  under the said entry 32 A
It was accordingly held that appellants were liable to pay sales tax at the rate of 16 ad valorem
504 2
Special Leave is granted in both the cases
The appeals are taken up for final hearing heard and disposed of by this common judgment
We have heard Shri GL Sanghi Senior Counsel and Shri AK Sanghi for the appellants and Shri TC Sharma for the respondents 
Though the notification inviting tenders and certain other documents appear to describes the goods variously as eucalyputs fire wood stacks 
 eucalyptus wood stacks Nilgiri fuel wood  etc
 the nomenclature is not determinative or conclusive of the nature of the goods which will have to be determined by the application of certain well settled principles guiding the matter
Three entries as they then stood in the Schedule to the Act  were pointed out by learned counsel as the possible alternatives Schedule II Part II Entry 32 A Timber 16 PART V Entry 12  Fire wood  charcoal 
3 Part Vl Entry I  All other goods not included in Schedule I or any other part of the Schedule 
10 Appellants contention urged before the High Court and reiterated before us was that what was sold were the leftovers and remnants of eucalyptus trees after the extraction of the substantial timber in the form of poles and Ballies and that even on the basis of what the forest department itself described the goods to be while putting the goods  to tender the goods were fire wood heaps 
It was urged that having regard to the well known concept of what constitutes Timber  the wood stacks sold could by no stretch of imagination be held to answer the description of Timber 
The wood sold it was said 505 fire wood or at all events plain wood  not amounting to Timber  or A firewood  in which case the goods fall within the residuary entry
This contention did not find favour with the High Court
In a taxing statute words which are not technical expressions or words of art but are words of everyday use must be understood and given a meaning not in their technical or scientific sense but in a sense as under stood in common parlance ie that sense which people conversant with the subject matter with which the statute is dealing would attribute to it
Such words must be understood in their popular sense 
The particular terms used by the legislature in the denomination of articles are to be understood according to the common commercial understanding of those terms used and not in their scientific and technical sense for the legislature does not suppose our merchants to be naturalists or geologists or botonists
The expression Timber  it seems to us has an accepted and well recognised legal connotation and is nomen juris
It has also a popular meaning as a word of everyday use
In this case the two meanings to Timber  the legal and the popular coalesce and are broadly subsumed in each other
In Honeywood vs Honeywood  at p 309
Sir George Jessel referred to what distinguishes and is Timber E The question of what timber is depends first on general law that is the law of England and secondly on the special custom of a locality
By the general rule of England oak ash and elm are timber provided they are of the age of 20 years and upwards provided also they are not so old as not to have a reasonable quantity of useable wood in them sufficient  to make a good post
Timber that is the kind of tree which may be called timber may be varied by local custom
There is what is called the custom of the country that is of a particular country or division of a country and it varies in two ways
First of all you may have trees called timber by the custom of the countrybeech in some countries hornbeam in others
and even whitethorn and black thorn and many other trees are considered timber in peculiar localities in addition to the ordinary timber trees
Then again in certain localities arising probably from the nature of the soil the trees of 506 even 20 years old are not necessarily timber but may go to 24 years or even to a later period I suppose if necessary and in other places the test of when a tree becomes timber is not its age but its girth
 In Shantabal vs State of Bombay  Ors  this court referring to the distinctions between standing timber  and tree  referred to the following lexicographic meaning of timber  30 Timber is well enough known to be wood suitable for building houses bridges ships etc whether on the tree or cut and seasoned
Webster s Collegiate Dictionary
It was accordingly held Therefore standing timber must be a tree that is in a state fit for these purposes and further a tree that is meant to be converted into timber so shortly that it can already be looked upon as timber for all practical purposes even though it is still standing
emphasis supplied Legal Glossary published by the Ministry of Company Affairs Law  Justice gives this meaning of Timber  wood meant for building or such like use
In the Chambers 20th Century Dictionary the meaning of the word Timber  is this wood suitable for building or carpentry whether growing or cut standing trees of oak ash elm locality by custom other kinds etc
emphasis supplied In words and phrases by John B Saunders Vol 5 Timber  is heed to be Trees less than six inches in diameter have been said not to be timber
emphasis supplied 507 5
In its popular sense timber  is understood to be Imarathi Lakdi 
In a popular sense Timber  has certain association of ideas as to its size stability utility durability the unit or measure of quantity and of valuation etc
The question is whether by the standards of these popular connotations the wood stacks  or wood heaps  sold to and purchased by the appellants can be held to answer the popular notions of  Timber  
When standing timber is sold as uncut tree different considerations may arise
The nature of the wood sold is described in the letter dated 3051985 addressed by the Divisional Forest officer
The subject matter of the sale has been referred to as Nilgiri fuel wood 
