# BIHAR AND ORISSA v. SRI RAMAKRISHNA DEO

- **Citation:** [1959] Supp. 1 S.C.R. 176
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Case number:** Civil Appeal No. 426 of 1957
- **Bench:** VENKATARAMA ArYAR, Gajendragadkar, A. K. Sarkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bihar-and-orissa-v-sri-ramakrishna-deo-1625
- **Pages:** 14

## Headnote

focome Tax-Forest trees-Income from sale of-Whether
agricultural income-Exemption from taxatio1>-Burden of proofFindings of the Tribunal-When binding on High Court-Indian
Income-tax Act, r922 (XI of r922), ss. 2(r), 4(3) (viii), 66(r).
The respondent, the proprietor of an estate, derived income
from the sale of trees growing in his forests and claimed that it
was agricultural income as defined in s. 2(1) of the Indian
Income-tax Act, 1922, and that it was exempt from payment of
income-tax under s. 4(3)(viii). The Appellate Tribunal found
that the evidence to show that there was plantation by the
estate authorities was meagre and unsubstantial, that the trees
in question must have been of spontaneous growth and that the
respondent had failed to establish facts on which he could claim
exemption. On reference, the High Court took the view that
though trees in the forest had not been planted by the estate
authorities, the latter had performed subsequent operations of a
substantial character for the maintenance and improvement of
the forest, and that the income vvas, therefore, agricultural
incorne.
It also held that the onus was on the income-tax
authorities to prove that the income derived from the sale of
trees was not agricultural income and that they had failed to
show that the income fell outside the scope of the exemption
mentioned in s. 4(3)(viii) of the Act.
Held, that the High Court erred in placing the burden on
the income-tax authorities to prove that the income sought to be
taxed was not agricultural income. The principle has been wellestablished that where a person claims the benefit of an exemption under the provisions of the Act, he has to establish it.
(1) S.C.R. SUPREME COURT REPORTS
177
Commissioner of Income-tax v. Venkataswamy Naidu, [1956]
z958
291.T.R. 529, followed.
-. .
The question whether the trees were of spontaneous growth The Commissioner
or were products of plantation was essentially a question of fact
0( lncome·T~x,
and the finding of the Tribunal on this point was binding on the Bihar and Orissa
High Court in a reference under s. 66(1) of the Act.
v.
.
.
Sri Ramakris/111a
Held, further, that the mcome received by the resI?ondent
D
by the sale of trees in his forests was not agricultural income as
eo
the trees had not been planted by him, and that it was
immaterial that he had maintained a large establishment for the
purpose of preserving the forests and assisting in the growth of
the trees.
The Commissioner of Income-tax, West Bengal, Calcutta v.
Raja Benoy Kitmar Sahas Roy, [1958] S.C.R. IOI, explained and
followed.

## Text

176
SUPREME COURT REPORTS (1959] Supp.
r958
pay only three sets of costs for the hearing, namely,
one set each to the petitioners represented by Shri
Sh1ee Vinod
Kuma' &- 0 ,,. Achhru Ram, Shri D. R. Prem and Shri Y. Kumar
v.
respocti vely an<l also one set of hearing fees for each
State of Ilimachal of the au vocates-on-record.
Prridesh
Das C. ].
October r4.
Petitions allowed.
THE COMMISSIONER OF INCOME-TAX,
BIHAR AND ORISSA
v.
SRI RAMAKRISHNA DEO
(VENKATARAMA ArYAR, GAJENDRAGADKAR and
A. K. SARKAR, JJ.)
focome Tax-Forest trees-Income from sale of-Whether
agricultural income-Exemption from taxatio1>-Burden of proofFindings of the Tribunal-When binding on High Court-Indian
Income-tax Act, r922 (XI of r922), ss. 2(r), 4(3) (viii), 66(r).
The respondent, the proprietor of an estate, derived income
from the sale of trees growing in his forests and claimed that it
was agricultural income as defined in s. 2(1) of the Indian
Income-tax Act, 1922, and that it was exempt from payment of
income-tax under s. 4(3)(viii). The Appellate Tribunal found
that the evidence to show that there was plantation by the
estate authorities was meagre and unsubstantial, that the trees
in question must have been of spontaneous growth and that the
respondent had failed to establish facts on which he could claim
exemption. On reference, the High Court took the view that
though trees in the forest had not been planted by the estate
authorities, the latter had performed subsequent operations of a
substantial character for the maintenance and improvement of
the forest, and that the income vvas, therefore, agricultural
incorne.
