Commissioner of Income Tax, West Bengal vs Raja Benoy Kumar Sahas Roy

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 165 of 1954

Decision Date: 23 May 1957

Coram: Natwarlal H. Bhagwati, J.L. Kapur

The case involved a dispute between the Commissioner of Income‑Tax for West Bengal and Raja Benoy Kumar Sahas Roy concerning the tax treatment of income derived from a forest owned by the assessee. The assessee had reported a sum of Rs 51,978 as income from his forest land in his income‑tax return and claimed that this amount constituted agricultural income exempt from tax under section 4(3)(viii) of the Indian Income‑Tax Act, 1922. The forest in question was a natural growth forest, approximately one hundred and fifty years old, composed mainly of sal and piyasal trees. Over time portions of the forest became denuded due to natural destructive elements, and the assessee repeatedly planted fresh trees in those depleted areas. The maintenance of the forest required considerable human labour and skill each year, including activities such as protecting the off‑shoots from the stumps of trees that had been cut and sold, and reviving the denuded sections through new plantation. The staff employed by the assessee carried out operations such as pruning, weeding, felling, clearing, cutting of channels, guarding the trees, and sowing seeds by digging the soil in the cleared zones. The Income‑Tax Officer rejected the claim of exemption, added Rs 34,430 to the assessable income, and allowed Rs 17,548 as an expense. This assessment was affirmed by the Assistant Commissioner of Income‑Tax. On appeal, the Appellate Tribunal observed that the sowing of seeds was occasional and that the income derived from jungle products did not fall within the definition of agricultural income under the Act. The High Court, however, reached a different conclusion, holding that tillage of the soil was not an essential requirement and that the income qualified as agricultural because human labour and skill had been applied directly to the land itself. The High Court therefore decided in favour of the assessee. The tax authorities had not attempted to determine the precise amount of income actually generated from the trees planted by the assessee, nor had they produced any material on record to establish that figure. Considering the substantial proportion of expenditure shown by the assessee in relation to the total income, the Supreme Court held that a significant part of the income must have arisen from the trees planted by the assessee. Consequently, the Court affirmed that the income derived from those trees constituted agricultural income within the meaning of section 2(1) of the Indian Income‑Tax Act, and that no further enquiry into the exact amount was required, leading to the dismissal of the appeal.

Because a fresh inquiry could not be justified after such a long lapse of time and because no attempt had been made to determine the exact amount of income derived from the trees, the Court concluded that the appeal had to be dismissed. The Court then explained the meaning of the word “agriculture” as used in section 2(1)(b)(i) of the Indian Income‑tax Act. It held that the term denotes the whole and integrated activity of an agriculturist carried out on land with the purpose of raising produce. This integrated activity includes basic and essential operations that require human skill and labour on the land itself, such as tilling the soil, sowing seeds, planting, and other similar operations. It also includes subsequent operations that are performed after the produce has sprouted, such as weeding, digging around the growth, removing undesirable under‑growth, tending, pruning, cutting, harvesting and marketing. The Court stressed that these later operations, if they are not connected with the basic operations, cannot by themselves constitute agriculture. Only when the land is subjected to the entire integrated activity can it be said to be used for an agricultural purpose and the income earned from it be regarded as agricultural income within the meaning of the Act. The Court noted that case law was discussed on this point. It further observed that whatever is produced by such agriculture must be an agricultural product and that the scope of “agriculture” cannot be limited merely to the production of grain and food for humans and cattle. Rather, it must extend to all land products that have some utility, whether for consumption or for trade and commerce. Accordingly, fruit and vegetable plantations, groves, pastures, luxury articles such as betel, coffee, tea, spices and tobacco, as well as commercial crops like cotton, flax, jute, hemp and indigo, and forest products such as timber, sal, piyasal trees, casuarina plantations, tendu leaves and horro nuts, can all fall within the ambit of agriculture. The Court mentioned that certain earlier decisions, namely Murugesa Chetti v. Chinnathambi Goundan (1901) I.L.R. 24 Mad. 421 and Raja of Venkatagiri v. Ayyappa Reddy (1913) I.L.R. 38 Mad. 738, were disapproved. The Court emphasized that this broader meaning of “agriculture” and its associated processes and products is tenable only where cultivation—meaning the basic operations—takes place, and it can never be separated from those basic operations. Consequently, there is no justification for extending the definition further to include activities that are merely related to or dependent on land, such as breeding and rearing livestock, dairy farming, butter and cheese making, or poultry farming. The Court also disapproved of the authorities Moolji Sicka & Co., In re (1925) 10 T.C. 341 and Commissioner of Income Tax v. K. E. Sundara Mudaliar (1950) 18 I.T.R. 259 on this point. While acknowledging that human skill and labour are required for both basic and subsequent operations, the Court held that only the basic operations involve skill and labour being expended on the land itself. This distinction becomes important when the operations are disjointed and do not form an integrated activity, as is the case with products of land that grow spontaneously, where human effort is limited to fostering growth, preservation and regeneration. Judicial opinion, the Court observed, is unanimous that products which grow wild on the land and require only collection for consumption or marketing are not agricultural products, and the income from them does not constitute agricultural income within the meaning of section 2(1) of the Act.

In the Court’s discussion, it was observed that products which arise spontaneously on land and which do not require any human skill or labour in their cultivation, and for which the only act performed by the taxpayer is to collect them for consumption or marketing, are not to be treated as agricultural products, and consequently the income derived from such products does not fall within the meaning of agricultural income prescribed in section 2(1) of the Income‑Tax Act. However, when the taxpayer carries out subsequent operations on those land‑derived products, the character of those operations must be examined in accordance with the principles previously set out. The Court further held that the distinction between agriculture and forestry, as reflected in Entries 14 and 19 of List II of the Seventh Schedule to the Constitution, does not render the two categories mutually exclusive. Income that accrues from forestry activities and that satisfies the definition of agricultural income under section 2(1) of the Act will nonetheless be regarded as agricultural income under Entry 46 of the Constitution and therefore will be governed by the provisions of the Income‑Tax Act.

The matter before the Court was Civil Appeal No. 165 of 1954, filed against the judgment and order dated 27 May 1953 of the Calcutta High Court in Income‑Tax Reference No. 35 of 1952. The appeal, filed under the certificate‑of‑fitness provision of section 66A(2) of the Income‑Tax Act (XI of 1922), sought review of the High Court’s decision on a reference made under section 66(1) of the same Act. The respondent owned an estate of approximately 6,000 acres of forest land that was assessed to land‑revenue and cultivated with Sal and Piyasal trees. This forest was of spontaneous growth, meaning it had not been established with the aid of human skill or labour, and it had existed for roughly 150 years. A substantial portion of the respondent’s income was derived from the sale of timber harvested from this forest. The last assessment year in which the forest income had been taxed under the Income‑Tax Act was 1923‑24; thereafter, up to the assessment year 1944‑45 that formed the basis of the present dispute, the income from the forest had been omitted from assessment. The assessment for 1944‑45 was initially made without including any forest income, but it was subsequently reopened under section 34 of the Act. In response to a notice issued under section 22(2) read with section 34, the respondent filed a return indicating a gross receipt of Rs 51,978 from the forest. The respondent claimed that this amount was not assessable because it constituted agricultural income and was therefore exempt under section 4(3)(viii) of the Act. The Income‑Tax Officer rejected the claim, allowing a deduction of Rs 17,548 as expenditure and adding the balance of Rs 34,430 to the assessable income as income derived from the forest.

The Appellate Assistant Commissioner upheld the assessment, and the Income Tax Appellate Tribunal likewise held that the sum in question was not agricultural income but income derived from the sale of jungle produce of spontaneous growth, and therefore it was not covered by section 2(1) of the Act. At the assessee’s request, the Tribunal referred the matter to the High Court under section 66(1) of the Act, presenting two questions of law that arose from its order. One of those questions asked: “Whether, on the facts and in the circumstances of this case, the sum of Rs 34,430 is ‘agricultural income’ and, therefore, exempt from tax under section 4(3)(viii) of the Indian Income‑Tax Act?” The Tribunal submitted a statement of case from which the following facts were admitted or established: (i) the forest covered approximately 6,000 acres and the trees growing there were Sal and Piyasal; (ii) the forest was of spontaneous growth, about 150 years old, and not a forest cultivated with the aid of human skill and labour; (iii) the forest was occasionally parcelled out for sale, and the areas from which trees were taken were guarded by forest guards to protect off‑shoots; (iv) it had been satisfactorily proved that considerable human labour and care were applied year after year to keep the forest alive and to revive portions that became denuded because of cattle or other causes; (v) the staff employed by the assessee performed specific operations, namely: (a) pruning, (b) weeding, (c) felling, (d) clearing, (e) cutting channels to aid rain‑water flow, (f) guarding the trees against pests and other destructive elements, and (g) sowing seeds after digging soil in denuded areas. The Tribunal found that the employment of human labour and skill in items (a) through (f) was necessary for the maintenance and upkeep of any forest of spontaneous growth. Regarding item (g), however, the Tribunal observed that sowing was carried out only occasionally and on a very small portion of the area where the original growth had been completely denuded; such occasions were few, the normal process being that when a tree was cut, a stump about six inches high was left, which produced off‑shoots that generated fresh growth over time, a process that continued unless an area became wholly denuded. The reference was heard by the High Court, which held that actual cultivation of the land was not required and, because human labour and skill were expended for the forest’s growth, the income from the forest qualified as agricultural income. Accordingly, the High Court answered the above question in the affirmative. The Revenue obtained the requisite certificate of fitness for appeal to this Court and therefore brought the present appeal. The question that arises for consideration in this appeal is

