Judgement

BHAGWATI, J.- This appeal with certificate or fitness under S.66A (2) of the Indian Income tax Act (XI of 1922) is directed against the Judgment and Order of the High Court of Judicature at Calcutta on a reference under S. 66 (1) of the Act.

2. The respondent owns an area of 6,000 acres of forest land assessed to land revenue and grown with Sal and Piyasal trees. The forest was originally of spontaneous growth, "not grown by the aid of human skill and labour" and it has been in existence for about 150 years. A considerable income is derived by the assessee from sales of trees from this forest.

The assessment year in which this forest income was last taxed under the Indian Income-tax Act was 1923-24 but thereafter and till 1944-45 which is the assessment year in question, it was always left out of account. The assessment for 1944-45 also was first made without including therein any forest income, but the assessment was subsequently re-opened under S. 34.

In response to a notice under S. 22 (2) read with S.34 of the Act, the respondent submitted a return showing the gross receipt of Rs. 51,798 from the said forest. A claim was, however, made that the said income was not assessable under the Act as it was agricultural income and was exempt under S. 4 (3) (viii) of the Act. The Income Tax Officer rejected this claim and added a sum of Rs. 34,430 to the assessable income as income derived from the forest after allowing a sum of Rs. 17,548 as expenditure.

The appellate Assistant Commissioner confirmed the assessment and the Income Tax Appellate Tribunal also was of opinion that the said income was not agricultural income but was income derived from the sale of jungle produce of spontaneous growth and as such was not covered by S. 2(1) of the Act. At the instance of the assessee the Tribunal referred to the High Court under S. 66 (1) of the Act two questions of law arising out of its order, one of which was:

Whether on the facts and in the circumstances of this case, the sum of Rs. 51,977 is agricultural income and as such is exempt from payment of tax under S. 4 (3) (viii) of the Indian Income Tax Act?"

(a) The Tribunal submitted a statement of case from which the following facts appear as admitted or established:

"(i) The area covered by the forest is about 6,000 acres, trees growing being Sal and Piyasal;

(ii) It is of spontaneous growth being about 150 years old. It is not a forest grown by the aid of human skill and labour;

(iii) The forest is occasionally parcelled out for the purposes of sale and the space from which trees sold are cut away is guarded by forest guards to protect offshoots;

(iv) It has been satisfactorily proved that considerable amount of human labour and care is being applied year after year for keeping the forest alive as also for reviving the portions that got denuded as a result of destruction by cattle and other causes;

(v) The staff is employed by the assessee to perform the following specific operations:

(a) Pruning,

(b) Weeding,

(c) Felling,

(d) Clearing,

(e) Cutting of channels to help the flow of rain water,

(f) Guarding the trees against pests and other destructive elements,

(g) Sowing of seeds after digging of the soil in denuded areas."

4. The Tribunal found that the employment of human labour and skill in items (a) to (f) was necessary for the maintenance and upkeep of any forest of spontaneous growth. Regarding item (g), however, it found that the said operation had been performed only occasionally and over a small fraction of the area where the original growth had been found to have been completely denuded. Such occasions were however few and far between, the normal process being that whenever a tree was cut, a stump of about 6" height was left intact which sent forth off-shoots all round bringing about fresh growth in course of time. This went on perpetually unless an area got otherwise completely denuded.

5. The reference was heard by the High Court and the High Court held that actual cultivation of t