Sale of Ecupultas Tree – whether it could be agricultural income or capital gain income?
Plz revert.
CA Ankur Agarwal (CA) (110 Points)
01 May 2017
Plz revert.
Dhirajlal Rambhia
(SEO Sai Gr. Hosp.)
(167415 Points)
Replied 02 May 2017
The Supreme Court in A. K. T. K. M. Vishnudatta Antharjanam v. Commr. of Agrl. I T. 1970 -TMI - 6217 – (SUPREME Court), held that the sale of the trees affected the capital structure, because by removing the roots the source from which fresh growth of trees could take place was removed, and the sale could not, therefore, give rise to a revenue receipt ; the receipt from the sale of the trees was therefore capital in nature. In the case at hand, it has not been disputed that the trees were removed with their roots for the purpose of making space for cultivation of tea.
In CIT v. Ambat Echuhutty Menon 1979 -TMI - 5211 – (SUPREME Court), the trees were spontaneously grown on agricultural land, which interspread among paddy fields, and were cut and sold but the roots and stumps were left out to extend cultivation and not for development or for regeneration. The Supreme Court held that the receipt from sale of such trees is capital receipt.
It follows that if the tree trunks are cut and sold with stumps intact with scope for re-generation, the receipt would be agricultural income. If not, it could be sale of capital asset.
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