The question before the Court was whether the income that the assessee obtained from selling Sal and Piyasal trees, which grew in a forest that originally was a natural forest that had not been produced with the help of human skill or labour, could be classified as agricultural income within the meaning of section 2(1) of the Indian Income‑Tax Act, and consequently whether such income was exempt from tax under section 4(3)(viii) of the same Act. Section 2(1) of the Act provides a definition of agricultural income and, for the purpose of this appeal, reads as follows: “agricultural income” means (a) any rent or revenue derived from land that is used for agricultural purposes and that is either assessed to land‑revenue in the taxable territories or is subject to a local rate that is assessed and collected by government officers; and (b) any income derived from such land by (i) agriculture, or (ii) the performance by a cultivator or a receiver of rent‑in‑kind of any process ordinarily employed by a cultivator or a receiver of rent‑in‑kind to render the produce raised or received by him fit to be taken to market, or (iii) the sale by a cultivator or a receiver of rent‑in‑kind of the produce raised or received by him, where no process other than that described in sub‑clause (ii) has been performed. Section 4(3) of the Act then states: “(3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them; … (viii) Agricultural income.” Although the exemption in section 4(3)(viii) relies on the definition of “agricultural income” contained in section 2(1), the Act does not contain a definition of the terms “agriculture” or “agricultural purpose.” Consequently, it was necessary to determine the meaning of those terms. One argument that was raised relied on entries 14 and 19 of List II of the Seventh Schedule to the Constitution. The argument asserted that entry 14 covered agriculture, including agricultural education, research, pest protection and prevention of plant diseases, while entry 19 dealt with forests. According to this view, there existed a clear demarcation between agriculture and forests, implying that forestry could not be subsumed under agriculture. If forestry were excluded from agriculture, then any income derived from forestry activities could not be agricultural income, and the proceeds that the assessee received from selling the forest trees would not qualify as agricultural income because they were not derived from land by agriculture as defined in the Income‑Tax Act. However, this argument failed to consider that the entries in the Seventh Schedule are intended to be interpreted broadly and to include matters incidental to the subjects listed, rather than being mutually exclusive.

Heads of legislation are to be interpreted in a liberal manner so that they cover all matters incidental to their scope, and they are not mutually exclusive. Consequently, when an assessee plants trees on a vacant site with the intention that those trees will develop into a forest—for example, by establishing a Casuarina plantation—and the assessee expends labour and skill to accomplish that purpose, the income derived from those trees must be regarded as agricultural produce. It is necessary to remember that, although the Seventh Schedule to the Government of India Act, 1935 contained a demarcation between agriculture and forestry, such a demarcation did not exist in the Devolution Rules made under the Government of India Act, 1919; moreover, the definition of agricultural income that is relevant to this case was incorporated in the Indian Income‑tax Acts as early as 1886, if not earlier, as shown by section 5 of the Indian Income‑tax Act, 1886 (II of 1886). In addition, despite the constitutional demarcation, taxes on agricultural income constitute a separate head under entry 46 of List II of the Seventh Schedule, and that head would include income from forestry operations provided that such income satisfies the definition of agricultural income given in Article 366(1), which refers to the definition applicable to Indian Income‑tax enactments. Because the terms “agriculture” and “agricultural purpose” have not been defined in the Indian Income‑tax Act, the Court must necessarily fall back upon the ordinary meaning in which these words have been understood in common parlance. The root sense of “agriculture” denotes a field and its cultivation, which implies the expenditure of human skill and labour upon land; nevertheless, the term has acquired a wider significance that is reflected in various dictionary meanings. It is permissible to consult the dictionary meaning of the term when the statutes contain no definition. As Lord Coleridge observed in R. v. Peters (1), although dictionaries are not authoritative exponents of statutory meanings, courts traditionally take words in their ordinary sense and may look to dictionaries for instruction. Similarly, Cozens‑Hardy, M. R., remarked in Camden (Marquis) v. I.R.C. (2) that courts may assist themselves by consulting standard authors and well‑known authoritative dictionaries when interpreting statutes. Turning therefore to the dictionary meaning of “agriculture,” we find the relevant definitions that guide the interpretation of the term in the present context.

Webster’s New International Dictionary described agriculture as “the art or science of cultivating the ground, including rearing and management of livestock, husbandry, farming, etc., and also including in its broad sense farming, horticulture, forestry, butter and cheese‑making etc.” Murray’s Oxford Dictionary defined it as “the science and art of cultivating the soil; including the allied pursuits of gathering in the crop and rearing livestock; tillage, husbandry, farming (in the widest sense).” Bouvier’s Law Dictionary, quoting the Standard Dictionary, stated that agriculture is “the cultivation of soil for food products or any other useful or valuable growths of the field or garden; tillage, husbandry; also, by extension, farming, including any industry practiced by cultivator of the soil in connection with such cultivation, as breeding and rearing of stock, dairying, etc. The science that treats of the cultivation of the soil.” In Corpus Juris the term was understood to mean “art or science of cultivating the ground, especially in fields or large quantities, including the preparation of the soil, the planting of seeds, the raising and harvesting of crops, and the rearing, feeding and management of livestock; tillage, husbandry and farming. In its general sense the word also includes gardening or horticulture.” Bhashyam Ayyangar J., in Murugesa Chetti v. Chinnathambi Goundan, cited the Century Dictionary and Anderson’s Dictionary of Law, observing that the primary meaning of agriculture is “the cultivation of the ground” (The Century Dictionary) and that, in its general sense, it is “the cultivation of the ground for the purpose of procuring vegetables and fruits for the use of man and beast including gardening or horticulture and the raising or feeding of cattle and other stock” (Anderson’s Dictionary of Law). The more ordinary signification is “the cultivation—with the plough and in large areas—in order to raise food for man and beast” (The Century Dictionary) or, in other words, “that species of cultivation which is intended to raise grain and other field crops for man and beast” (Anderson’s Dictionary of Law). Horticulture, denoting the cultivation of garden or orchards, is a species of agriculture in its primary and more general sense. Ramesam J., in Panadai Pathan v. Ramasami Chetti, referred to the connotation that Wharton’s Law Lexicon adopts from the 8 Edw. VII, c. 36, as including “horticulture, forestry, and the use of land for any purpose of husbandry etc.” The 10 Edw. VII, c. 8 s. 41 definition further includes “meadow or pasture land or orchard or osier or woodland, or for market gardens, nursery grounds or allotments, etc.” and the 57 and 58 Viet. c. 30 s. 22 definition of “agricultural property” was held to comprise agricultural land, pasture and woodland, among other things. These various meanings illustrate the breadth of the term as it has been interpreted in different authorities.

In the judgment the Court observed that dictionaries ascribe various meanings to the word “agriculture”. It noted that the term has been employed in a narrow sense, meaning merely the cultivation of fields, and also in a broader sense, meaning all activities connected with the land such as horticulture, forestry, breeding and rearing of livestock, dairying, butter and cheese making, and husbandry. The assessee’s counsel urged that the Court should adopt this broader interpretation and therefore treat forestry operations as falling within the meaning of agriculture even though such operations do not involve tillage, sowing, planting or other similar work on the soil. The argument advanced was that tillage, sowing, planting or comparable activities are unquestionably agricultural operations, and if those activities form part of the forestry work undertaken by the assessee, the later activities would be a continuation of the same and consequently would acquire the character of agricultural operations. The Court, however, referred to the case reported in (1) (1922) I.L.R. 45 Mad. 710, and held that the absence of the basic tillage‑related activities does not necessarily alter the nature of the subsequent activities nor deprive them of an agricultural character. Accordingly, even where a forest is of spontaneous growth, if forestry work is carried out in that forest for the purpose of promoting the growth of forest trees, those activities would also possess the character of agricultural operations. The Court further asked why, if breeding and rearing of livestock, dairying, butter and cheese making can be included within the meaning of “agriculture”, such activities should be excluded from the category of agricultural operations. Substantial emphasis was placed on section 4(3)(viii) of the Act, which provides for the exemption of “agricultural income” from assessment, and the argument was made that such exemptions must be construed liberally. The Court relied on the observations of Justice Vishwanatha Sastri in Commissioner of Income‑tax, Madras v. K. E. Sundara Mudaliar, wherein it was held that an exemption granted by statute should be given its full scope and amplitude and should not be narrowed by limitations not introduced by the legislature. The Court also quoted Justice Mookerjee in Commissioner of Agricultural Income‑tax, West Bengal v. Raja Jagadish Chandra Deo Dhabal Deb, who stated that contemporary view requires a statutory exemption to be interpreted liberally in favour of the assessee, provided that the language of the statute is not distorted, and that the rule must be read together with the exempting provisions, which are paramount. In addition, the Court cited a passage from The Upper India Chamber of Commerce v. Commissioner of Income‑tax, C.P. & U.P., noting that the present case involves the interpretation of an exemption clause in a taxing statute.

In interpreting an exemption clause contained in any taxing statute, the Court emphasized that such a clause should, as far as possible, be given a liberal construction and should be read in favour of the assessee, provided that this interpretation does not distort or injure the actual language employed in the provision.

The Court further observed that the head of legislation known as “Taxes on agricultural income” is set out in item 46 of List II of the Seventh Schedule to the Constitution. Consequently, that head must be construed liberally, and the term “agriculture” should be understood in its broader sense so that any income derived from agriculture, as understood in that wider meaning, falls within the statutory category.

The judgment cited authority that the expression “agricultural land” appearing in Entry 21 of List II of the Seventh Schedule to the Government of India Act, 1935, is to be given a wide interpretation. Such an interpretation includes lands that are presently used or that are capable of being used for raising valuable plants or trees, or for any other purpose of husbandry, as referred to in the cases of Sarojinidevi v. Shri Krishna Anjanneya Subrahmanyam (1) and Megh Raj v. Allah Rakhia (2).

