Case: The Commissioner Of Income-Tax,Bihar And Orissa Vs. Sri Ramakrishna Deo

2. The respondent is the proprietor of the impartible zamin of Jaipur in Koraput District. The estate is of the area of 12,000 sq. miles of which 1540 sq. miles are reserve forest and 100 sq. miles, protected forest. The respondent derives income from the forests by the sale of timber such as teak, salwood, lac, myrobalan, tamarind, cashewnuts and firewood. There is no dispute either as to the receipt of such income or as to its quantum. All that appears in the account books of the respondent. The point in controversy is as to whether this income is chargeable to tax. It is the contention of the respondent that this is agricultural income as defined in S. 2 (1) of the Act, and that it is, in consequence, exempt under S. 4(3) (viii). By his order dated January 31,1943, theOfficer held that the forests in question had not been proved to have been planted by the respondent, that the trees were of spontaneous growth, and that the income therefrom was not within the exemption under S. 4 (3)(viii); and this order was confirmed on appeal by the Appellate Assistant Commissioner. The respondent took the matter in further appeal to the Appellate tribunal, and there put forward the contention that theOfficer had failed to take into account a letter of the Dewan dated June 3, 1942, which gave a detailed account of the operations carried on by the estate in the rearing and maintenance of forests and that on the facts mentioned in that letter, his finding that there had been no plantation of trees was erroneous. By its order dated April 9, 1946, the Tribunal accepted this contention, and directed a fresh enquiry into the facts mentioned in the said letter.3. Pursuant to this order, theOfficer again enquired into the matter. He observed that though he gave ample opportunities to the respondent to prove that there was plantation of trees by the estate, no materials were placed in proof of that fact and that neither plantation books nor any working plans for timber plantation had been produced. He accordingly held that the forests had grown naturally, and that the income therefrom was assessable to tax. On this report, the appeal again came up for hearing before the tribunal. The main contention urged by the respondent at the hearing was that the facts showed that the forests which had yielded income during the years of account could not have been the virgin forests which had originally grown spontaneously on the hills, because they had been periodically denuded by the hill tribes in the process of Podu cultivation carried on by them. What this Podu cultivation means is thus stated in the District Gazetteer, Vishakhapatnam, 1907consists in felling a piece of jungle, burning the felled trees and undergrowth, sowing dry grain broadcast in the ashes (without any kind of tilling) for two years in succession, and then abandoning the plot for anotherargument of the respondent was that as a result of the Podu cultivation, the original forests should have disappeared and that the trees that had subsequently grown into forest and sold as timber must have been planted by human agency and their sale proceeds must accordingly be agricultural income. Dealing with this contention, the Tribunal observed that though there had been extensive destruction of forests in the process of Podu cultivation, nevertheless, considerable areas of virgin forests still survived, that the evidence of actual cultivation and plantation by the zamin authorities was meagre and unsubstantial, that no expenses were shown to have been incurred on this account prior to 1904, that the amount shown as spent during that year was negligible, that the trees planted then could not have been the trees sold as timber during the assessment years, and that the respondent had failed to establish facts on which he could claim exemption. It should be mentioned that this order covered the assessments for five years from7, the facts relating to the character of the income being the same for all the years. On the application of the respondent, the Tribunal referred the following question for the decision of the High Courton the facts and in the circumstances the income derived from forest in this case is taxable under the Indian. The reference was heard by Panigrahi C. J. and Misra J. who answered it in the negative. They observedappears to us that the cases as set out by both parties have been put too high. The department takes the view that unless there is actual cultivation of the soil the Income from the forest trees cannot be regarded as agricultural Income. The fact that the assessee has spent some money and planted valuable trees in mine areas is not sufficient to free the income out at the extensive forests which owe their existence to spontaneous growth, from its liability to taxation. The assessee on the other hand seeks to create an impression that there is not a single tree of spontaneous growth, in these forests, and such trees as now constitute forests have sprung up out of the stumps left by the hillmen as a result of the system of Podu cultivation adopted by them. It appears to us that neither at these claims can be regarded as precise or correct.learned Judges then observed that the forests in the Koraput area had been under Podu cultivation for a long period, and that as the result of that cultivation they had practically disappeared even by the year 1870, that the trees had subsequently grown into forests and they had also been destroyed by about the year 1901, and that therefore there could not have been any virgin forest left surviving. Then they referred to the fact that the respondent had been maintaining a large establishment for the preservation of the forests, and that there had been organised activities (1) "in fostering the growth of the trees and preserving them from destruction by man and cattle; (2) in cultivation of the soil by felling and burning trees from time to time ; (3) in planned exploitation of trees by marking out the areas into blocks; (4) in systematic cutting down of trees of particular girth and at particular heights; (5) in planting new trees where patches occur; and (6) in watering, pruning, dibbling and digging operations carried on from time to time." And they stated their conclusion thusthese and similar operations which have been undertaken by the assessee through his huge forest establishment, show that there has been both cultivation of the soil as well as application of human skill and labour, both upon the land and on the trees themselves, it cannot be assumed therefore that all the trees are of spontaneous growth. The indications, on the other hand, appear to be that most of them are sprouts springing from burnt stumps. There is no basis for the assumption made by theDepartment that all the trees are forty years old and that they owe their existence to spontaueous growth. Apart from that it will be noticed that what distinguishes the present case from all the reported decisions is that practically the whole of the forest area has been subjected to process of Podu cultivation spreading over several decades so that it is impossible to say that there is any virgin forest left.The onus was certainly upon the department to prove that the income derived from the forests was chargeable to tax and fell outside the scope of the exemption mentioned in Section 4 (3)this view, they held that the department had failed to establish that the income, derived from the sale of trees was not agricultural income, and answered the reference in favour of the respondent. The learned Judges, however, granted a certificate to the appellant under S. 66 (a) (2) of the Act, and that is how the appeal comes before us.

