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Section 4 of the Income-tax, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Income - Chargeable as - Assessment year 1959-60 - Whether where trunks of trees are cut so that stumps remain intact and capable of regeneration, receipts from sale of trunks would be in nature of income - Held, yes FACTS The father of the assessee had leased under an agreement 500 acres of forest land for cutting and removing trees. The trees were not removed with roots. The stumps of trees were allowed to remain in land so that the trees may regenerate. The ITO treated the income from sale of trees as taxable. On appeal, the AAC confirmed the order of the ITO. On second appeal, the Tribunal set aside the order of the AAC. On reference, the High Court set aside the order of the Tribunal. On appeal to the Supreme Court : HELD If a person sells merely leaves or fruits of the trees or even branches of the trees it would be difficult (subject to the special exemption under section 4(3)(viii) of the Income-tax Act, 1922) to hold that the realization is not of the nature of income. Where the trunks are cut so that the stumps remain intact and capable of regeneration, receipts from sale of the trunks would be in the nature of income. It is true that the tree is a part of the land. But by selling a part of the trunk, the assessee does not necessarily realize a part of his capital. It need not be considered whether in case there is a sale of the trees with the roots so that there is no possibility of regeneration, it may be said that the realization is in the nature of capital. The appeal failed and was dismissed. CASE REVIEW Decision of the Kerala High Court in Commissioner of Income-tax v. Venugopala Varma Raja [1968] 67 ITR 802 affirmed. Note : The case was decided against the assessee. CASES REFERRED TO CIT v. T. Manavedan Tirumalpad [1931] I.L.R. 54 Mad. 21: AIR 1930 Mad. 764 (FB), CIT v. N.T. Patwardhan [1961] 41 ITR 313(Bom.), CIT v. H.B. Van Ingen [1964] 53 ITR 681 (Mys.), Fringford Estates Ltd. v. CIT [1951] 20 ITR 385 (Mad.), Kamakhya Narain Singh (Raja Bahadur) v. CIT [1946] 14 ITR 673 (Pat.), Maharaja of Kapurthala v. CIT [1945] 13 ITR 74 (Oudh.), Ram…

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