While the Court recognised the persuasive force of the foregoing opinions, it declined to adopt them on behalf of the assessee because the Constitution itself, in Article 366(1), provides a specific definition of “agricultural income.” That definition is intended for the purposes of enactments relating to Indian income tax, and the same term is also defined in section 2(1) of the Indian Income‑Tax Act. Accordingly, the Court held that the definition contained in the statute must be examined on its own terms, and must be given effect irrespective of any other considerations.

Nevertheless, the Court noted that the statutes do not expressly define the words “agriculture” and “agricultural purposes.” In view of this omission, the Court felt free to refer to the meanings attributed to those words in legal and general dictionaries. The relevant dictionary references include I.L.R. [1945] Mad. 61 (1) and [1942] F.C.R. 53, 62 (2).

The Court also examined the dictionary meanings of “forestry” and “cultivation.” The Shorter Oxford Dictionary, Volume 1, page 735, describes “forestry” as “the science and art of forming and cultivating forests, management of growing timber.” Webster’s New International Dictionary, Volume 1, page 990, defines “forestry” as “the science and art of farming, caring for, or cultivating forests; the management of growing timber.” The same dictionary, on page 643, explains “to cultivate” as follows: (i) to prepare, or to prepare and use, for the raising of crops; to till, for example, to cultivate the soil; to loosen or break up the soil about a growing crop or plants for the purpose of killing weeds, especially with a cultivator, as in cultivating corn; and (ii) to raise or foster the growth of something by tillage or by labour and care, to produce by culture, as in cultivating roses or cultivating oysters. Whether

In determining whether a narrower or a wider meaning of the expression “agriculture’’ should be applied to a particular case, the Court observed that the answer must be sought not only by examining the provisions of the various statutes that use the term, but also by considering the specific facts and circumstances of the case at hand. The Court emphasized that a definition of the term contained in one statute does not automatically serve as a guide for interpreting the same term in another statute, and that the way the term has been understood in different statutes does not necessarily illuminate how it should be understood in a general sense. A survey of decided cases, the Court noted, reveals a wide range of opinions on the connotation of the words “agriculture’’ and “agricultural purposes.’’ At one stage, “agriculture’’ was understood in its most primary sense, namely the cultivation of fields for the production of food crops intended for human beings and domesticated animals. Although this limited interpretation focused on the basic operations of tilling the soil, sowing seeds, planting or similar activities, the scope of the crops that could be regarded as agricultural was later broadened to include all crops grown on the land, whether they were food crops or not. Another line of thought expanded the meaning of “agriculture’’ to embrace not only the products generated by the cultivation of land but also allied activities that relate to the land and that foster the growth, preservation, maintenance or regeneration of the land’s products. This broader view therefore brought within its ambit not only the primary agricultural operations but also subsequent operations performed on the products of the land, even where those later operations were not accompanied by the initial basic operations, provided that they involved human skill and labour. In contrast, the Court observed that there are instances of products of the land that arise spontaneously or grow wild without any human effort; such products have been uniformly held not to fall within the concept of “agriculture’’ and the income derived from them cannot be classified as “agricultural income.’’ The Court indicated that it would briefly discuss the various cases dealing with these differing aspects in order to derive a principle that could guide the resolution of the question before it. The earliest case mentioned was Kunhaven Haji v. Mavan (1893), in which the Court held that a lease of a coffee garden did not constitute an agricultural lease within the meaning of Section 117 of the Transfer of Property Act. In that case, the Court based its conclusion on the lease document, which appeared to pertain solely to the coffee plants, and it did not undertake any further discussion of the broader legal position.

It may be recorded that Justice Shephard, who had taken part in the earlier decision, later acknowledged in the case of Murugesa Chetti v. Chinnathambi Gounden (2) that his previous opinion concerning a coffee garden had been erroneous. The matter before the Court in Murugesa Chetti v. Chinnathambi Gounden (2) also involved section 117 of the Transfer of Property Act. In that case the lease under consideration concerned land used for the cultivation of betel. The Court held that such a lease fell within the meaning of an agricultural lease prescribed by section 117. Justice Bhashyam Ayyangar, who delivered the principal judgment, examined the ordinary meanings of the word “agriculture” and observed that, in the context of section 117, the term was intended in a broad sense to include the raising of vegetables, fruits and other garden produce for the nourishment of humans or animals, even though some of those products might be classified in England as horticultural rather than agricultural. The learned judge then analysed the fine distinction between “agriculture” and “horticulture”, remarking: “The distinction between agriculture when it is used otherwise than in its primary and more general sense and horticulture is a fine one even in England and in India; especially, it will be impossible in the case of several products of the land to draw a line between agriculture and horticulture according to English notions. The only practical distinction which I can suggest and one which will give effect to the policy of the Legislature in exempting agricultural leases from the operations of section 107, etc., of the Transfer of Property Act is to regard as agriculture, as distinguished from horticulture, not only all field cultivation by tillage but also all garden cultivation for the purpose chiefly of procuring vegetables or fruits as food for man or beast and other products fit for human consumption by way of luxury, if not as an article of diet.” He proceeded to discuss the legislative policy of exemption, referring to the observations of Justice Cave in Ellis & Co. v. Hilse(l): “The very object of this exemption is the well‑known one of favouring agriculture—an old object of English legislation in favour of a very important industry.” Justice Ayyangar added that this principle acquired even greater force in India, where agriculture was more important than in England and where both wet and dry cultivation were undertaken principally to obtain food for people and cattle as well as other soil products that were commonly consumed as gentle stimulants or luxuries. He noted that betel leaf is an article of daily consumption across all classes in the country, comparable to the widespread use of tobacco leaf, and that the betel vine is ordinarily grown alongside other plantations.

In that earlier case the court observed that betel vines were generally cultivated alongside plantation crops, and that the produce of those plantations formed a principal part of the vegetable diet. Because the lease in dispute was for the purpose of cultivating betel, the lease was held to be an agricultural lease. Justice Shephard concurred with this finding and expressly revised the view he had expressed previously in Kunhavan Haji v. Mavan. In the later decision of Raja of Venkatagiri v. Ayyappa Reddy (1913) I.L.R. 38 Mad. 738, the issue before the court was whether land that was suitable only for grazing cattle and not for ploughing or for raising crops could be described as “ryoti” land, even though such land might have been classified as “old waste.” The court examined the definitions contained in section 3 of the Madras Estates Land Act (Madras Act I of 1908) and held that a tenant of such grazing land was a “ryot” and any sum paid for the purpose of pasturing cattle was “rent.” However, the court concluded that the land in question did not qualify as “ryoti” land because it was not capable of being ploughed or of producing agricultural crops. The court explained that the ordinary meaning of “agriculture” referred to the raising of annual or periodic grain crops through the processes of ploughing, sowing, and related operations, as stated by Justice Sadasiva Ayyar on page 741 of the report. In the matter of Chief Commissioner of Income Tax, Madras v. Zamindar of Singampatti (1922) I.L.R. 45 Mad. 518 (F.B.), the dispute arose from an assessment made under Act VII of 1918 on income that the Zamindar earned from forests and fisheries located within his zamindari. The assessee challenged the assessment on two grounds: first, that the income should be regarded as agricultural income within the meaning of section 4 of the Income‑Tax Act and therefore exempt from tax; and second, that the assessment violated the terms of his permanent sanad for the zamindari as well as the provisions of Regulation XXV of 1802. The court held that where the peishkush of a permanently settled estate was fixed in commutation not only for the rentals of cultivated land but also for all revenue that might be derived from forests or fisheries, both the sanad and section I of Regulation XXV of 1802 exempted such incomes from further taxation by the government, and section 3 of the Income‑Tax Act could not override that exemption. Consequently, the court considered it unnecessary to decide whether income from forests or fisheries fell within the definition of “agricultural income.” Nevertheless, the court noted that a reference to Murray’s and Webster’s dictionaries showed that the term “agriculture” is sometimes used narrowly to mean the science of cultivating the soil, but it is also employed in a broader sense that includes “forestry,” as Webster records. The court observed that determining which sense the framers of the Income‑Tax Act intended would require further inquiry, and that such a determination was not within the scope of the present decision.

In examining the rationale for the exemption of agricultural income from income‑tax, the Court noted that the only explanation offered was the fairness of relieving a revenue source that had already contributed to the State through land‑revenue payments. Consequently, the issue of whether income derived from forests qualified as “agricultural income” under section 4 of the Income‑tax Act remained unresolved, and the conclusion that such forest income was not subject to income‑tax was based on the provisions of the Sanad and section I of Regulation No. 25 of 1802. The case of Kaju Mal v. Salig Ram (1) involved, among other matters, a plantation where tea was cultivated, raising the question of whether that land fell within the definition of “agricultural income” or “village immoveable property” as prescribed in sections 3(i) and (ii) of the Punjab Pre‑emption Act, 1905. The Court held that lands planted with tea bushes were lands used for agricultural purposes, a decision later affirmed by the Privy Council in Kaju Mall v. Salig Ram (1). The Court further observed that the expression “agricultural purposes” in section 2(iii) of the Punjab Alienation of Land Act, 1900 expressly embraced tea cultivation; therefore, any land not occupied by a building in a town or village but let or occupied for tea cultivation qualified as “agricultural land” within the meaning of section 3(i) of the Punjab Pre‑emption Act, 1905. In Emperor v. Probhat Chandra Barua (2), a matter decided under the Indian Income‑tax Act, the Court identified three classes of income arising from permanently settled estates: (1) income from fisheries, (2) income from land used for stacking timber, and (3) income from pasturage. The first two categories were clearly not agricultural income nor income derived from “land which is used for agricultural purposes” as defined in sections 2 and 4 of the Act. By contrast, income from pasturage was held to constitute agricultural income and therefore could not be lawfully subjected to income‑tax. Although a divergence of opinion existed between Rankin, J., and Page, J., regarding the taxability of income from fisheries and timber‑stacking land based on the Permanent Settlement Regulations of 1793, that disagreement was deemed irrelevant to the present consideration. What mattered, the Court emphasized, was that both judges concurred that income from pasturage arose from “land which is used for agricultural purposes” and thus fell within the exemption provided by clause 4(3)(viii) to agricultural income as defined by section 2(1)(a) of the Act. Finally, in Kesho Prasad Singh v. Sheo Pragash Ojha (3), the Privy Council held that a grove did not constitute land “held for agricultural purposes” within the meaning of section 70 of the Agra Tenancy Act, 1901, thereby affirming the decision of the Allahabad High Court on that point.