It also held that the onus was on the income-tax
authorities to prove that the income derived from the sale of
trees was not agricultural income and that they had failed to
show that the income fell outside the scope of the exemption
mentioned in s. 4(3)(viii) of the Act.
Held, that the High Court erred in placing the burden on
the income-tax authorities to prove that the income sought to be
taxed was not agricultural income. The principle has been wellestablished that where a person claims the benefit of an exemption under the provisions of the Act, he has to establish it.
(1) S.C.R. SUPREME COURT REPORTS
177
Commissioner of Income-tax v. Venkataswamy Naidu, [1956]
z958
291.T.R. 529, followed.
-. .
The question whether the trees were of spontaneous growth The Commissioner
or were products of plantation was essentially a question of fact
0( lncome·T~x,
and the finding of the Tribunal on this point was binding on the Bihar and Orissa
High Court in a reference under s. 66(1) of the Act.
v.
.
.
Sri Ramakris/111a
Held, further, that the mcome received by the resI?ondent
D
by the sale of trees in his forests was not agricultural income as
eo
the trees had not been planted by him, and that it was
immaterial that he had maintained a large establishment for the
purpose of preserving the forests and assisting in the growth of
the trees.
The Commissioner of Income-tax, West Bengal, Calcutta v.
Raja Benoy Kitmar Sahas Roy, [1958] S.C.R. IOI, explained and
followed.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
426 of 1957.
Appeal from the judgment and order dated April 21,
1955, of the Orissa High Court at Cuttack in Special
Jurisdiction Case No. 179 of 1951.
A. N. Kripal, R. H. Dhebar and D. Gupta, for the
appellant.
A. V. Viswanatha Sastri, M. S. K. Sastri and R.
J agannatha Rao, for the respondent.
1958. October 14. The Judgment of the Court was
delivered by
VENKATARAMA AIYAR, J.-This is an appeal against
the judgment of the High Court of Orrissa in ar eference
under s. 66(1) of the Indian Income-tax Act, 1922,
hereinafter referred to as the Act, and the point for
decision is whether income received by the respondent
by the sale of trees groing in his forests is agricultural income exempt frm taxation under s. 4(3)(viii)
of the Act.
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, myrabolam,
tamarind, cashewnuts and firewood.
There is no
23
Venkatarama
Aiyar. J.
178
SUPREME COURT REPORTS [1959] Supp.
z95B
dispute either as to the receipt of such income or as to
C -. .
its quantum. All that appears in the account books
The
on-imissio1ier
d
Th
.
.
.
of 1"come-Tax, of the respc_m .ent.
. e pomt m controversy _is _as to
lliha• cmd o.i<sa whether this mcome IS chargeable to tax. It IS the
v.
.
contention of the respondent that this is agricultural
s,; Ramah.is/ma income as defined in s. 2(1) of the Act, and that it is,
Deo
in consequence, exempt under s. 4(3)(viii).
By his
order dated ,January 31, 1943, the Income-tax Officer
Venkatarama
A -
1
held that the forests in question had not been proved
iyar,
.
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 the Incometax Officer had failed to take into account a letter of
the Dewan dated June 3, 1942, w.hich gave a detailed
account of the operations carried on by the estate in
the rearing and maintena.nce 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.
Pursuant to this order, the Income-tax Officer 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
(1) S.C.R. SUPREME COURT REPORTS
179
them. What this Podu cultivation means is thus
z958
stated in the District Gazetteer, Vishakapatnam, 1907: Th c -. .
e omnussioner
" This consists in felling a piece of jungle, burning of Income-Tax,
the felled trees and undergrowth, sowing dry grain Bihar and OriSS11
broadcast in the ashes (without any kind of tilling) for
.
v.
.
two years in succession, and then abandoning the plot 5" Ra;;
0krishna
for another elsewhere."
The argument of the respondent was that as a result
Venkatarama
of the Podu cultivation, the original forests should
Aiyar, J.
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 'I.'ribunal 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_ accoμnt 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 from
1942-43 to 1946-47, 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
Court:
" ·whether on the facts and in the circumstances
the income derived from forest in this case is taxable
under the Indian Income-tax Act."