Reasoning:
5. At the very outset, we should dissent from the view expressed by the learned Judges that the burden is on the department to prove that the income sought to be taxed is not agricultural income.The law is well settled that it is for a person who claims exemption to establish it, and there is no reason why it should be otherwise when the exemption claimed is under the Income taxis ample authority for the view that the principle that a person who claims the benefit of an exemption has to establish it, applies when the exemption claimed is under the provisions of theAct. Vide the observations of the Lord President and of Lord Adam in Maughan v. Free Church of Scotland,Tax Cas 207 at p. 210and the observations of Lord Hanworth, M. R. in Keren Kayemeth Le Jisroel Ltd. v. Commissioners of Inland Revenue,Tax Cas 27 at p.decisions of Indian Courts have likewise ruled and quite rightly that it is for those who seek exemption under S. 4 of the Act to establish it. Vide Amritsar Produce Exchange Ltd., In re,I T R 307 at p. 327 : ( AIR 1938 Cal 44 at p. 48) and Sm. Charusila Dassi, In re,1 T R 362 at p. 370 : (AIR 1947 Cal 148 at p. 151).On the merits, the question what is agricultural income within S. 2 (1) of the Act is the subject of a recent decision of this Court in Commissioner ofWest Bengal, Calcutta v. Benoy Kumar Shahs Roy, 1958 S C R 101 at pp. 158 155, and 160:((S) AIR 1957 S C 768 at pp. 788, 789 and 790). There, it was held that before an income could be held to be agricultural income, it must be shown to have been derived from land by agriculture or by one or the other of the operations describe in cls. (i) and (ii) of S. 2 (1) (b) of the Act, that the term "agriculture" meant, in its ordinary sense, cultivation of the field, that in that sense it would connote such basic operations as tilling of the land, sowing of trees, plantation and the like, and that though subsequent operations such as weeding, pruning, watering, digging the soil around the growth and removing under growths could be regarded as agricultural operations when they are taken in conjunction with and as continution of the basic operations mentioned before, they could not, apart from those operations, be regarded as bearing the character of agriculturalthese are matters of appreciation of evidence on what is essentially a question, of fact, viz., whether the trees were of spontaneous growth or were products of plantation. On this, the Tribunal has given a clear finding on a consideration of all the material evidence, and its finding is final and not open to challenge in a reference under S. 66 (1) of the Act.Even the learned Judges of the High Court who considered themselves free to review thatas already pointed out, withoutjustification, could only observe that the trees must have mostly grown from the stumps left when the forests were burnt for purposes of Podu cultivationa finding which is fatal to the contention now urged for the respondent that they were the result of plantation. We are of opinion that there are no grounds on which the finding of the Tribunal could be attacked in theseobservations do not lay down that if considerable amounts are expended in the maintenance of forests, then it must be held that the trees were planted by the proprietors. They only mean that it a considerable portion of the forests is found to have been planted, a substantial portion of the forest income may be taken to have been derived therefrom. And this too, it must be remarked, is only a presumption of fact, the strength of which must depend on all facts found.In the face of the clear finding in the present case that the forests with which the assessment years are concerned were of spontaneous growth, the observations quoted above can be of no assistance to the respondent, it is scarcely necessary to add that the observations "If the enquiry had been directed on proper lines, it would have been possible for theauthorities to ascertain how much of the income is attributable to forest of spontaneous growth and how much to trees planted by the proprietors" quoted above cannot be read, as was sought to be done for the respondent, as throwing on the Department the burden of showing that the income sought to be taxed was not agricultural income. That, in their context, is not the true meaning of the observations, and the law is as laid down inI T R 529: ((S ) A I R 1956 S C 522).