The wood was offered for sale in stacks of the size of l x 1
25 x 2 mtrs
With each piece of a length of 125 meters and a girth at the thinner end of not less than 10 cms
They were sold not by volume or by the number of pieces
The wood was offered with a particular kind of user in mind viz as a source of industrial raw material for pulp  in the manufacture of synthetic fibre
As pointed out by the High Court in the returns filed by the respondents it was mentioned that eucalyptus plantation was a recent development and promoted with the specific purpose for use in specifically in the preparation of pulp and sold throughout the state with this specific object
Respondents in their endeavor to controvert appellants  contention that the wood sold was fire wood went on to say that while stacks of fire wood of similar sizes fetch prices between Rs20 to Rs80 each the stacks of the eucalyptus wood on the other hand fetch to Rs300 to Rs600 per stack and that therefore nobody uses eucalyptus as fire wood
The High Court felt pursuaded to the view that the wood  sold did not admit of being described as fire wood
It reasoned Fire wood in common commercial parlance and as understood by the trade as well as by the consuming public is not just any wood that can be used as logs of fuel
Every kind of wood is potential fire wood for you can start a fire with any wood
But this is not the test
Firewood is wood of a kind which has attained notoriety as fuel
Nobody who sells fire wood debarks the wood before sale
Nobody who buys firewood requires them to be shaved and debarked
Purchasers may desire the wood to be cut to size
But that is all
There may be eccentric sellers and eccentric buyers who may indulge their fancies in specialities in firewood
508 But that again is not the test
Where the wood is not in the normally accepted commercial practice firewood and more especially where the wood is sold and purchased subject to specifications which conduce the wood to particular purposes other than fuel which is the case in the present two revisions the goods sold cannot be regarded as firewood
 While something perhaps could be argued in support of this reasoning what however emerges is that the finding that the goods was Timber  appears to have been reached as a necessary consequence and logical corollory of the goods not being fire wood  If the wood is not fire wood it need not necessarily and for that reason alone be Timber 
All wood is not timber as indeed all wood is not fire wood  either though perhaps it may not be incorrect to say that both firewood  and Timber  are wood  in its generic sense
The High Court further reasoned  
It has also been mentioned that timber is obtained by cutting standing trees
It may be hard wood timber or soft wood timber
Eucalyptus trees are covered by soft wood timber    
The petitioners offered to purchase the goods which could be used for manufacture of woodware furniture etc
as well as manufacture of Pulp
The petitioners deal in timber 
Here again pushed to its logical conclusions the reasoning incurs the criticism of proceeding to determine the nature of the goods  by the test of the use to which they are capable of being put
The user test  is logical but is again inconclusive
The particular use to which an article can be applied in the hands of a special consumer is not determinative of the nature of the goods
Even as the description of the goods by the authorities of the forest department who called them varyingly as eucalyptus fuel wood  eucalyptus wood heap  etc
is not determinative the fact that the purchasers were dealers in timber is also not conclusive
The High Court also observed  
The length of the pieces is not relevant criteria to 509 determine whether the wood is timber or not
The goods A offered for sale were eucalyptus wood stacks  
Length is no doubt a relevant consideration but it is a relative concept and associated with the idea of utility
A piece of rope it is said is itself a rope provided It serves the purpose of one
The question is not really whether EucalyptusNilgiri Tree is or is not a Timber  tree
By every reckoning it is
Eucalyptus is a large rapid growing evergreen tree of the myrtle family originally a native of Austrailia Tasmania and Malaysis
There are a large number of its species
The ideal species under ideal conditions it would appear reaches a height of 370 ft with a girth of nearly 25 ft
Apart from its utility as a source of gum and medicinal oils the slow growing species are especially known for the quality of its timber marked for strength size and durability See Encyclopaedia Britannica 1968 Vol 8 page 806  807 Encyclopaedia American Vol
10 pages 648  649
But the question is whether the subsidiary parts of the tree sold in heaps after the Ballies  and poles are separated can be called Imarathi Lakdi  or Timber 
We think it would be somewhat of a strain on the popular meaning of the expression Timber  with the sense size and utility implicit in the idea
to call these wood heaps Timber  meant or fit for building purposes
Persons conversant with the subject matter will not call these wood heaps Timber  whatever else the goods might otherwise be
It would appear that at one stage the forest department itself opined that the goods  were not timber but only fire wood
We must however add that no tests of general validity applicable to or governing all cases can at all be laid down
The point to note and emphasis is that all parts or portions of even a timber tree need not necessarily be Timber 
Some parts are timber some parts merely fire wood and yet others merely wood 
Having regard to the nature and description of the wood in the present case we think the wood heaps  are not susceptible to be or admit of being called Timber  with all the concomitants and associations of that idea
Perhaps different considerations might apply if say the pieces of eucalyptus wood are of a longer length or of a higher girth
Differences of degree can bring about differences of kind 7