The reference was heard by Panigrahi, C. J., and
Misra, J., who answered it in the negative. They
observed:
"It appears 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
180
SUPREME COUR'r REPORTS [1959] Supp.
r958
soil the income from the forest trees cannot be regardc-.. ed as agricultural income. The fact that the assessce
The
ommm•onu h
d 1
d
1 bl
·
of Income-Tax.
as spent S<?me mone;y- . an p ante va ua e trees m
Bihar and o,;,,. some areas IS not sufficient to free the income out of
v.
the extensive forests which owe their existence to
Sri Ramakdshna spontaneous growth, from its liability to taxation. The
Deo
assessee on the other hand seeks to create an impression that there is not a single tree of spontaneous
V enk~taYama
Aiyar, J.
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 of these claims can be regarded as precise or
correct."
The 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 thus:
"All these 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. '.l'he indications, on
(1) S.C.R. SUPREME COURT REPORTS
181
the other hand, appear to be that most of them are
r95s
sprouts springing from burnt stumps. There is no
-. .
b .
1'
h
.
d
b
h
I
The Comm1ssto'1ct
as1s ior t e assumpt10n ma e
y t e
ncome-tax of 1,,come-Tax,
Department that all the trees are forty years old and Bihar and orissa
that they owe their existence to spontaneous growth.
v.
Apart from that it will be noticed that what distinSri Rmnakrislma
guishes the present case from all the reported decisions
Dea
is that practically the whole of the forest area has been
Vr.nlwtarama
subjected to process of 'Podu' cultivation spreading
Aiyar, J.
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 forest was
chargeable to tax and fell outside the scope of the
exemption mentioned in Section 4(3)(viii)."
In this view, they held that the Department had failed
to establish that the income derived from the sale of
trees wa.s 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.
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-tax Act. The learned Judges were of the
opinion that their conclusion followed on the principle
of the law of Income-tax that "where an exemption
is conferred by a statute, the State must not get the
tax either directly or indirectly", and support for this
view was sought in the following observations of Lord
Somervell, L. J ., in Australian Mutual Provident Society
v. Inland Revenue Commissioners {1):
"The rule must be construed together with the
exempting provisions which, in our opinion, must be
regarded as paramount. So far as the rule, if taken
(I) [1946] I All E.R. 528.
182
SUPREME COURT REPORTS [1959] Supp.
r95B
in is.olation, would have the effect of indirectly deprivTh• Commi5'ion" ing the company of any part of the benefit of the
of Income-Tax. exemption, its operation must be cut down, so as to
Bihar and Orissa prevent any such result, and to allow the exemption
v.
to operate to its full extent."
Sri Ramakrishna
Deo
These observations have, in our opinion, no bearing on
the question of burden of proof. They merely lay
Venkata;ama
down a rule of construction that in determining the
Aiyar. J.
scope of a rule, regard must be had to the exemptions
engrafted thereon, and that the rule must be so construed as not to nullify those exemptions. No such question arises here .. There is 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 the
Income-tax Act. Vide the observations of the Lord
President and of Lord Adam in Maughan v. Free
Church of Scotland (1) and the observations of Lord
Hanworth, M. R., in Keren Kayemeth Le Jisroel Ltd. v.
The Commissioners of Inland Revenue (2) at p. 36 that
" the right to exemption under Section 37 must be
established by those who seek it. The onus therefore
lies upon the Appellants", and of Lord Macmillian at
p. 58 that,
"In my opinion, the Appellants have failed to
bring it within any one of these categories and consequently have failed in what was essential for them to
make out, namely, that this Company is a body of
persons established for charitable purposes only."
The 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 (3) and Sm. Charusila
Dassi and others, In re (').
So far as exemption under
s. 4(3) (viii) is concerned, the matter is concluded by a
decision of this Court given subsequent to the decision
now under appeal. In Commissioner of Income-tax v.
Venkataswamy Naidu ('), this Court held, reversing
the judgment of the High Court of Madras, that it
(1) (1893) 3 Tax Cas. 207, 210.
(2) (1931) 17 Tax Cas. ;!.J.
(3) [1937] 5 r:r.R. 307, 327.
(4) [1946] 14 l.T.R. 362, 370.
(5) [195G] 29 I.T.R. 529, 534.
(1) s.c.R. SUPREME COURT REPORTS
183
was for the assessee to prove that the income sought
z95B
to be taxed was agricultural income exempt from taxa- Th c-. .
.
d
(3)( ... )
Bh
. J
d 1.
.
th
e
omm1ss1oner
t1on un er s. 4
vn1 .
agwat1,
., · e 1vermg
e
of Income-Tax,
judgment of the Court observed:
Bihar and Orissa
" ... the High Court erroneously framed the ques-
.
v.
