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1964 Supreme(Kar) 10
Karnataka High Court
Judges : G.K.Govind Bhat,K.S.Hegde
COMMISSIONER OF INCOME-TAX, MYSORE - Appellant
Versus
H.B.VAN INGEN - Respondent
I. T. R. N. 10 Of 1963
Decided On : 02/12/1964
The main legal point established is that the nature of the receipt, whether capital or revenue, depends on the circumstances of the transaction and the nature of the assets involved.
Headnote:
Capital vs. Revenue Receipt - Taxation - The court held that the sum of Rs. 5,872 realized from the sale of trees is a capital receipt and not a revenue receipt, based on the finding that the trees were part of the coffee estate purchased by the assessee and were not spontaneously grown or immature at the time of purchase.
Fact of the Case:
The assessee purchased a coffee estate with planted trees, cleared jungle portions for coffee planting, and sold the cleared trees. The dispute was whether the sum realized from the tree sale is a capital or revenue receipt.
Finding of the Court:
The court found that the trees sold were part of the purchased estate and not spontaneously grown or immature, leading to the conclusion that the sum is a capital receipt.
Issues: The main issue was whether the sum realized from the sale of trees should be treated as capital or revenue receipt for taxation purposes.
Ratio Decidendi: The court's decision was based on the finding that the trees sold were part of the purchased estate and not spontaneously grown or immature, leading to the conclusion that the sum is a capital receipt.
Final Decision: The court held that the sum of Rs. 5,782 is a capital receipt and not a revenue receipt.
( 1 ) THIS is a reference under section 66 (1) of the Indian Income-tax Act, 1922. The question of law referred is :
"whether, on the facts and circumstances of the case, the sum of Rs. 5,872 is a capital or a revenue receipt ?"
( 2 ) THE Income-tax Officer and the Appellate Commissioner came to the conclusion that the same is "income" whereas the Income-tax Appellate Tribunal came to the conclusion that it is "capital".
( 3 ) THE materials facts of the case are as follows :
( 4 ) THE assessee purchased a coffee estate on October 9, 1934, for a sum of Rs. 22,000. Even on the date of the purchase, coffee plants had been planted in a portion of that estate and the rest jungle. Year after year, he cleared portions of the jungle for the purpose of planting coffee. The cleared jungle was sole by him. The question for decision is whether the price realised by him by the sale of the trees is "income".
( 5 ) THE facts found by the Tribunal which finding is binding on us are as follows :
"the assessee did not either inherit or purchase a forest. He only parted with his capital to acquire a coffee estate; part of that case estate consisted of trees. These trees were sold. "
( 6 ) IT is not the finding of the Tribunal that the trees sold had spontaneously grown after the purchase was made; nor is there any finding that the trees sold were immature on the date of the purchases and that they became mature on the date of sale. From the finding of the Tribunal it is seen that the very trees purchased as part of the purchase transaction were sold. On the basis of this finding, the only conclusion possible is that the price realised by the sale of those trees is a capital and not a revenue receipt.
( 7 ) OUR answer to the question of law referred is that on the facts and circumstances of the case, the sum of Rs. 5,782 is a capital receipt and not a revenue receipt. No costs.
( 8 ) REFERENCE answered accordingly.
