Case: V. Venugopala Varma Rajah Vs. Commissioner Of Income-Tax, Kerala

1. In computing the income of the appellants father to tax for the assessment year 1959-60 the Income-tax officer included Rs. 75,000 received under an agreement for cutting and removing trees from 500 acres of Mangayam Katchithode forest. The Appellate Assistant Commissioner after calling for a report on certain facts confirmed the order. But the Tribunal held that the receipt was of a capital nature and deleted it from the taxable income.2. At the instance of the Commissioner of Income-tax, the Tribunal referred the following question to the High Court of Keralaon the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in holding that Rs. 75,000 being income from felling of trees from forests is not subject toHigh Court answered the question in the negative.

Reasoning: 3. We are of the view that the facts found by the Tribunal are not sufficient to enable us to record an answer to the question. It is not necessary for the purpose of this case to enter upon a detailed analysis of the principle underlying the decisions and to resolve the conflict. On the finding in the present case it is clear that the trees were not removed with roots.The stumps of the trees were allowed to remain in the land so that the trees may regenerate. If a person sells merely leaves or fruits of the trees or even branches of the trees it would be difficult (subject to the special exemption under Section 4 (3) (viii) of the Income-tax Act, 1922) to hold that the realization is not of the nature of income. Where the trunks are cut so that the stumps remain intact and capable of regeneration, receipts from sale of the trunks would be in the nature of income. It is true that the tree is a part of the land. But by selling a part of the trunk, the assessee does not necessarily realise a part of his capital.