.
tion in the negative form and placed the burden on the Shri Ramakmhna
Income-tax Authorities of proving that the income
Deo
from the sale of milk received by the assessee during
venkaiarama
the accounting year was not agricultural income. In
Aiyar, J.
order to claim an exemption from payment of incometax in respect of what the assessee considered agricultural income, the assessee had to put before the
Income-tax Authorities proper materials which would
enable them to come to a conclusion that the income
which was sought to be assessed was agricultural
income. It was not for the Income-tax Authorities to
prove that it was not ~gricultural income. It was
this wrong approach to the question which vitiated the
judgment of the High Court and, led it to an erroneous
cone l usion.''
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 The Commissioner of
Income-tax, West Bengal, Calcutta v. Raja Benoy Kumar
Sahas Roy (1). 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 described in
els. (i) and (ii) of s. 2(l)(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
undergrowths could be regarded as agricultural operations when they are taken in conjunction with and
as continuation of the basic operations mentioned
before, they could not, apart from those operations, be
regarded as bearing the character of agricultural
operations.
(1) (1958] S.C.R. IOI, 155, 158, 160.
184
SUPREME COURT REPORTS [1959] Supp.
1~58
" It is only " observed Bha.gwati, J., delivering
Th C
. .
the judgment of the Court, " if the products are raised
e
ommwioner f'
h 1 d b
h
£
f
h
b ·
of bicome-Tax
rom t e an
y t e per1ormance o t ese
as10
Bihar .,,,z o,;,.;. operations that the subsequent operations attach themv.
selves to the products of the land and acquire the
Sri Ramakri.slma characteristic of agricultural operations ... "
'J)eo
fh
.
"But i t esebasic operations a.re wanting the subYenk•tarama
sequent operations do not acquire tho characteristic of
Aiyar, ;.
agricultural operations."
Dea.ling with trees which grow wild, Bhagwa.ti, .J.,
observed:
·
"It is agreed on all hands that products which
grow wild on the land or are of spontaneous growth
not involving any human labour or skill upon the land
a.re not products of agriculture and the income derived
therefrom is not agricultural income. There is no
process of agriculture involved in the raising of these
products from the land.''
The law being thus settled, in order to decide
whether the income received by the respondent by the
sale of trees in hi.ii forests was agricultural income or
not, the crucial question to be answered is, were those
trees planted by the proprietors of the estate, or did
they grow spontaneously? If it is the latter, it would
be wholly immaterial that the respondent has maintained a large establishment for the purpose of preserving the forests and assis~ing in the growth of the trees,
because ex hypothesi, he performed no basic operations
for bringing the forests into being. Now, the Tribunal
has clearly found that there were no plantations of
trees by the. estate authorities worth the name, and
that the trees, the income from which is the subject.
matter of the assessments, must have been of sponta..
neons growth. That is a. finding of fact . which is
binding on the Court . in a. reference under s. 66( l) of
the Act. The learned Judges declined to accept this
finding, because they considered that the Tribunal had
not appreciated the true significance of Podu cultivation. That, in our opinion, is a. misdirection. If the
point for decision had been whether the forest was a
virgin forest or whether it had subsequently sprung up,
the evidence relating to Podu cultivation would have
(I) S.C.R. SUPREME COURT REPORTS
185
been very material. But the point for decision is not
1958
whether the forests were ancient and primeval, but
-
·
h h
h
l d b
1
d b
h
h . The Commissioner
,~. et er t ey 1a
een p ante . y ~ e estate aut onof Income-Tt1x,
ties, and on that, the Podu cult1vat10n would have no Bihllr and o,;s.<a
hearing. As a result of the Podu cultivation, the origiv.
nal forests would have disappeared. But the question s,; Ramakrishna
would still remain whether the forest which again
Deo
sprang t,1p was of spontaneous growth, or was the result,
Venkatarama
of plantation. Now, there is no evidence that as and
Aiyar 1.
when the jungle had disappeared under Podu cultivation, the estate intervened and planted trees on the areas
thus denuded. On the other hand, the learned Judges
themselves found that after the destruction of the
original forests in the prncess of Podu cultivation,
there was a fresh grnwth of forests from the stumps
of the trees which had been burnt. If that is the fact,
then the new growth is also spontaneous and is not
the result. of any plantation.
