C.Hanumantha Rao (Deceased) v. Commissioner of Income Tax,Race Course Road, Coimbatore

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 30.04.2009Coram :THE HONOURABLE MR. JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MR.JUSTICE M.M.SUNDRESHTax Case (Appeals) No.44 of 20041. C.Hanumantha Rao (Deceased)2. C.Subba RaoAppellant (2nd appellant brought on record as L.R. Of the first appellant vide orderdated 20.10.2008 in TCMP.17&18/08)v.Commissioner of Income Tax,Race Course Road, Coimbatore 18.Respondent Tax Case (Appeal) filed under section 260-A of the IncomeTax Act, 1961 against the order of the Income Tax AppellateTribunal, 'D' Bench, Chennai dated 08.07.2008 made in ITANo.2626/Mds/96 against ITA.No.549/C/94-95 on the file of theCommissioner of Income Tax (Appeals) dated 9.10.96 againstPAN.HV.9351/ITO/W-I (9) S & M/1991-1992 dated 31.3.1994 on thefile of the Income Tax Officer, Ward - I (9), Salem.For appellant: Mr.V.S.JayakumarFor respondent: Mr.T.Ravikumar, Standing Counsel for Income Tax Department JUDGMENTK.RAVIRAJA PANDIAN, J.The appellant has preferred this appeal against the orderof the Income Tax Appellate Tribunal dated 08.07.2008 made inITA No.2626/Mds/96. 2. The facts of the case are : The assessee is anindividual and owner of a coffee estate filed its return ofincome for the assessment year 1991-92 declaring loss. The saidreturn of income had been processed under section 143(1)(a) ofthe Income Tax Act accepting loss returned. Subsequently, the https://hcservices.ecourts.gov.in/hcservices/ case of the assessee was taken up for scrutiny and notice undersection 143(2) of the Act has been issued. After rejecting thestand of the assessee that the sale proceeds of the silver oaktrees (shade trees) standing in the coffee estate would notattract the capital gain and following the decision of theSupreme Court in the case of CIT v. Jothy Kanna Choudhary, 1957(32) ITR 705, the assessing officer concluded the sale of shadetrees would attract capital gains and accordingly computed thecapital gains at 40% of the sale price. On appeal, theCommissioner of Income Tax (Appeals) while upholding theassessment on capital gains on the sale of shade trees, directedthe assessing officer to adopt the gross capital gain at 30% ofthe sale price. The Tribunal confirmed the order of theCommissioner of Income tax (Appeals) on appeal being taken bythe assessee. The present appeal is filed against that order ofthe Tribunal. 3. The appeal was admitted on the following substantialquestions of law : 1. Whether, on the facts and in the circumstancesof the case, the Appellate Tribunal was right inholding that the sale of shade trees should betaxed under the head and capital gains tax andin not exempt as agricultural income?2.Whether the Tribunal was right in notconsidering the decision in the case ofSmt.Subbadra H. Rao, in ITA No.2625/96 dated23.07.2002?4. Learned counsel for the assessee submitted that he isnot pressing the second question of law and the same need not betraversed. The same is recorded.5. In respect of the first question of law, it is contendedthat a Division Bench of this Court in the case of Kil KotagiriTea and Coffee Estates Co. Ltd., v. State of Tamil Nadu, (1998)234 ITR 252, arising out of the Tamilnadu Agricultural IncomeTax Act, has held that the Supreme Court in the case of CIT v.Raja Benoy Kumar Sahas Roy, (1957) 32 ITR 466 has observed thatany income to be regarded as agricultural income, it should bederived by the assessee by tilling of the land, sowing of theseeds, planting and similar operations on the land. The otheroperations like weeding, digging the soil around the growth,removal of undesirable undergrowth, etc., would not per se beregarded as agricultural operations and in order to invest themwith the character of agricultural operation, the subsequentoperation of the weeding, digging etc must necessarily be inconjunction with and in continuation of the basic operations,which are the effective cause of the products being raised onthe land. https://hcservices.ecourts.gov.in/hcservices/