The Court observed that it was impossible to hold that the statutory provision in question could apply to a property such as the grove described, because the grove was not within the intended scope of that provision. The earlier authorities cited in support of this view were (1)(1923) I.L.R. 5 Lah. 50, (2)(1924) I.L.R. 51 Cal. 504 and (3)(1924) I.L.R. 46 All. 831. In the matter of Commissioner of Income‑tax, Madras v. T. Manavedan Tirumalpad (1), the decision was rendered under the Indian Income‑tax Act (XI of 1922). The assessee had been assessed by the Income Tax Officer for the fiscal year 1928‑29 on the basis of the proceeds received from the sale of timber trees that had been cut and removed from forest land. The central issue was whether those proceeds were subject to income‑tax. The Court noted that the income arose from the sale of timber harvested in a forest, unlike income from the sale of paddy cultivated on agricultural land, which would ordinarily be taxable but for the specific exemption granted to agricultural income by the Income‑tax Act. The Court further observed that a similar exemption existed for income derived from the sale of timber, yet the judgment did not contain any discussion that clarified whether the receipts from timber sales should be classified as agricultural income and therefore exempt from tax. Subsequently, the Madras High Court in Chandrasekhara Bharathi Swamigal v. Duraisami Naidu (2) provided an extensive analysis of the meaning of “agriculture”. That case arose under the Madras Estates Land Act (Mad. I of 1908) and required determination of whether the cultivation of Casuarina trees for fuel qualified as an agricultural purpose, which would render the occupier a “ryot” within the meaning of the Act. The Court held that land used for growing Casuarina trees did not constitute agricultural land, and consequently the occupier was not a “ryot”. While delivering the judgment, Justice Reilly examined the definition of agriculture and concluded that it could not be defined merely by the nature of the product cultivated. Instead, agriculture should be understood in terms of the circumstances under which cultivation is carried out. He quoted at page 902: “I agree with the remark of Shephard, J., in Murugesa Chetti v. Chinnathambi Goundan (1) that a man who plants or maintains trees for firewood is not in ordinary parlance an agriculturist. If we take the strict meaning of ‘agriculture’ according to its derivation, it means the cultivation of a field, the cultivation of an open space, as opposed to horticulture, the cultivation of a comparatively small enclosed space.” The judgment further explained that the cultivation of a field in agriculture or of a garden in horticulture cannot be confined to any particular product.

In this passage the Court expressed respect for earlier judgments but rejected the narrow views advanced by certain judges. It stated that it could not agree with the opinion of Bhashyam Ayyangar, J., in Murugesa Chetti v. Chinnathambi Goundan (1) who limited the meaning of agriculture to the production of food for humans or animals or to products that are luxuries for human consumption, describing such an interpretation as overly restrictive. The Court also disagreed with the view of Sadasiva Ayyar, J., in Raja of Venkatagiri v. Ayyappa Reddi that agriculture should be confined only to grain crops. The Court observed that there is no justification for excluding from agriculture the cultivation in open spaces of useful fibres such as cotton, jute, flax and hemp, and it emphasized that agriculture should be understood according to the circumstances in which cultivation is carried out rather than by the nature of the products produced. While some authorities have suggested that agriculture is limited to tillage, the Court noted that cultivation existed long before the invention of the plough and that even today many cultivators work with spades instead of ploughs. However, the Court distinguished the planting of timber or fire‑wood trees, which are intended to remain on the land for many years as plantations, woods or forests, from the concept of agriculture, which it defined as the cultivation of an open space. It acknowledged that establishing a plantation may require initial land preparation, as noted in (1) (1901) I.L.R. 24 Mad. 42I, 423, and later activities such as protecting, watering and thinning the young plants, as indicated in (2) (1913) I.L.R. 38 Mad. 738. Nevertheless, when the land becomes covered with trees that must stand for decades or even a century, leaving the soil largely untouched for most of that period, the Court found it inappropriate to label such activity as agriculture, describing it as a distinct kind of land use. The Court referred to the decision in Kesho Prasad Singh v. Sheo Pragash Ojha (1) where the Privy Council, agreeing with two learned judges of the Allahabad High Court, held that land let for a grove was not let for an agricultural purpose under the Agra Tenancy Act, an Act that does not define “agriculture”. Finally, the Court recalled that in Commissioner of Income Tax v. Manavedan Tirumalpad (2) a Full Bench of this Court had observed that income derived from cutting timber did not constitute agricultural income.

The learned Judge broadened the meaning of the term “agriculture” by considering the circumstances in which cultivation takes place rather than limiting the definition to the nature of the products produced. He held that “agriculture” includes not only the production of food for man or beast or other items intended for human consumption as a luxury, but also embraces useful products such as cotton, jute, flax and hemp. However, the Judge stopped short of including the growing of trees in plantations where the land remains covered by trees that have to stand on it for many years. The next case cited in this series is Deen Mohammad Mian v. Hulas Narain Singh (1) (1924) I.L.R. 46 All. 831, where the Court held that an orchard constitutes agricultural land. The Court observed that the case of an orchard is quite different because orchard trees are ordinarily planted by men after the ground has been prepared, which itself is an act of cultivation, and seasonal crops are gathered from the orchard. Fruit trees also require seasonal attention such as pruning and digging around the roots, and it cannot be said that the activity ceases to be cultivation merely because the whole tree is not replanted each year. In the present case, the Court expressed the opinion that the land in suit is agricultural land; it is land from which, by preparing the soil and planting and cultivating trees, the raiyat expects to receive periodic returns in the form of produce for food. This represented a further extension of the idea originally expressed by Reilly, J., in Chandrasekhara Bharathi Swamigal v. C. P. Duraisami Naidu (1), incorporating the plantation of trees in orchards that do not need to be replanted every year within the connotation of “agriculture”. An additional extension of the term is found in the observations of Vishwanatha Sastri, J., in The Commissioner of Income‑tax, Madras v. K. E. Sundara Mudaliar (2) at page 273, where he noted that in this part of the country mango, coconut, palmyra, orange, jack, arecanut, tamarind and other trees are usually planted in enclosed land and do not bear fruit or crop in the early years of growth. These trees remain on the land for many years, yielding fruit only after they reach maturity. There is no reason why the planting, rearing, watering, fencing, protection of such trees and the gathering of their fruits during the annual seasons should not be regarded as “agriculture”. He explained that there is some cultivation or prodding of the soil at the inception when the planting is done and subsequently at intervals. In the case of coffee grown on hill slopes, there is no ploughing or tillage, yet the activity remains within the concept of agricultural operation.

In the judgment the Court explained that the cultivation of coffee and tea cannot be dismissed as a non‑agricultural activity. The plants remain rooted in the soil for many years and their harvest is taken at intervals. The Court then described the cultivation of plantains in the padugai lands, which are the strips of ground between river sandbanks and flood banks in the delta region. Young plantain suckers are brought to these areas and placed in pits dug in straight rows, leaving adequate space between each plant. Small trenches are dug alongside each row to collect and retain water. Each plantain tree lives for about two years, after which shoots emerge from its base and replace the original tree, providing a natural regeneration of the garden. The Court held that this method of raising plantains clearly constitutes an agricultural purpose. In a similar way the Court noted that sugarcane plants stand on the field for two years or a little longer and are usually harvested twice. Castor plants also remain in the soil for several years, and their seeds are collected periodically. The Court further illustrated the cultivation of bamboo, which is commonly planted in enclosed plots by digging pits, filling them with sand and manure, and inserting young bamboo stalks at appropriate distances. Water is supplied for the first two or three years, and each year the soil around each bamboo clump is turned over with a spade and small earthen ridges are built to trap rainwater. Bamboo reaches maturity after three to four years, after which the thorny branches growing on the main stem are cut and used for fencing. The Court concluded that there is no reason to treat any of these described operations as anything other than agricultural activities.

The Court then observed that the cases it had cited all interpreted the term “agriculture” in a relatively narrow sense, although the interpretation has broadened over time. Earlier, Bhashyam Ayyangar J. in Murugesa Chetti v. Chinnathambi Goundan applied an extremely narrow construction of the term. Later, Reilly J. in Chandrasekhara Bharathi Swamigal v. C.P. Duraisami Naidu, and Vishwanatha Sastri J. in The Commissioner of Income‑tax, Madras v. K.E. Sundara Mudaliar (1901) I.L.R. 24 Mad. 421, 423 and (1931) I.L.R. 54 Mad. 900, adopted a somewhat wider meaning. The Court found that across all these authorities a common element emerges: either tillage of the land, sowing of seeds, planting, or similar work that imparts the character of agricultural activity. When this central element is present, the land is used for agricultural purposes and the income derived from it is classified as agricultural income. The Court also noted that there exist other decisions which interpret “agriculture” in an even broader sense, encompassing all activities related to the land, even if those activities do not include the basic agricultural operations described above.