What emerges therefore is that the goods in question are not Timber  within the meaning and for purposes of entry 32A of the Act
In regard to the question as to what other description the goods answer and which other entry they fall under learned counsel on both 510 sides submitted that if we hold that entry 32 A is not the appropriate one the matter be remitted to the High Court for a fresh consideration of the matter in the light of such other or further material the parties may place before the High Court
We accept this submission
In the result these appeals are allowed in part and the finding of the High Court that the goods in question fall within and attract entry 32 A of Part II of Schedule II of the Act  is set aside and the matter is remitted to the High Court for an appropriate decision as to which other entry the goods in question attract
The appeals are disposed of accordingly
We might advert to yet another submission of Sri Sanghi
He submitted that consistent with the finding that the goods  do not attract tax at 16 under the said entry 32A respondents cannot retain the tax already collected at 16
Learned Counsel submitted that even if the goods are said to fall under the Residuary entry the rate of tax would only be 10 and that respondents accordingly should be directed to refund to the appellants sums equivalent to 6 of the tax wherever tax at 16 has been collected without waiting for a decision on remand as indeed there would be no prospect of the goods attracting tax at a rate higher than 10 now that entry 32 A is held inapplicable
This in our opinion is a reasonable request and requires to be accepted
The concerned Respondents are directed to refund to the appellants  sums equivalent to 6 wherever the taxes are already recovered at 16
In the circumstances there will be no order as to costs
RSS Appeals allowed


Summary:
 The respondent the assessee company carried on business of manufacture of textiles
From the year 1949 the respondent started running into losses resulting in the stoppage of its manufacturing activity from December 1953
In May 1956 one of the creditors of the company filed a winding up petition in the High Court
One major creditor of the respondent company in exercise of its powers under an English mortgage of the fixed assets of the company took actual possession of the immovable properties hypothecated to the creditor
The High Court with the approval of the assessee company and its creditors evolved a scheme whereunder the business assets of the company were let out on a rent of Rs250000 per year
The lease was for ten years with option of renewal for another ten years
The intention was that the various creditors would be paid out of the lease money
The lease money realised by the company for the assessment years 1957 58 to 1959 60 was assessed by the Income Tax Department under section 10 of the Income Tax Act under the head Profits and gains of business
But in the subsequent assessment years the Income Tax officer held that income from the lease rent was liable to be assessed under the head Income from other sources under section 12 of the Act
The assessee company filed an appeal against the order of the Income Tax officer
The Commissioner upheld the order of the Income Tax officer
The assessee took the matter to the Income Tax Tribunal
The Tribunal directed the Income Tax officer to treat the income arising out of the letting out of the assets as business income 
The matter then went to the High Court
The High Court held that the income derived by the assessee company by way of the lease rent from the letting out of the assets during the years ending 31st December 1959 31st December 1960 31st December 1961 and 31st December 1962 is assessible to tax under the head profits and gains of business
Aggrieved by the decision of the High Court the revenue appealed to this Court
390 Dismissing the appeal as also the connected petitions for special leave the Court  HELD Whether a particular income received by the assessee as a result of the activities carried on by the assessee is business income or rental income depends upon the manner of the exploitation of the assets of the assessee
It only varies from the facts and circumstances of each case
In each case the intention has to be gathered as to whether the commercial asset was intended to be exploited by the assessee or whether it was intended to be used by letting it out for a temporary period
From the facts and circumstances of the case it appears that it was a possible conclusion that the assessee intended that there should be a temporary suspension of the business for the purpose of re construction of the company and for that matter there must be stopping of the user of the machinery by the assessee
It was a temporary lease though for 10 or 19 years on renewal and after the expiry of the period the property reverted back to the assessee
It is pre dominantly a matter of intention which is an inference to be drawn from the relevant facts
All the relevant facts it appears have been considered by the Tribunal from the correct stand point
The Tribunal found that the intention was not to part with the machine but to lease it out for a temporary period as a part of exploitation
In such circumstances it cannot be said that no business was carried on and the income derived from the machine letting out was only a rent income and in the facts and circumstances of the case it cannot be said that such a finding was perverse or not sustainable
The High Court was right in the view it took
398F 399E H 400A B Commissioner of Excess Profits Tax Bombay City vs Shri Lakshmi Silk Mills Ltd  Commissioner of Income Tax West Bengal vs Calcutta National Bank Ltd  Narain Swadeshi Weaving Mills vs Commissioner of excess Profits Tax  Inland Revenue Commissioner vs Broadway car Ltd  Commissioner of Income Tax vs Shaw Wallace  Co Cal 1343 and New Savan Sugar and Gur refining Co Ltd vs Commissioner of Income Tax Calcutta  referred to