THE COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA vs. SRI RAMAKRISHNA DEO

CIVIL APPEAL No. 426/1957Supreme Court1958 INSC 8514 October 1958Bench: 3 JudgesAuthor: T.L. VENKATARAMA AIYYAR, P.B. GAJENDRAGADKAR, A.K. SARKAR14 pages
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What were the facts?

The assessee, proprietor of an estate, derived income from the sale of forest trees. He claimed this income was agricultural and thus exempt from tax under Section 4(3)(viii) of the Indian Income-tax Act, 1922. The Income-tax Officer initially held the trees were of spontaneous growth and the income not exempt. The Appellate Tribunal directed a fresh inquiry. Upon re-examination, the Tribunal found evidence of plantation by the estate authorities to be meagre and unsubstantial, concluding the trees were of spontaneous growth and the assessee failed to establish facts for exemption. The High Court, on reference, held that even if trees were not planted, subsequent substantial operations for maintenance and improvement made the income agricultural. It also wrongly placed the burden of proof on the revenue to show the income was not agricultural.

What did the Supreme Court hold?

The Supreme Court held that the High Court erred in placing the burden of proof on the income-tax authorities. It is well-established that the assessee claiming the benefit of an exemption must establish it. The Court also held that the question of whether trees were of spontaneous growth or the product of plantation is a question of fact, and the Tribunal's finding on this point was binding on the High Court. The Court further held that income from the sale of trees in the forests was not agricultural income because the trees had not been planted by the respondent. The fact that the respondent maintained a large establishment for preserving the forests and assisting their growth was immaterial. The observations in Commissioner of Income-tax, West Bengal, Calcutta v. Raja Benoy Kumar Sahas Roy were distinguished and explained as not laying down that considerable expenditure on maintenance implies plantation, but rather that if a substantial portion of forests is found planted, a substantial portion of income may be derived therefrom, which is a presumption of fact.

What were the issues?

1. Whether the income derived from the sale of forest trees is agricultural income exempt from tax under Section 4(3)(viii) of the Indian Income-tax Act, 1922, given the Tribunal's finding of spontaneous growth versus the High Court's finding of substantial maintenance and improvement operations. 2. Whether the burden of proof lies on the assessee to establish the claim for exemption as agricultural income, or on the revenue to prove it is not agricultural income. Assessee's arguments: The assessee contended that the High Court correctly held the income to be agricultural, relying on the principle that substantial operations for maintenance and improvement of the forest, even if not direct plantation, rendered the income agricultural. They also argued, based on observations in Commissioner of Income-tax, West Bengal, Calcutta v. Raja Benoy Kumar Sahas Roy, that high expenses in relation to receipts indicated a substantial portion of income derived from planted trees. Revenue's arguments: The revenue argued that the High Court erred in placing the burden of proof on them. They contended that the assessee must establish their claim for exemption. They also argued that the Tribunal's finding of spontaneous growth was a question of fact binding on the High Court, and that the expenditure on maintenance did not automatically imply plantation by the proprietor.

Which sections of the Income-tax Act were involved?

Section 2(1),Section 4(3)(viii),Section 66(1)

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176 SUPREME COURT REPORTS (1959] Supp. r958 pay only three sets of costs for the hearing, namely, one set each to the petitioners represented by Shri Sh1ee Vinod Kuma' &- 0 ,,. Achhru Ram, Shri D. R. Prem and Shri Y. Kumar v. respocti vely an<l also one set of hearing fees for each State of Ilimachal of the au vocates-on-record.

Prridesh Das C. ].

October r4. Petitions allowed. THE COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA v. SRI RAMAKRISHNA DEO (VENKATARAMA ArYAR, GAJENDRAGADKAR and A. K. SARKAR, JJ.) focome Tax-Forest trees-Income from sale of-Whether agricultural income-Exemption from taxatio1>-Burden of proof- Findings of the Tribunal-When binding on High Court-Indian Income-tax Act, r922 (XI of r922), ss. 2(r), 4(3) (viii), 66(r).

The respondent, the proprietor of an estate, derived income from the sale of trees growing in his forests and claimed that it was agricultural income as defined in s. 2(1) of the Indian Income-tax Act, 1922, and that it was exempt from payment of income-tax under s. 4(3)(viii). The Appellate Tribunal found that the evidence to show that there was plantation by the estate authorities was meagre and unsubstantial, that t

The order continues below.

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