6. The Commissioner of Income Tax (Appeals), in his order,has traversed the procedures contained in the publication titled"Coffee in India : Planters' Guide" published by the CoffeeResearch Station functioning under the Coffee Board, wherein itwas stated that the silver oak trees are commonly used aspermanent shade trees. These trees are planted at spacings ofabout 35' to 40' between the trees. Such trees are not ofspontaneous origin, but are established through the culturalprocedures, such as sowing of seeds, etc., Identical is thenature of operation in the present case also. If this aspect ofthe matter was taken into consideration, then the income derivedfrom the sale of shade trees would definitely be an agriculturalincome and outside the purview of the Income Tax Act, 1961. 7. Learned counsel for the assessee, after referring to thejudgment of this Court in W.A. No.372 of 2001 in respect of thesame assessee relating to the assessment year 1991-92, contendedthat the said judgment is distinguishable by reason of resintegra. The aspect of the exploiting physical labour for thebasic operation of tilling and sowing and the subsequentoperation of rearing the same has not at all been considered bythe Tribunal. 8. However, Mr.T.Ravikumar, learned standing counsel forthe revenue submitted that all the issues have been covered bythe judgment of the Division Bench of this Court in W.A. No.372of 2002 decided on 05.04.2007 (assessee's own case). Theappellant cannot have a say or to argue differently in thiscase. The issue whether the income derived from the sale ofshade trees would partake the character of capital gains hasalready been concluded by judgments of various High Courts andeven in the assessee's own case. He also highlighted that theappeal against the said judgment was dismissed by the SupremeCourt and the order impugned requires no interference in thisappeal.9. We heard the learned counsel on either side and perusedthe materials available on record.10. In the assessee's own case in respect of assessmentyear 1990-91 the assessee himself offered a sum of Rs.56,000/-as income arising out of the sale of shade trees in his coffeeestate for capital gains, but later, filed a revised returnseeking exclusion of the said sum on the premise that the treeswhich were cut and sold by the assessee had been planted by theprevious owner of the estate and removal of the said old treeswere sought for better yield from the coffee plants andtherefore the income derived from the sale of such trees in thecoffee estate was agricultural in nature and consequently thesame falls outside the purview of the Income Tax Act. TheCommissioner of Income Tax rejected the plea of the assessee by https://hcservices.ecourts.gov.in/hcservices/ relying on the apex Court judgment in State of Kerala v.Karimthuravi Tea Estates Ltd., (1966) 60 ITR 275. As againstthat order of the appellate authority, the assessee filed writpetition No.6433 of 1993. The writ petition was dismissed byfollowing the same decision in the case of Karimthuravi, asagainst which the writ appeal in W.A. No.372 of 2002 was filed.In that writ appeal, the Division bench has surveyed almost allthe earlier judgments on this issue and after noting the facts,in para 6.1.4 that there was no controversy about the fact thatthe shade trees were planted by the previous owner and they hadbecome old and useless due to efflux of time and therefore, theywere cut and sold for planting shade trees newly for betteryield from the coffee plants, held that the income so earned wasliable to tax under section 45 of the Act. 11. The Division Bench also has taken note of the decisionin the case of Beverley Estates Ltd v. CIT (1979) 117 ITR 302,wherein also the income derived out of sale of trees weretreated as capital gains following Karimthuravi's case citedsupra. The Division Bench has held that the gain arising to theassessee therein by the sale of standing shade trees grown byhim are assessable under section 45 of the Income Tax Act, 1961.For reaching such a conclusion, the Division Bench has alsorelied on the decisions in the cases of Travancore Tea EstatesCo. Ltd v. CIT 93 CTR 314, CIT v. Silver Cloud and Plantations,(1998) 231 ITR 671 and State of Tamil Nadu v. Tmt.Soundara Rajs,(2000) 241 ITR 431 and has ultimately held that the incomederived from the sale of shade trees cut from the estate cannotbe regarded as agricultural income and can only be regarded asincome of capital nature and exigible to capital gains tax. 12. It is admitted on either side that the appeal filedagainst that order made in the writ appeal has been dismissed bythe Supreme Court. Hence, the contention that the shade treeshave been planted, cultivated and reared by the assessee wouldnot make any difference in this case. This issue has beenconsidered by the Division Bench in respect of the assessmentyear 1990-91 in assessee's own case, as stated supra. 