Commissioner of Income Tax vs Balmore Estates Private Ltd.

Ramanujam, J.—The Revenue in these applications filed u/s 256(2) of the Income Tax Act, 1961, seeks a direction to the Tribunal to state

a case and refer the following question as arising from the order of the Tribunal :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding and had valid materials to hold that the sale

consideration of albezia trees was in the nature of agricultural income and hence it is not liable to capital gains tax under the Income Tax Act, 1961

?

The assessee is a company carrying on business in the manufacture and sale of tea. The assessments for the assessment years 1975-76 to

1977-78 were completed accepting the income or loss returned by the assessee. Subsequently, the Income Tax Officer had information that the

assessee had failed to include capital gains arising from the sale of albezia trees sold during the three years in question. He was of the view that

albezia trees were shade trees and hence receipts arising on the sale of shade trees was liable to be taxed as capital gains. He, therefore, reopened

the assessment invoking section 147 of the Income Tax Act and brought to tax the receipts from the sale of albezia trees as capital gains. The

assessee took the matter in appeal to the Commissioner of Income Tax (Appeals) against the reassessments made by the Income Tax Officer.

Before the Appellate Assistant Commissioner, the assessee contended that since receipts from the sale of trees constituted agricultural income

taxable under the Agricultural Income Tax Act, the same was not assessable as capital gains under the Income Tax Act. The Appellate Assistant

Commissioner, however, rejected the said contention on the ground that the assessee itself had taken up the stand in the proceedings before the

Agricultural Income Tax Appellate Tribunal that the shade trees are capital assets and, therefore, the sale proceeds from the sale of such assets

represented capital receipts. Dissatisfied with the order passed by the Commissioner of Income Tax, the assessee filed further appeals to the

Tribunal. Before the Tribunal, it was contended by the assessee on the basis of the finding rendered by the Agricultural Income Tax Appellate

Tribunal that the sale proceeds represented agricultural income and hence could not be taxed under the head ""Capital gains"" under the Income Tax

Act. The Revenue contended that on the finding rendered by the Agricultural Income Tax Appellate Tribunal that the sale proceeds from the

disposal of shade trees represented agricultural income, that could not be taxed as capital gains under the Income Tax Act (sic). The Tribunal

allowed the appeals of the assessee and deleted the capital gains assessed to tax by the Income Tax Officer for the three assessment years on the

ground that once the sale proceeds of albezia trees have been taxed as revenue receipts under the Agricultural Income Tax Act, the same receipts

cannot be taken as capital receipts and brought to charge under the head ""Capital gains"". The Revenue now seeks to canvass the correctness of

the view taken by the Tribunal by seeking a reference to this court. However, we find that subsequent to the decision of the Tribunal, the assessee

brought before this court the assessment under the Agricultural Income Tax Act in T.C. Nos. 443 to 445 and 469 to 471 of 1982 - Balamore

Estate (Private) Ltd. Vs. State of Tamil Nadu, , relating to the same assessment year and this court in the said decision to which one of us was a

party, after dealing with the nature of the income, held that the sale proceeds of albezia trees are revenue receipts and, therefore, taxable under the

provisions of the Agricultural Income Tax Act, as agricultural income, thus upholding the view of the Agricultural Income Tax Officer. Once the

sale value of the trees is treated and assessed as agricultural income under the provisions of the Agricultural Income Tax Act, the same cannot be

treated as capital receipts and charged as capital gains. It is no doubt true as pointed out by learned counsel for the Revenue that in the said

decision, this court has held that albezia trees were not planted solely for the purpose of giving shade to the tea plants, but the same were raised

specifically for the purpose of deriving income by regularly cutting and selling them for making kattamarans. Notwithstanding that finding, this court

has held that the income by sale of those trees should be treated only as revenue receipts and not as capital receipts. In view of the said decision of

this court, we do not think it possible to direct the Tribunal to refer the said question as the view taken by the Tribunal in this case is in accord with

the view taken by this court in the above decision. The petitions are, therefore, dismissed. There will, however, be no order as to costs.