In fairness to the learned Judges, it must be observed that at the time when they heard the reference there
was a conflict of judicial opinion on the question
whether subsequent operations alone directed to the
preservation and improvement of forests would be agricultural operations within s. 2(1) of the Act; and the
view they took was that such operations when conducted on a large scale as in the· present case would
be within s. 2(1) of tb.e Act. It was in that view that
they observed that "it is therefore idle to regard tilling as the sole and indispensable test of agriculture".
The decision of the learned Judges was really based
on the view that though trees in the forest had not
been planted by the estate authorities, the latter had
performed subsequent operations of a substantial
character for the maintenance and improvement of the
forest, and that, in consequence, the income was agricultural income. This view is no longer tenable in
view of the decision of this Court in The Commissioner
of Income-tax, West Bengal, Calcutta v. Raja Benoy
K itmar Sahas Roy (1 ).
It is contended by Mr. Viswunatlrn S1tstri for the
(1) [1958] S.C.R 101, 155, 15q, xGo.
24
186
SUPREME COURT REPOR'fS [l!J59] 8upp.
1958
respondent that on the facts established in the evi-
-
-
dence, the proper conclusion to come to is that the trees
r:; 1~~;:,7;'.~:,~:,
1
·' sold by. ~he respondent had b~e? planted by ~he e~tate
J;;1.,,, """ Od."a itnthonties, and that the dec1s10n of the High Court
v.
that the income thus realised is within the exemption
s,; 11 .. ,,,,,,,,.,;,1,,,,, nnrler s. 4(3)(viii) could be supported even on the view
Deo
of la.w tt1ken in The Commissioner of Income-tax, West
Bengal, Calcutta v. Ra•a Benrn1 Kumar Sahas Roy ( ').
1·e11/~11trirama
;J
":J
Aiyar ].
The argument was that there was unimpeachable
evidence that the old forests had disappeared under
Podu cultivation, that the estate had been regularly
cng11ged in planting trees at least from the yea.r
l!l04, as is shown by the accounts of the zamin, thitt
it wa.s a reasonable inference to make that there
had been similar plantations even during the years
prior to 1904 notwithstanding that no accounts were
produced for those years, because it would not be
reasonable to expect that such accounts would now
be available, that though the amount shown as spent
for plantation might not be considera hie, that was
understandable when regard is had to the fact that
the agricultural operations were conducted on tho
hills and not on the plains,. that, on these facts,
it would be proper to conclude that the forests were
in their entirety the result of plantation. It would be
an erroneous approach, it was argued, to ca.II upon
the assessee to prove tree by tree that it was planted.
Now, these 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
oviclence, and its finding is final and not open to
challenge in a reference under s. 66 (1) of the Act.
Evon the learned Judges of the High Court who cone
sidered themselves free to review that finding-and,
as already pointed out, without justification, could only
observe that the trees must have mostly grown from
the s~umps left when the forests were burnt for purposes of Podu cultivation-a finding which is. fatal to
the. contention now urged for the respondent that they
{1) [1958] S.C.R. IOI, 155, 158, 16o.
(1) S.C.R.
SUPREME COURT REPORTS
187
wero the result of plantation. We are of opinion that
'958
there are no grounds on which the finding of the Tri- The Cornmis-<ioner
bunal could be attacked in these proceedings.
oJ Income-Tux.
It remains to deal with one other contention urged IJih"' "''d Oris.a
on behalf of the respondent, and that is based on the ., .. R
v •.. 1
fact that the amounts spent in the upkeep of the for- ·" "';:;"' ""'
rests were large in comparison with the receipts therefrom. The following are the figures relating to tho
Ve11lwtarama
forest receipts and expenses for the years with which
Aiyar J.
the present assessments are concerned :
Years
Receipts
Expenses
1942-43
Rs. 438,894
Rs. 174,437
1943-44
H,s. 407,447
Rs. 209,SlJ;)
1944-45
Bs. 552,122
Rs. 228,830
1945-46
Rs. 372,971
Rs. 247,216
1946-47
Rs. 689,366
Rs. 460,369
The argument is that from the high proportion of the
expenses in relation to the receipts it could be inferred
that the income from trees planted by the estate
formed a substantial portion of the income derived
from the forests.
And support for this conclusion is
sought in the following observations in The Commissioner o.f Income-tax, West Bengal, Calcutta v. Raja
Benoy Kumar Sahas Roy (1) :
" The expenditure shown by the assessce for the
maintenance of the forest is about Rs. 17,000 as
against a total income of about Rs. 51,000.
