Elixir Plantations Ltd vs Commissioner of Income Tax

Madhavan Nair J:

The question referred is whether the amount of Rs. 68,000/-was correctly brought to tax ?

The statement of the Case in its paragraph 2 reads :

The assessee purchased a Coffee Estate known as ''Greenfield'' Estate in Coorg in 1958. During the accounting year 1959-60, relevant to the assessment year 1960-61, the assessee sold certain dead and windfallen Avenue Trees for a sum of Rs. 68,690/- and credited it in the profit and loss account under miscellaneous receipts in Greenfield Estate. Of this, Rs. 68,000/-was the amount received from a firm called Malankam Timbers, a registered partnership.

It is clear from the above statement that the sum of Rs. 68,000/- which is the subject matter of reference, is part of the sale-proceeds of dead and windfallen avenue trees cut and removed from the Estate, which was purchased a year or two before the transaction. If the trees are dead and windfallen it is certain that no future growth out of them is possible. The principle of Commissioner of Income Tax, Bombay South Vs. N.T. Patwardhan, is that if the trees are so cut as to leave their stumps capable of yielding further growth, the proceeds of the cutting will be revenue, and not capital. When the sale is of "dead and windfallen" trees, the cutting and removal would exhaust the trees, leaving no chance of further income therefrom. The receipts must then be of a capital nature. The question referred therefore has to be answered in the negative and in favour of the assessee. We do so. No order as to costs here.

Registrar will send a copy of this judgment under his signature and seal of the Court to the income tax Appellate Tribunal as required u/s 66 (5) of the income tax Act, 1922.