The income from the sale of trees growing in forests is not agricultural income exempt from taxation under S. 4 (3) (viii) of the Act if the trees are of spontaneous growth and not planted by the estate authorities.

Judgement

T. L. YENKATARAMA AIYAR, J. : This is an appeal against the judgment of the High Court of Orissa in a reference 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 growing in his forests is agricultural income exempt from taxation under S. 4 (3) (viii) of the Act.

2. 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, myrobalan, tamarind, cashewnuts and firewood. There is no dispute either as to the receipt of such income or as to its quantum. All that appears in the account books of the respondent. The point in controversy is as to whether this income is chargeable to tax. It is the contention of the respondent that this is agricultural income as defined in S. 2 (1) of the Act, and that it is, in consequence, exempt under S. 4(3) (viii). By his order dated January 31,1943, the Income-tax Officer held that the forests in question had not been proved 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 Income-tax Officer had failed to take into account a letter of the Dewan dated June 3, 1942, which gave a detailed account of the operations carried on by the estate in the rearing and maintenance 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.

3. 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 them. What this Podu cultivation means is thus stated in the District Gazetteer, Vishakhapatnam, 1907 :

"This consists in felling a piece of jungle, burning the felled trees and undergrowth, sowing dry grain broadcast in the ashes (without any kind of tilling) for two years in succession, and then abandoning the plot for another elsewhere.

The argument of the respondent was that as a result of the Podu cultivation, the original forests should 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 Tribunal 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 ha