Having
regard to the magnitude of this figure, we think that
a substantial portion of the income must have been
derived from trees planted by the proprietors themselves."
To appreciate the true import of these observations,
we must have regard to the context in which they
occur. The facts found in that case were that portions
of the forest which was originally. of spontaneous
growth had gradually been denuded, that the proprietor haJ planted trees in the areas so denuded, that
this had gone on for a period of over 150 years, and
that therefore " the whole of the income derived from
(I) (1958) S.C.R. IOI, 155, I58, 160.
188
SUPREME COURT BEPORTS [1959] Supp.
1958
the forest cannot be treated as non-agricultural in-
-. .
come". It was then observed that "If the enquiry
1;; 1~;:~.:··;':~'." had _been directed on proper lines, it. ~ould have be~n
Uiha• and o,;,sa possible for the Income-tax author1t1es to ascertam
v.
how much of the income is attributable to forest of
,,, 11amak•;,1 .. a spontaneous growth and how much to trees planted by
Deo
the proprietors", but that, in view of the long lapse of
time, it was not desirable to remand the case for env c11/u1tara111a
1
·
b
quiry into the matter. Then fo low the o servations
Aiyur ].
on which the respondent relies, and when read in the
light of the findings that the plantations made by the
proprietors were not negligible, they mean nothing
more than that out of the total income a substantial
portion was likely to be agricultural income, and that
it was therefore not a fit case for ordering fresh enquiry. These observations 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 if a considerable portion of the forests is found
to have been planted, a substantial portion of the
forest income rnav be taken to have been derived
therefrom.
And tl1is too, it must be remarked, is <'nly
·a presumption of fact, the strength of which must
depend on all the facts found. In the face of the clear
Jinding 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 obsenations " If the enquiry
had been directed on proper lines, it would have been
'_pos~ible fm the Income-tax authorities to ascertain
how much of the income is attributable to forest of
spontaueous growth and how much lo 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 so11ght 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 in Commissioner of I ncoine-tax v. Venkataswamy N aid-u (' ).
(1) [1956] 29 I.T.R. 529, 534.
(1) S,C.R. SUPREME COURT H.EPOl{iTS
189
In the result, this appeal is allowed, tho order of
the Court below is set aside and the reference is
answered in the affirm<\tive.
'fhe respondent will
pay the costs of the appellant here and in the Court
below.
The Con1111issim1er
of luconw-Tax.
/11har and Orissa
'"
Appeal allowed.
Shri Uuniakrisll'na
lJ<'O
Y. NAP.AYANA CHETTY & ANOTHER
v.
THE INCOME-TAX Ol!'F'ICER, NI!~LLORE
AND OTHERS
(VENKATARAMA AIYAR, GAJENDRAGADKAlt and
A. K. SARKAR, JJ.)
Income-tax-Rule empowering Income-tax Officer to cancel
r.:gistration of firm found not he genuine-Validity of-Registered
firm, if an assessee-Service of notice on firm through partner, if
valid a11d proper-Writ P.ctition, ijlies 11gai11st illegal assessmentIndian Income-tax Act, z922 (XI of z922), ss. 23, 34-:-Income-tax
Rules, r. 6B-Constitution of India, Art. 226.
Two persons, B ai;id C, formed a partnership firm on April
20, i936, and the firm was dissolved on March 31, i948. B ancl .c
aloug with R formed a second firm on July 3'>. HJ41, an<! it was
dissolved on March 31, 1949· B and C along with five others
formed a third firm on December l, 1941, and it was dissolved on
January I, 1949· All the three firms were carrying on business in
yarn and cloth and all of them were registered under s. 26-A of
the Income-tax Act. For the years 1943-44 and 1944-45 the
said firms were treated as separate entities and separate assessment orders were passed in respect of the income of each one of
them for the said years. Subsequently, the Income-tax Officer
served notices under s. 34 of the Act on C on behalf of the firms
and after hearing the parties he held that the firms were ficti-'
tious and so cancelled their registration under r. 68 of
tl1t~
income-tax Rules and passed fresh orders of assessment against
them on the basis that they were unregistered firms.
One Y
who was a partner in the third firm and C filed four writ petitions under Art. 226 of the Constitution in the High Court chalknging the validity of the orders passed. The High Court di~
missed the petitions but granted certificates of fitness to appeal
Vfokularatna
Aiyur ].
October 15.