Case: State of Kerala Vs. Karimtharuvi Tea Estates Limited

The facts leading to the case may be briefly stated. The respondent is a company which carries on the business of manufacturing and selling tea. For the purpose of affording shade to the tea bushes, the respondent grows grevelia trees in its different tea estates. During the accounting year relevant to the assessment year 1957-58, the respondent received a sum of Rs. 600-12-0 by the sale of grevelia firewood and this amount was included by the Agricultural Income-tax Officer, Special Circle, Quilon, in computing the agricultural income of the respondent. The respondent appealed to the Deputy Commissioner of Agricultural Income-tax & Sales Tax, Quilon, contending that the said sum was a capital receipt, but the Deputy Commissioner rejected the contention. The contention was reiterated by the respondent in second appeal filed by it to the Kerala Agricultural Income-tax Appellate Tribunal2. The Appellate Tribunal by its order dated August 2, 1962, held that the said sum could not be considered to be a revenue receipt and was not therefore liable to be included in computing the agricultural income of the respondent. On a reference made to the High Court, the Division Bench agreed with the Tribunal and answered the question in favour of the respondent. The appellant thereupon applied to this court and obtained special leave

Court's reasoning:
4. There is no controversy about the fact that the owners of tea estates plant grevelia trees not for the purpose of deriving any income therefrom but solely for the purpose of providing shade for the tea plants and that such shade is essential for the proper cultivation of tea. The trees were cut down and sold : after they had become useless by efflux of time. The grevelia trees in the tea estate of the respondent constituted therefore capital assets and the proceeds derived therefrom by sale as firewood would not constitute agricultural income under the Act