Isaac, J. -
(1.) THIS is a reference made by the Kerala Agricultural Income-tax Appellate Tribunal under Section 60(1) of the Agricultural Income-tax Act 1950, on the application of the Commissioner of Agricultural Income-tax, KErala. The questions referred are:
"(i) On the facts and in the circumstances of the case, is the Tribunal right in holding that there is nothing in the agreement dated 19th February, 1962, to show that it was a composite agreement of lease and sale?
(ii) On the facts and in the circumstances of the case, is the Tribunal right in holding that the agreement dated 19th February, 1962, is an agreement for an outright sale of rubber trees?
(iii) Is the Tribunal right in giving a literal interpretation to the agreement without duly considering the attendant circumstances like the unreasonableness of the time allowed for cutting and removing the trees, the unreasonableness of the amount shown as consideration for the sale of the rubber trees, that the trees are capable of being tapped for two or three years more, etc., and how the parties acted under it ?"
(2.) THIS reference relates to the assessment year 1964-65, and the previous year is the one which ended on March 31, 1964. The assessee is an incorporated company, owning a rubber plantation. By an agreement dated 19th February, 1962, executed between the assessee and the Malabar Rubber Company, the assessee sold all the rubber trees standing on an area of 128.60 acres of land for a sum of Rs. 1,71,765. THIS was for the purpose of replanting the above area with rubber, after cutting and removing the old trees, which had apparently become non-yielding or unremunerative. The purchaser had paid an earnest money of Rs. 10,000 before the execution of the agreement; and the provision regarding the payment of the balance amount was that it should be paid in 37 equal monthly instalments commencing from the last day of March, 1962, and ending with the last day of March, 1965. The agreement also provided, among other things, that the purchaser shall cut and remove the trees as soon as possible, and in any case on or before 31st March, 1965. Under the agreement the assessee received from the Malabar Rubber Company a sum of Rs. 55,708 during the accounting year ended March 31, 1964.
The assessee had also executed another agreement dated April 7, 1961, with one Yusuff in respect of 150 acres of rubber plantation. Under this agreement, the assessee sold the rubber trees standing in the said area together with the right of slaughter tapping for a sum of Rs. 2,19,000. The price of the trees was fixed at Rs. 24,000 and the consideration for the slaughter tapping was fixed at Rs. 1,95,000. This sum of Rs. 24,000 was received by the assessee during the accounting year ended March 31, 1964.
For the assessment year 1964-65, the assessee claimed that the aforesaid two sums of Rs. 55,708 and Rs. 24,000 received by it on account of sale of old rubber trees were capital receipts and not income. The Inspecting Assistant Commissioner, who was the assessing authority, rejected the assessee's claim. Regarding the amount of Rs. 55,708 received from the Malabar Rubber Company, he stated that, in view of the fact that the value of the rubber trees sold from 128.60 acres of land to the above company was fixed at Rs. 1,71,765 as against Rs. 24,000 fixed as the value of the trees sold from 150 acres to Yusuff, his predecessor in office, he visited the estate on February 16, 1964; and that it was then he found that slaughter tapping was actually in progress in the whole area; that, in the light of the above facts, the assessee agreed in respect of the assessment for the year 1963-64 that the amount received from the Malabar Rubber Company represented actually the price of trees and consideration, for granting the right of slaughter tapping; and that, accordingly, the sum of Rs. 55,708 was income and not capital. Regarding the sum of Rs. 24,000 received from Yusuff, the Inspecting Assistant Commissioner stated that what was sold was not old and unyielding trees, and that the said amount also constitutes income.
(3.) THE assessee filed an appeal before the Deputy Commissioner of Agricultural Income-tax, who was the appellate authority, and he accepted the claim of the assessee regarding the sum of Rs. 24,000 without any hesitation. Regarding the sum of Rs. 55,507 received from the Malabar Rubber Company, he agreed with the finding of the Inspecting Assistant Commissioner and the reasons stated by him in support of the said finding, and held that the said amount was income.
The assessee appealed before the Appellate Tribunal. It held that the agreement dated February 19, 1962, between the assessee and the Malabar Rubber Company evidenced an outright sale of the rubber trees, that it was "incorrect to import any extraneous motives in the terms of the agreement and construe it as a composite one of lease and sale", and that the amounts received by the assessee under the said agreement were capital receipts. In the opinion of the Tribunal, the document is the sole determining factor, and the revenue is not entitled to go behind the document, and determine the real character of the transaction on a consideration of facts not stated in, or disclosed, by the document.;