In the case of King Emperor v. Alexander Allen (2), the Court examined the meaning of the phrase “land used solely for agricultural purposes” that appeared in sub‑section (3) of section 63 of the Madras District Municipalities Act (Mad. IV of 1884) as amended by the Madras District Municipalities Amendment Act (Mad. III of 1897). The Court held that land on which potatoes, grain, vegetables and similar crops were cultivated, as well as pasture land, fell within the meaning of land used solely for agricultural purposes under the sub‑section. To reach this conclusion, the Court adopted the definition of agricultural land found in the Agricultural Rates Act (59 and 60 Vict., Chap. 16) section 9, which describes agricultural land as any land used exclusively as arable, meadow or pasture ground, cottage gardens exceeding one‑quarter of an acre, market gardens, nursery grounds, orchards or allotments, but expressly excludes land occupied with a house as a park, gardens other than those described, pleasure grounds, land kept mainly for sport or recreation, or land used as a race‑course. The Court also consulted the meaning given in Murray’s Oxford English Dictionary, noting that restricting the word “agriculture” to tillage alone was rare. The Court observed that the lands in question were not fields for agriculture but pastures for cattle, and consequently decided to follow the broader definitions. The Court stated that it could not draw a distinction between large and small plots on which grain roots were cultivated, and that all such land must be considered land used solely for agricultural purposes. Counsel had urged that these so‑called waste lands were actually pasture lands and therefore should be treated as lands used solely for agricultural purposes. The Court agreed that if it could be shown that the waste lands were truly pasture grounds or lands used for rearing livestock, they would be deemed lands used solely for agricultural purposes. The learned Judges were influenced by the dictionary meaning of “agriculture” as given in Murray’s New Oxford Dictionary, and understood the term in a wide sense that included the use of land for rearing livestock.

In the later decision of Panadai Pathan v. Ramaswami Chetti (1), the issue concerned a lease granted for the cultivation of casuarina trees. The question before the Court was whether such a lease qualified as a lease for agricultural purposes within the meaning of section 117 of the Transfer of Property Act. The Court held that the lease was indeed for agricultural purposes and therefore did not require a registered instrument for its creation. While delivering the judgment, Spence J. expressed a view that differed from the earlier opinion of Bhashyam Ayyangar J. in Murugesa Chetti v. Chinnathambi Goundan, demonstrating a divergence in the interpretation of what constitutes agricultural use under the statute. This distinction highlighted the evolving judicial approach to defining agricultural land and its permissible uses.

The Court referred to the observations of Bhashyam Ayyangar, J., in Murugesa Chetti v. Chinnathambi Goundan, noting that the term “agriculture” in its broader sense includes the cultivation of vegetables, fruits and other garden produce for the nourishment of humans or animals, and that limiting the term merely to food‐producing activities would exclude crops such as flowers, indigo, cotton, jute, flax, tobacco and similar cultivations. The Court further explained that this view differed from the opinion expressed by Sadasiva Ayyar J. in Seshayya v. Rajah of Pittapur and Rajah of Venkatagiri v. Ayyappa Reddi, where agriculture was defined narrowly as the raising of annual or periodic grain crops through ploughing, sowing and related operations, a definition that would leave out sugarcane, indigo, tea, flower, tobacco and betel cultivation. The Court then quoted the dictionary definition of “agriculture” found in the Oxford Dictionary and Bouvier’s Law Dictionary, stating: “In my opinion agriculture connotes the raising of useful or valuable products which derive nutriment from the soil with the aid of human skill and labour; and thus it will include horticulture, arboriculture and silviculture, in all cases where growth of trees is effected by the expenditure of human care and attention in such operations as those of ploughing, sowing, planting, pruning, manuring, watering, protecting etc.” The Court also cited the concurring judgment of Ramesam, J., who relied on the definition adopted in Wharton’s Law Lexicon and held that agriculture includes the use of land as meadow, pasture, orchard, osier, woodland, market garden, nursery ground or allotment, while expressly excluding the cultivation of fibrous plants such as cotton, jute and linen, plants used for dyeing such as indigo, and all timber trees and flowering plants. According to Ramesam, J., the establishment of a Casuarina plantation requires ground preparation and subsequent watering, and therefore the cultivation of Casuarina trees falls within the meaning of “agricultural purpose” under section 117 of the Transfer of Property Act. The Court observed that both judges considered some degree of ground preparation or human care—such as ploughing, sowing or planting—to be essential for an activity to qualify as agricultural. The Court then turned to the decision in Commissioner of Income‑tax, Burma v. Kokine Dairy, Rangoon, where the issue was whether income derived from a dairy farm and the milk produced there constituted agricultural income exempt from income tax. Roberts C.J., delivering the Court’s opinion, observed that where cattle are entirely stall‑fed and never pastured, the activity is unquestionably a trade and not an agricultural operation.

The Court explained that when cattle are kept mainly on pasture but are still given only small quantities of oil‑cake or similar supplements, the income earned from selling their milk may be treated as agricultural income; however, the Court emphasized that between the two extremes—full stall‑feeding and complete grazing—there exist many intermediate situations, and it is the responsibility of the income‑tax officer to examine the facts of each case and determine on which side of the dividing line the particular situation falls. The Court then referred to the earlier decision in Lean and Dickinson v. Ball, noting that Lord Cullen had reasoned that the case involved poultry farming in which the birds obtained a material portion of their sustenance from the ground’s produce. The Court observed that this line of reasoning was similar to that adopted by Lord Wright in Lord Glanely v. Wightman, where it was stated that, if authority were required, the quoted provisions demonstrate that “profits of occupation” encompass gains from animal produce as well as from agricultural, horticultural, or arboricultural produce of the soil. The Court further quoted that it is evident that the rearing of animals, being products of the soil because they draw nourishment from and live upon the soil, constitutes a source of profit from the occupation of land, whether the animals are kept for food consumption such as bullocks, pigs or chickens, for providing food such as cows, goats or fowls, for recreation such as hunting or race horses, or for work such as draught or plough horses. The Court pointed out that all these animals are as integral to the soil, in the relevant sense, as trees, wheat, flowers or roots, although they differ in obvious respects. The Court also noted that modern farming employs mechanical appliances and power for activities such as ploughing, reaping and threshing, and even for traditional processes like making cream, butter or cheese, yet the farmer continues to deal with the products of the soil, and that Schedule B therefore covers the income. The House of Lords, the Court observed, was addressing profits of occupation of land rather than income arising from the use of land for agricultural purposes, and consequently was not limited in its interpretation of the term “occupation.” All the activities described by the House of Lords could therefore fall within the ambit of the taxing statutes. The Court concluded that the essential question remains whether such activities fit within the meaning of “agriculture” and “agricultural purpose,” the only concepts that can bring the income derived therefrom within the definition of agricultural income under the statute.

In this case the Court examined the meaning of agricultural income under section 2(1)(a) of the Indian Income‑Tax Act. It referred to the decision in Moolji Sicka & Co., In re, where the Chief Justice had interpreted the term “agriculture” in a broad sense, so as to include operations not only on the land itself but also on the shrubs that grew from the soil and were, in his view, part of the soil. The assessees were manufacturers of biri, a type of cigarette made by wrapping tobacco in tendu leaves. The tendu plant grew wild, propagating without any human intervention on jungle and waste lands. The assessees obtained leases over several villages for the purpose of plucking the leaves of these plants. Their work involved pruning the tendu trees and burning dead branches and dried leaves that lay on the ground. The Court held that the profits obtained from selling the tendu leaves could not be treated as exempt agricultural income in their entirety; however, to the extent that the assessees' activities consisted of pruning the tendu shrubs, there was, in a technical and legal sense, cultivation of the soil in which the shrubs grew. Consequently, the portion of income that the assessee could demonstrate was derived from the collection and preparation of the leaves—preparation being necessary to make the leaves marketable—was exempt as agricultural income under sections 2(1) and 4(3)(viii) of the Act. The learned Chief Justice explained that “cutting back or pruning the wild tendu clearly contributes to the growth of the leaves in that shrub and I am prepared to hold that the pruning of the shrub is a cultivation of the shrub and, as the shrub grows in the soil and is a part of it, it is a cultivation of the soil in a legal and technical sense.” Thus, the word “cultivation” was understood not merely as cultivation of the earth itself but also as cultivation of the tendu shrubs that are rooted in the soil and therefore legally part of it. Although the operations were performed on the shrubs rather than directly on the soil, the judgment extended the meaning of cultivation to include such activities, linking them to the soil. The Court emphasized that cultivation of the soil was the essential element that rendered the income from the tendu leaves agricultural within the definition of section 2(1)(a). The decision also cited Commissioner of Income‑Tax, Madras v K E Sundara Mudaliar, where Justice Vishwanatha Sastri observed that pasture land used for feeding and rearing livestock is land used for agricultural purposes, thereby reinforcing the broader interpretation of agriculture.

In this passage, the Court explained that livestock such as cows, buffaloes, sheep and poultry fall within the concept of “husbandry.” The Court observed that these animals are regarded as products of the soil in the same manner as crops, roots, flowers and trees because they live on the land and obtain their nourishment from the soil and its produce. The Court supported this view by citing the authority of Glanely v. Wightman (3) and the decision of the Commissioner of Income‑tax, Burma (1) [1950] 18 I.T.R. 259, 271 and Kokine Dairy Co. (1). The Court then stated that it would be unreasonable to restrict the meaning of “agriculture” solely to the cultivation of open fields with annual or periodic crops such as wheat, rice, ragi, cotton, tobacco or jute. It noted that a tree species such as Casuarina is frequently raised on dry, poor‑quality lands, and that the same parcel of land is often used alternately for growing ordinary cereal crops such as groundnut, gingelly, cholam or kambu and for establishing Casuarina plantations. The Court explained that the land continues to be assessed as dry land regardless of which crop is cultivated. This broader interpretation of “agriculture” is reinforced by the definitions found in Murray’s Oxford Dictionary and Webster’s Dictionary, which describe the term as encompassing allied activities including the rearing, feeding and management of livestock, as well as husbandry, farming, horticulture and related enterprises such as butter and cheese making. The Court indicated that it would later examine, at the appropriate stage, how far this expanded meaning should be applied under the definition of “agricultural income” provided in section 2(1)(a) of the Indian Income‑Tax Act. The Court further observed that all the cases cited involved some degree of human skill or labour applied either to the land itself or to its produce; without such human effort, the income derived from the land would not be regarded as agricultural income. Conversely, where the products of the land arise from wild or spontaneous growth without any human labour or skill, there is a unanimous view that no agricultural operations are involved and consequently no agricultural income is generated. In such situations, the lack of human intervention, rather than any activity, is the principal cause of the growth of the products. The Court referred to the case law on this point, beginning with Kaju Mal & others v. Salig Ram (2), which is the earliest decision dealing with a stretch of natural forest. That case held that the forest land in question was agricultural land or land used for purposes subordinate to agriculture or for pasture, and therefore it was exempt from pre‑emption under section 4 of the Punjab Pre‑emption Act, 1905. Although that judgment did not discuss the underlying legal principles, it set the stage for the subsequent decision of Province of Bihar v. Maharaja Pratap Udai Nath Sahi Deo (1), a case decided under the Bihar Agricultural Income Tax Act (Bihar VII of 1938), where the Court later articulated the ratio of these earlier decisions in clear terms.

