( 1 ) IN this reference under Section 66 (l), Income-tax Act, the Income-tax Appellate Tribunal has referred the following questions to us for answer :

Q. 1--Whether income from the sale of forest trees of spontaneous growth, growing on land which is assessed to land revenue, is agricultural income within the meaning of Section 2 (1) (a), Income-tax Act and as such exempt from income-tax under Section 4 (3) (viii) of the Act ? q. 2--Whether the assesees net receipts from the sale of forest trees were the assessses income liable to income-tax and not merely capital converted into cash?"

( 2 ) AS regards the second question, it was the assessees own case that the forest was being worked for, at least, some time on scientific lines in accordance with a scheme of making profit, there was a regular working plan and the assessee was deriving regular income from the forest and spending money to increase the profit. It was in view of these admissions that Shri Pathak had to concede that the answer to this question must be in the affirmative, i. e. , that the net receipts on the sale of forest trees were the assessees income liable to income-tax and were not merely capital converted into cash.

( 3 ) SHRI Pathak has, however, urged that this income must be treated as agricultural income within the meaning of Section 2 (1) (a), Income-tax Act and as such it is exempt from income-tax. As the question has been framed, the answer can only be in favour of the department.

( 4 ) THE assessee had prayed that the question be amended as follows :

"whether the income from the sale of forest trees originally of spontaneous growth for the regeneration and preservation of which human labour and skill were used, growing on land, which is assessed to land revenue, is agricultural income within the meaning of Section 2 (1) (a), Income tax Act and as such exempt from income-tax under Section 4 (3) (viii) of the Act?" when this application came up before the Tribunal, the Tribunal held as follows :

"as regards the proposed alteration, we think that it is not necessary as the matter has been fully brought out and discussed in the Statement of the Case and the question formulated by the tribunal is, of course, subject to the facts stated, and findings arrived at. by the tribunal. The suggestion made by the applicant will, however, be included in the paper-book,"

This note appended to the Statement of the Case shows that the Tribunal did not reject the contention of the applicant that, though the trees were originally of spontaneous growth, the applicant had applied human labour and skill for the regeneration and preservation of the trees growing on the land. The Tribunal, however, following the decision in Ghandrasekhara Bharati swamigal v. Duraisivami Naidu, 54 Mad. 900, held that since human labour and skill had been put in merely for the regeneration and preservation of the forest timber, the process did not amount to agricultural operation as it did not involve the cultivation of the soil so that the income had not been derived by "agriculture. "

( 5 ) SECTION 4 (3), Income-tax Act is as follows :

"any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them. . . . . . (viii) Agricultural income. ".

Section 2 (1), Income-tax Act defines agricultural income as meaning :" (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land-revenue in British India or subject to a local rate assessed and collected by (officers of the Grown) as such ; (b) any income derived from such land by (i) agriculture, or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him,