13. Further the contention that the shade trees have beenplanted, reared by the assessee has been taken note of by theCommissioner of Income Tax (Appeals) and ultimately held that ineither case (whether they were grown spontaneously or cultivatedby the assessee to give shade to the crops) the income derivedon the sale of the shade trees could not be regarded asagricultural income under the Agricultural Income tax Act. Forcoming to the conclusion the Commissioner has relied on thedecision in the case of Younus Sait Sons v. State of Tamil Nadu,215 ITR 132. Presumably that might be the reason for theassessee, who through the voice of the same counsel, surrenderedbefore the Tribunal without any uncertain terms that the appealwas covered against the assessee and in favour of the revenue by https://hcservices.ecourts.gov.in/hcservices/ the decision of the Income Tax Appellate Tribunal in the case ofITO v. Late C.Seshagiri Rao in ITA No.2320/Mds/1996 decided on23.05.2002. As rightly contended by the learned counsel for therevenue, the assessee cannot approbate and reprobate the issuein different forms in respect of the same issue. In order tomake it clear, we are of the view that it is better to extractthat portion of the order of the Tribunal, where the assesseeconceded that the issue has been covered by an earlier judgmentagainst the assessee. The extract is under :"The only issue involved in this appeal by theassessee is against the consideration of profit on saleof silver oak trees which were shade trees standing inthe coffee estate as capital gain and not asagricultural income.2. At the time of hearing, the counsel for theappellant was fair enough to consider (sic : concede)that the issue involved in this appeal is coveredagainst the assessee and in favour of the revenue by thedecision of the Income Tax Appellate Tribunal, ChennaiBench D in the case of ITO v. Late C.Seshagiri Rao, BYL/R Sri S.Sridhar, Mettur Sandalwood Oil Co., Mettur Damfor the assessment year 1974-75 in ITA No.2320/Mds/1996decided on 23.05.2002. The learned departmentalrepresentative did not raise any objection." 14. In view of the decision in the case of Younus SaitSons cites supra and also the decision of the Division Bench inassessee's own case, wherein almost all the decisions on theissue has been taken into consideration, and decided against theassessee, the observations made in Kilkotagiri case, would notany way advance the case of the assessee, rather we are of theview that the assessee is not entitled to put forth any othercontrary contention, in view of his conceding argument beforethe Tribunal. Before us, the correctness of the order of theTribunal is only put in issue and we do not find any ground forinterference in that order. 15. The contention that the Division Bench judgment in thewrit appeal in assessee's own case referred to supra is resintegra is raised for the sake of rejection, because of thereason that the said judgment very well considered the fact thatthe trees was planted and reared by the erstwhile owner and thegrowth of the trees were not of spontaneous nature in para 6.1.4of its order. https://hcservices.ecourts.gov.in/hcservices/

16. For the foregoing reasons, the first question of lawhas to be decided in favour of the revenue and against theassessee and the first question of law is accordingly answeredin favour of the revenue and against the assessee.mfSd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1.The Assistant Registrar,Income Tax Appellate Tribunal,Rajaji Bhavan, Besant Nagar, D Bench, Chennai.2.The Commissioner of Income Tax (Appeals),Coimbatore.3.The Income Tax Officer,Ward-I (9), Salem.+ 1 cc to Mr. T. Ravikumar, Advocate, SR No.19438+ 1 cc to Mr. V.S. Jayakumar, Advocate, SR No.19924MBS(CO)SR/15.6.2009T.C. (A) No.44 of 2004