In the case decided under the Income Tax Act (Bihar VII of 1938), the Court explained the principle laid down by earlier decisions. The assessors in those cases had earned income from what were called “Bankar” and “Phalkar.” “Bankar” referred to revenue obtained from the sale of timber that came from virgin forests or jungles that had not been cultivated, while “Phalkar” denoted income derived from the fruits of wild jungle trees and shrubs. The essential question before the Court was whether such income could be classified as agricultural income within the meaning of the definition contained in the Act. Chief Justice Harries, delivering the judgment of the Court, observed that the “Bankar” head of income originated from virgin forests or jungle land that had not been cultivated. Although a few forest guards might have been employed to protect the property, the trees had not grown as a result of any human cultivation; they had grown naturally without human intervention, and therefore their growth could not be said to result from the cultivation of soil. In his view, the absence of cultivation was what allowed the area to develop into a jungle.

Regarding “Phalkar,” the Court explained that this income came from wild jungle fruits and that the fruits could not be said to be the result of cultivation. On the contrary, they resulted from the lack of cultivation. The trees and bushes that yielded these fruits grew on land that was not cultivated, and often the more neglected and wild the land, the thicker grew these wild bushes and trees. In practice, the crop was the result of the want of cultivation rather than the result of cultivation. The Court concluded that it was not established that the income described as “Phalkar” in these cases was derived from land used for agriculture or from agricultural activity, and therefore it could not be assessed as agricultural income for tax purposes. In the earlier decision of Raja Mustafa Ali Khan v. Commissioner of Income Tax, U. P. & C. P., which reached the Privy Council, the Oudh Chief Court held that income from the sale of forest trees that grew naturally, without human agency, even if the land was assessed for land revenue, did not constitute agricultural income under section 2(1)(a) of the Income‑tax Act. That Court had earlier followed the judgment in Maharaja of Kapurthala v. Commissioner of Income Tax C. P. & U. P., where the meaning of “agriculture” was discussed, noting that a fiscal statute must be construed strictly, but that there was no doubt that the expression “land used for agricultural purposes” in the Income‑tax Act did not extend to forests of spontaneous growth where nothing was done to prepare the soil or foster the growth of trees through tillage.

In the judgment, the Court explained that the term “forests of spontaneous growth” referred to forest areas where no effort was made to prepare the soil for planting and where the trees had not been encouraged by any tillage or cultivation. The Court held that it would be inappropriate to grant the taxpayer the advantage of a dictionary meaning of the word “agricultural” when it was not contested that the expression could not be broadened for the purposes of the Income‑Tax Act to include every secondary implication that might be suggested. Accordingly, the Court interpreted the term in its primary sense. It therefore concluded that income obtained from the sale of forest trees that grew spontaneously on land assessed for land revenue did not constitute agricultural income within the meaning of section 2(1)(a) of the Income‑Tax Act. The Court cited the decision in Yuvarajah of Pithapuram & Anr. v. Commissioner of Income Tax, Madras (3) as a further illustration. In that case, the assessee earned revenue from forests of spontaneous growth by selling wood, bark, leaves, other usufructs of trees, minor forest produce and licence fees, as well as from trees that had grown wild in areas not designated as forest. The Zamindari of Pithapuram was a permanently settled estate governed by Regulation XXV of 1802 under the Permanent Settlement, and it was argued that imposing income tax on income other than agricultural income from such an estate would not violate the said regulation. The argument relied on the earlier authority of Chief Commissioner of Income Tax v. Zamindar of Singampatti (1). However, the Court found that this authority had been implicitly overruled by the Privy Council decision in Probat Chandra Barua v. King Emperor (2). Consequently, the Court examined whether income derived from forests of spontaneous growth—through the sale of wood, bark, leaves, other usufructs, minor forest produce and licence fees, as well as from trees that had grown wild in non‑forest areas—could be classified as agricultural income under section 2(1) of the Indian Income‑Tax Act. The Court observed that ample authority existed confirming that income from wild‑grown trees was not agricultural income, and it added that describing such income as agricultural would distort the meaning of the word “agriculture”. Accordingly, the income in question was held not to be agricultural income within the meaning of section 2(1) of the Act. The Court noted that the appellant had attempted to appeal this decision to the Privy Council, but that appeal was dismissed in Yuvarajah of Pithapuram & Anr. v. Commissioner of Income Tax, Madras (3). The judgment also referred to Benoy Ratan Banerji v. Commissioner of Income Tax, U.P., C.P. & Berar (4), another case where the assessee derived income from the sale of timber from a Zamindari that had long contained numerous forest trees, khar and wild plants, with no evidence that the assessee had cultivated the trees. The Court reiterated that for income to be classified as “agricultural,” it must arise not only from land used for agricultural purposes but also from the process of agriculture itself, a condition not satisfied by spontaneously growing trees on which the assessee made no contribution through cultivation.

The Court observed that the Zamindari in question had, for many years, contained a number of forest trees, khar and wild plants, and that the record contained no evidence that the growth of those trees resulted from any actual cultivation by the assessee. The various trees that were sold were of spontaneous growth and had not grown as a result of any cultivation by the assessee. The Court held that for income to fall within the definition of “agricultural income” it must not only be derived from land used for “agricultural purposes” but must also be produced by the process of “agriculture”. Because the trees were spontaneous and the assessee had made no contribution by way of cultivation, the Court said that no question could arise about either the land on which they grew being “used for agricultural purposes” or the trees and the income they produced being the result of “agriculture”. Accordingly, the Court held that income from the sale of forest trees of spontaneous growth, growing on land naturally and without human intervention, was not agricultural income within the meaning of section 2(1)(a) of the Income‑Tax Act, even though such land was subject to a local rate assessed and collected by Crown officers. Consequently, that income was not exempt from tax under section 4(3)(viii) of the Act. The Court then referred to a decision of the Nagpur High Court in Beohar Singh Raghubir Singh v. Commissioner of Income Tax, reported in 1948, where the income in question was derived by the assessee from the sale of forest produce such as timber, tendu leaves, mohua flowers and harranuts taken from a forest that was not cultivated but of spontaneous growth. The issue was whether such income qualified as agricultural income and therefore exempt under section 4(3)(viii). The Court examined dictionary definitions of “agriculture”, noting that although forestry could be included within the term, the essence of agriculture, even when extended to forestry, required the application of human skill and labour; without that it could be neither an art nor a science, and that factor was decisive in such cases. The Court then quoted with approval a passage from the Federal Court judgment in Meghraj v. Allah Rakhia, which confirmed a Punjab Chief Court decision that land used as a tea garden was land used for “agricultural purposes”. The Chief Court had observed that the term “agricultural land” in the 1905 Act was used in its widest sense to denote all land which is tilled, and it had held that land covered by a natural forest was not agricultural land, a view that appeared to have been affirmed by the Judicial Committee. The Court stressed the importance of the word “tilled”, saying that it highlighted the distinction between agricultural and non‑agricultural purposes. It concluded that it is essential for income to be derived from an activity that necessitates the employment of human skill and labour, and that income arising merely from the gathering of what nature produces without any active effort by the assessee cannot be classified as agricultural income.

In the judgment that was quoted, the term “land” was said to be used in the Act of 1905 in its broadest sense to denote every piece of land that is tilled. The Chief Court, however, held that land covered by a natural forest did not constitute agricultural land, and that view was also said to have been confirmed by the Judicial Committee. The Court stressed the word “tilled” because, in its opinion, it highlighted the distinction between land used for agricultural purposes and land used for non‑agricultural purposes. The decisions referred to in this context were Kaju Mal v. Saligram and Kajumal v. Saligram. From these authorities the Court concluded that for income to be regarded as agricultural, it must arise from an activity that requires the application of human skill and labour, and it cannot be merely the result of a person’s neglect or inaction that merely gathers natural spoils. The assessee must not only labour to reap a harvest but also must labour to produce it. Accordingly, the Court held that the income under consideration was not agricultural income and therefore could not be exempt from tax under section 4(3)(viii) of the Indian Income‑Tax Act.

The discussion then turned to the decision of the Privy Council in Raja Mustafa Ali Khan v. Commissioner of Income‑Tax, U.P., Ajmer and Ajmer Merwara. It was recalled that the Oudh Chief Court, in that case, had decided that income derived from the sale of forest trees growing naturally on land without any human intervention, even when the land was assessed for land revenue, was not agricultural income within the meaning of section 2(1)(a) of the Indian Income‑Tax Act. The appellant appealed this decision to the Privy Council, and the principal question before the Lords was whether the land was “used for agricultural purposes” and whether the income derived from it qualified as agricultural income. The Privy Council observed that the income in question arose from the sale of trees described as forest trees growing on land naturally, and that there was no evidence that the assessee was engaged in any regular forestry operations; the jungle from which the trees were cut was a spontaneous growth. The Council considered whether such income should be characterized as rent or revenue under section 2(1)(a), or alternatively as income from agriculture under section 2(1)(b). It held that, irrespective of the specific provision relied upon, the essential condition was that the land must be used for agricultural purposes; the phrase “such land” in subsection (b) refers back to the land mentioned in subsection (a) and must satisfy the same requirement.

