P. N. BHAGWATI, J. M. SHELAT, J.

( 1 ) TWO questions arise in this reference (1) whether the two-thirds of the sale proceeds of the forest trees and forest produce sold by the assesses during the accounting year Samvat Year 2006 constitute capital receipts and (2) whether on the facts and in the circumstances of the case certain operations carried out by the assesses with reference to the lands in question constitute agricultural operations making the sale proceeds agricultural income as defined by section 2 (1) and being exempt from income-tax under section 4 (3) (viii) of the Income Tax Act of 1922.

( 2 ) THE assesses is the present Ruler of the former State of Bansda which merged in the dominion of India in 1948 and which was attached to the former State of Bombay. The assessee is the owner of certain forest lands situate in villages Sadad Devi Ranifalia and Vaghai which were gifted to him by his father in Samvat Year 2006 that being the relevant previous year. He sold the trees and other forest produce existing on these lands for a sum of Rs. 72 611 The assessee claimed that he had spent during that year in the aggregate the sum of Rs. 22 950 for clearing the said forests which

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