Y.Bhargava, J. - (1.) In this reference under Section 66 (l), Income-tax Act, the Income-tax Appellate Tribunal has referred the following questions to us for answer : Q. 1--Whether income from the sale of forest trees of spontaneous growth, growing on land which is assessed to land revenue, is 'agricultural income' within the meaning of Section 2 (1) (a), Income-tax Act and as such exempt from income-tax under Section 4 (3)(viii) of the Act ? Q. 2--Whether the assesee's net receipts from the sale of forest trees were the assessse's income liable to income-tax and not merely capital converted into cash?"
(2.) As regards the second question, it was the assessee's own case that the forest was being worked for, at least, some time on scientific lines in accordance with a scheme of making profit, there was a regular working plan and the assessee was deriving regular income from the forest and spending money to increase the profit. It was in view of these admissions that Shri Pathak had to concede that the answer to this question must be in the affirmative, i.e., that the net receipts on the sale of forest trees were the assessee's income liable to income-tax and were not merely capital converted into cash.
(3.) Shri Pathak has, however, urged that this income must be treated as agricultural income within the meaning of Section 2 (1) (a), Income-tax Act and as such it is exempt from income-tax. As the question has been framed, the answer can only be in favour of the department.;