In the matter before the Court, it was held that the decisive factor was whether the land in question could be shown to be “used for agricultural purposes”; if the assessee failed to prove this, his case would fail. The Court concurred with earlier judgments of the Chief Court of Oudh, the High Court of Madras (see Yuvarajah of Pithapuram v. (1) [1948] 16 I.T.R. 330; (2) [1945] 13 I.T.R. 98; Commissioner of Income Tax, Madras (1)), and the High Court of Allahabad (see Benoy Ratan Banerji v. Commissioner of Income Tax, U.P., C.P. & Berar (2) and other Indian authorities). The Court observed that it remained unsettled whether land that has been planted with trees and cultivated in the ordinary course of arboriculture could be described as “used for agricultural purposes” within the meaning of the provision, and it expressed no opinion on that specific question. For the purposes of the present appeal, the Court stated two points: first, that the meaning attached to the term “agriculture” in statutes other than the Income‑Tax Act should not be imported; and second, that, although drawing a precise line is always difficult, land cannot be said to be used for agricultural purposes under the Indian Income‑Tax Act unless there is some measure of cultivation of the land together with an expenditure of skill and labour upon it. The Court agreed with the High Court that the record contained no evidence capable of supporting the conclusion that this condition had been satisfied. It was noted that the Privy Council had also proceeded on the assumption that there was no proof of any regular forestry operations by the assessee, and that those observations implied that, had regular forestry activities been carried on, the result might have been different. The Privy Council, however, did not opine on whether land planted with trees and managed in the ordinary course of arboriculture could be treated as agricultural land. Nevertheless, the Court was explicit that without some measure of land cultivation and an accompanying expenditure of skill and labour, the land could not be characterised as used for agricultural purposes within the meaning of the Act. Accordingly, the Court defined agricultural operations as those involving both a degree of cultivation and the application of skill and labour. Where such conditions are met with respect to particular land, that land may be regarded as used for agricultural purposes and the income derived therefrom may constitute agricultural income within the meaning of section 2(1)(a) of the Act.

The Court explained that, according to the decision of the Privy Council, the term “agriculture” in the Indian Income‑Tax Act was defined to require two elements: a measurable amount of cultivation of the land and a measurable expenditure of skill and labour upon it. Consequently, unless any operation—whether characterised as an agricultural operation or a forestry operation—met both of those elements, it could not be described as an agricultural operation and the land on which it was carried out could not be said to be land used for agricultural purposes within the meaning of the Act. It might have been expected that the Privy Council’s pronouncement would finally resolve all disputes concerning the meaning of “agriculture” and “agricultural purposes.” That expectation proved unfounded because the language used by the Lords was ambiguous, and an immediate controversy arose over whether the phrases “some measure of cultivation of the land” and “some expenditure of skill and labour upon it” were intended to be cumulative requirements or alternative ones. Substantial effort was then expended in trying to identify which forestry activities could be treated as regular operations and whether such activities could be assimilated to agricultural operations so that the land on which they were performed would qualify as land used for agricultural purposes, thereby allowing the income derived therefrom to fall within the definition of agricultural income under the Act. The first case that confronted this issue after the Privy Council decision was Commissioner of Agricultural Income Tax, West Bengal v. Raja Jagadish Chandra Deo Dhabal Deb (1), which was heard before the Calcutta High Court. In that case the assessee was the zamindar of Chilkigarh in the Midnapore district, an area whose western portion contained a “jungle mahal.” The income in dispute originated from the sale of Sal trees growing in that forest. The forest was not a neglected virgin forest; the assessee employed a staff consisting of one forester, six guards and twenty‑four Chaukas to look after and to cultivate the forest properly. The Sal trees were generally sold in blocks when they reached an age of about fifteen years, and approximately one thousand acres were sold each year. The purchasers cut down all the trees in the blocks they bought for use as fuel and house posts. During the rainy season, new shoots emerged from the stumps of the felled trees and, over the next fifteen years, matured into trees ready for the next round of cutting. To protect these young shoots in their early growth stage, the areas that had been denuded were closely guarded for at least one year after cutting, preventing cattle and people from damaging the vulnerable shoots. In addition, the ground was kept free of under‑growth jungle to promote shoot growth; this clearing was not performed at the assessee’s expense because the villagers were allowed to remove the under‑growth themselves at no cost.

The record showed that the villagers were permitted to clear the undergrowth from the forest floor and to take the cleared material away without any charge. The Sal trees that were standing in the forest at the relevant time, as well as the Sal trees that had been sold in the year 1350 B.S., had been cultivated in exactly the same manner that had been described earlier. From these facts the Court concluded that human care and skill had been employed to promote the growth of the Sal trees, and that the income which was derived in 1350 B.S. resulted from that human involvement. The Court then examined the ordinary dictionary meaning of the word “agriculture” and, following the decision of the Privy Council in Raja Mustafa Ali Khan v. Commissioner of Income Tax U.P., Ajmer & Ajmer Merwara(l), held that income arising from a virgin forest or from forests that grew spontaneously was not agricultural income. The Court also rejected the earlier view that tilling of the soil was an essential condition for a pursuit to fall within the concept of agriculture. It observed at page 440 that the decisive question was whether “some expenditure of skill and labour” had been made on the forest, as indicated by the Judicial Committee in that earlier decision. The Court then relied on further observations of the Privy Council, noting that the presence of “any regular operations in forestry” would be a material fact for consideration. It quoted the Council’s remark that “the introduction of human agency and the application of human efforts would be the criteria for consideration.” After reviewing a number of prior cases, the Court stated at page 441 that a careful analysis of the reasons given by the learned judges in those decisions makes it clear that each case must be examined on its own facts to decide whether there has been sufficient application of human effort before deciding whether the income from a particular forest is agricultural or otherwise.

Turning to the facts recorded by the Tribunal in the present case, the Court was of the opinion that the forest in question could not be described as a virgin forest nor as a forest in which trees grew spontaneously without any human intervention. The Court noted that the forest was subjected to regular activities such as the felling of trees, the appearance of new shoots during the rainy season, the guarding of those shoots to prevent trampling by foot or browsing by animals, and the removal of undergrowth and fallen leaves. These activities were regarded as “regular operations in forestry” and required the application of human effort. The Court held that the level of human effort involved was sufficient to bring the income from those forests within the head of agricultural income. It further observed that, if the view of the Judicial Committee were to exclude all kinds of income from the category of agricultural income unless there was actual cultivation of the land, the reference to “regular operations of forestry” would have been unnecessary. Thus, the Court concluded that, in the special circumstances disclosed, the income derived from the forests fell within the meaning of agricultural income under section 2(1)(a) of the Bengal Agricultural Income‑Tax Act, 1944.

It was observed that if the land had been cultivated, mentioning “regular operations of forestry’’ would have been unnecessary. The Court held that it was not essential always to have “some measure of cultivation of the land’’ and “some expenditure of skill and labour upon it’’ together; proof of either condition was enough to bring the case within either clause (a) or (b) of section 2(1) of the Act. The Court explained that “regular operations in forestry’’ inevitably involve the expenditure of skill and labour on the land on which the forest grows. Consequently, the Court concluded that, given the special facts disclosed in the case, regular forestry operations were being carried out and that the income derived from the forest in question qualified as agricultural income under section 2(1)(a) of the Bengal Agricultural Income‑Tax Act, 1944.

The case of Jyotirindra Narayan Sinha Choudhury v. State of Assam arose under the Assam Agricultural Income‑Tax Act, 1939, and required the Court to determine whether the amounts realised by the assessee from the sale of Sal trees growing in a forest constituted agricultural income within the meaning of section 2(1) of that Act. No evidence was produced to show that the Sal trees were of spontaneous growth. Although the possibility that the forest might originally have been spontaneous was acknowledged, it was an admitted fact that the forest trees were protected and fostered through the application of human labour and skill. In those forests, operations such as clearing jungles, removing creepers and climbers, thinning by eliminating less healthy trees from densely grown areas, removing unsound, crooked or diseased trees, burning leaves to fertilise the ground, cutting trees at specific heights, rotating blocks of forest in a cyclic order, preserving mother trees for seed spread, and protecting the forest from fire were regularly performed. These regular operations were undertaken for the growth, preservation and regeneration of the forest. The Court held that because extensive forestry operations were employed in the Sal‑tree forest, the income from the sale of those trees was agricultural income as defined by the Assam Agricultural Income‑Tax Act. In reaching this conclusion, the Court relied on various dictionary definitions of “agriculture” and observed that, despite differing scopes and purposes in various definitions, all share the essential feature of applying human skill and labour, without which agriculture cannot exist. The Court then referred to the Privy Council decision in Raja Mustafa Ali Khan v. Commissioner of Income Tax, quoting that “Their Lordships have not laid down that some measure of cultivation is absolutely necessary before it can be…”.

The Court explained that land may be regarded as being used for agricultural purposes when either “some measure of cultivation” or “some expenditure of skill and labour” is present. It held that the existence of either condition is sufficient to characterize the land as agricultural, and that actual tillage or cultivation is not a necessary prerequisite to the broader concept of “agriculture.” After citing the Calcutta High Court decisions in Hedayat Ali v. Kamalanand Singh (2) and Commissioner of Agricultural Income Tax v. Jagadish Chandra Deo Dhabal Deb (3), the Court observed that a review of the authorities leads to the conclusion that “purpose” within the meaning of the Assam Agricultural Income‑Tax Act can be agricultural even when its achievement does not involve actual soil cultivation. The Court quoted the Privy Council in Raja Mustafa Ali Khan v. Commissioner of Income Tax, stating that income from the sale of forest trees would be agricultural if there is “some expenditure of skill and labour upon it.” Regular forestry operations, the Court noted, necessarily involve such skill and labour; therefore, where these operations occur, the income from the sale of trees falls within the ambit of agricultural income as defined by the Assam Act.

