Judgment

GROVER, J.- These appeals by special leave from a judgment of the Kerala High Court arise out of the assessment of agricultural income of the assessee made under the Kerala Agricultural Income-tax Act, 1950, hereinafter called the "Act", in respect of the assessment years 1963-64 and 1964-65.

2. For the assessment year 1963-64 the assessee filed a return showing a net agricultural income of Rs. 12,558-76. When the matter came up for hearing before the Agricultural Income-tax Officer another statement showing an amount of Rs. 43,250-00 as income from teak trees was filed. The Agricultural Income-tax Officer disallowed certain expenses and assessed the income for the year 1963-64 at Rs. 62,021-00. For the assessment year 1964-65 a return was filed declaring a net agricultural income of Rs. 25,733-63. No income was shown from the sale of teak trees. The Agricultural Income-tax Officer found that teak trees had been sold for a lump sum of Rs. 76,500-00 out of which Rupees 43,250-00 had been received in the previous year (1963-64) and he included the said amount in that year s income. The balance amount of Rupees 33,250-00 was received in the previous year corresponding to the assessment year 1964-65. In determining the assessable income for that year this amount was added to the income which had been returned and after disallowing certain amount which had been claimed by way of expenses the net income was determined at Rupees 61,041-00. The assessee filed appeals before the Additional Appellate Assistant Commissioner who confirmed the assessment and dismissed the appeals. Further appeals were taken to the Agricultural Income-tax Tribunal. The Tribunal held that the amount in dispute was agricultural income and not capital. The expenses which were claimed were also disallowed. On an application made under Sec. 60 (1) of the Act the following two questions were referred to the High Court :

"1. Whether on the facts and in the circumstances of the case, the receipt from the sale of teak trees for the purpose of planting the area with rubber is capital in nature and exempt from Agricultural Income-tax Act.

2. If the answer to the above question is in the negative, whether the expenses incurred in the prior years for the purpose of obtaining the said agricultural income is allowable as a deduction from the sale proceeds of the trees."

The High Court did not agree with the contention of the assessee that the amounts received by sale of the teak trees constituted capital and were not agricultural income. Certain amounts were, however, allowed as deductions by way of expenses for the assessment year 1963-64.

3. The principal point that has to be determined is whether the sale proceeds of the teak trees constituted capital or revenue. It appears to have been common ground before the High Court that the assessee planted the teak trees sometime in the year 1946-47. The form of the question itself showed that the trees were cut and completely removed from the land together with their roots for the purpose of planting rubber. There was no question of any further regeneration or growth of the trees which had been cut and removed. In other words there was no possibility of recurring income from these trees. In V. Venugopala Varma Rajah v. Commr. of Income-tax, Kerala, Civil Appeal No. 810 of 1967, D/- 24-9-1969 the question before this court was whether trees which had not been removed with the roots and the stumps of which had been allowed to remain in the land was in the nature of income. This is what was observed in that case :

"Where the trunks are cut so that the stumps remain intact and capable of regeneration, receipts from sale of the trunks would be in the nature of income. It is true that the tree is a part of the land. But by selling a part of the trunk, the assessee does not necessarily realise a part of his capital. We need not consider whether in case there is a sale of the trees with the roots so that there is no possibility of r