In contrast, the Court referred to the judgment in Pratap Singh Balbeer Singh v. Commissioner of Income Tax, U.P., C.P. & Berar (4), where the Allahabad High Court adopted a different approach. In that case, the assessee earned income from the sale of forest trees that grew naturally and spontaneously without any human agency, although the assessee later carried out forestry operations on a scientific basis according to a profit‑making scheme. The High Court observed that a regular working plan and regular income, together with expenditure to increase profit, did not convert the activity into agriculture. It held that the terms “agriculture” and “agricultural purposes” with reference to land imply that some operations must be performed on the land itself; human skill and labour must be employed for activities such as ploughing, manuring, planting, or similar processes. Mere weeding, care, and preservation of spontaneously grown forest trees were not considered operations on the land sufficient to constitute agriculture. While interpreting the Privy Council passage from Raja Mustafa Ali Khan v. Commissioner of Income Tax, the Court emphasized that the essential element for income to be classified as agricultural is the existence of “some measure of cultivation of the land” or “some expenditure of skill and labour upon it.”

The Court observed that the language employed by the Privy Council made it clear that any expenditure of skill and labour had to be directed upon the land itself and could not be limited to oiling trees that had arisen through spontaneous growth. It further held that mere regeneration and preservation of trees could not be described as an expenditure of human skill and labour on the land, and consequently the land could not, in those circumstances, be said to be used for agricultural purposes nor could any process of agriculture be said to be taking place. The Court then explained that a planned and scientific exploitation of a forest that had grown spontaneously, even though such exploitation might generate regular income, could not be treated as agricultural income because no operations were performed and no human skill or labour was applied to the land itself in that situation. In the case before it, the judgment under appeal adopted a middle‑way approach. The Tribunal had found that, except for the occasional sowing of seeds, the activities carried out—although necessary for the maintenance and upkeep of any forest of spontaneous growth—did not involve the kind of human labour and skill that would qualify them as agricultural operations. The sowing of seeds was described as “few and far between,” and the usual way the forest regenerated after a portion was cut down was by the growth of off‑shoots from the remaining stumps; therefore, the activities were essentially limited to the “maintenance, preservation, nursing and rearing” of the forest. It was contended before the High Court, on behalf of the assessee, that the exemption from agricultural income tax established in Commissioner of Agricultural Income Tax, West Bengal v. Raja Jagadish Chandra Deo Dhabal Deb covered the present case, and it was submitted that the facts here, if at all, were even more favorable to the assessee. The Court considered the decision of the Privy Council in Raja Mustafa Ali Khan v. Commissioner of Income Tax, U.P., Ajmer and Ajmer‑Merwara and quoted the observation at page 87: “I do not think that when the Privy Council said that there must be ‘some measure of cultivation on the land, some expenditure of skill and labour upon it’, their Lordships intended to say that the expenditure of skill and labour must always be in the form of cultivation.” The Court noted that the word “or” inserted by the Allahabad High Court between the two phrases does not appear in the original judgment but is implied. The Court concluded that if the land is left to the forces of nature to produce whatever products those forces can generate, there is no agriculture, and agriculture can arise only if the labour and skill of man are applied to the land.

In its analysis, the Court explained that for income to be characterised as agricultural, it was not necessary that the land be tilled, but it was essential that human labour and skill be applied directly to the land itself rather than merely to the products that grew upon it. The Court held that the land must be actively exploited with the purpose of obtaining growth or improved growth from the soil, and that such exploitation could occur without the specific act of tillage. Accordingly, the Court concluded that although tillage was not a requisite condition, the expenditure of human effort and expertise had to be directed onto the land itself, not just onto the natural growth that the land produced. The Court further clarified that when income originates from the natural growths of the land, it is income derived from the land but not income derived by the operation of agriculture. Income could be regarded as agricultural only when the land was subjected to the labour and skill of man, whether through cultivation or any other form of human intervention, in order to produce or improve the produce that generated the income.

Applying this principle to the facts before it, the Court observed that if a forest consisting of naturally occurring trees was taken over and thereafter the land was regularly weeded and cleared, if moisture necessary for the nourishment of the trees was supplied by cutting channels across the land and distributing rain‑water through those channels, and if the land was dug and seeded whenever bare patches appeared, then such actions indicated human intervention on the land. Moreover, the Court noted that elaborate subsidiary arrangements were maintained for protecting the trees and for tending new shoots that sprang from the stumps of felled trees until those shoots grew into new trees. The Court reasoned that these activities could be characterised as forestry operations involving agricultural work carried out on forest land, and therefore the income derived from that land could be said to arise from agriculture. The Court also referred to the earlier decision in Sir Kameshwar Singh v. Commissioner of Income‑Tax, Bihar & Orissa (1), which was the subject‑matter of C.A. Nos. 11 2 to II 7 of 1956 and also fell under the Indian Income‑Tax Act (XI of 1922). The Appellate Tribunal in that case had found that Sal and ebony trees growing in the forest were conserved by allowing a circular space of fifteen feet around each tree, that trees and jungle within each circle were cut down leaving sufficient space for growth, and that forest conservancy staff were employed to look after the forest. The Court construed the observations of the Privy Council in Raja Mustafa Ali Khan’s case (1) to mean that, in order to show that income is agricultural income within the meaning of the definition, it must be proven that the land itself was cultivated and that some skill and labour were expended upon it. Even if the two conditions laid down by the Privy Council were read as alternative conditions, the Court held that there was no material on which to hold that there

In this part of the judgment the Court noted that the record showed no proof of any expenditure of skill and labour upon the land, and therefore the proceeds obtained from the sale of forest trees could not be characterised as agricultural income. The Court then referred to the decision in Jyotikana Chowdhurani v. Commissioner of Income Tax, Assam (3), which also lies before the Court in Civil Appeals Nos. 57 to 62. In that matter a Special Bench of the Assam High Court was called upon to decide whether income earned by the assessees from selling trees that arose by spontaneous growth—without any planting, sowing, or the employment of human agency for the purpose of tillage—could be regarded as agricultural income within the meaning of section 2(1)(a) of the Indian Income‑Tax Act, when the assessees nevertheless carried out forestry operations that involved a considerable outlay of human skill and labour. The majority of that Bench, comprising Chief Justice Sarjoo Prasad and Justice Ram Labhaya, with Justice Deka dissenting, held that although there was no tillage of the soil, no planting of seed or saplings, and the trees had germinated naturally, the activities undertaken by the assessees were aimed at promoting the growth and development of the trees. In essence, those activities required the expenditure of human skill and labour on the land itself. The Court described those activities as “agricultural operations” and concluded that the land on which the trees stood was being used for “agricultural purposes.” Accordingly, the income derived from the sale of the trees qualified as “agricultural income” and was therefore exempt from tax under section 4(3)(viii) of the Income‑Tax Act. The Court cited earlier authorities, including the reports in (1) [1948] 16 I.T.R. 330 and (2) [1953] 26 I.T.R. 424, 439, 461. Chief Justice Sarjoo Prasad then explained the test laid down in Raja Mustafa Ali Khan v. Commissioner of Income‑Tax (1). He observed that the argument advanced by Mr Iyengar—that the phrase “some expenditure of skill and labour upon it” merely clarifies the expression “cultivation of the land” and therefore all that the Privy Council required was cultivation—was unpersuasive. He stated that he did not accept that “cultivation” is necessarily synonymous with ploughing or tillage, and even if it were, the Privy Council’s wording did not stop at “some measure of cultivation of the land.” The addition of the phrase “some expenditure of skill and labour upon it” after a comma, he said, clearly signified a requirement that went beyond mere cultivation. Although there is no conjunctive term linking the two expressions, the context makes the intended meaning plain. Justice Ram Labhaya articulated the Privy Council’s test in his own words, stating that a test had been laid down for determining when land may be said to be used for agricultural purposes, and that the test requires that there must be some measure of

According to the test articulated by the Privy Council, land must be used for “cultivation of the land; some expenditure of skill and labour upon it.” It must be remembered, however, that the Lords, when stating the facts of the case, emphasized that the proceeding was based on the premise that there was no evidence showing the assessee engaged in any regular forestry operations. That observation is crucial for interpreting the test. Forestry activities are indeed carried out within forests and they involve the application of human skill and labour to the soil with the objective of stimulating growth. Such activities could readily satisfy the requirements of the test evolved by the Lords, as reported in (1) [1948] 16 I.T.R. 330. Consequently, the absence of forestry operations in Raja Mustafa Ali Khan’s case (1) must be given full weight when the test laid down therein is being applied. The last decision in this line of authority is Vikram Deo Varma v. Commissioner of Income‑Tax, ‘Bihar & Orissa (2). In that case the assessee earned income from extensive forest tracts that formed part of an impartible estate of which he was proprietor. Over many decades the entire forest area had been subjected by hill‑tribes to “podu” cultivation, a process that involved setting fire to trees, clearing the forest lands, and raising crops, so that no virgin forest remained. Through a large forest establishment a considerable amount of human labour and skill was expended in: (i) fostering the growth of trees and protecting them from destruction by men and cattle; (ii) cultivating the soil by periodically felling and burning trees; (iii) planning the exploitation of trees by demarcating areas into blocks; (iv) systematically cutting down trees of a particular girth and height; (v) planting new trees where gaps occurred; and (vi) watering, pruning, dibbling and digging. The Tribunal held that, because there was no forest cultivation or tillage in the strict sense, the income could not be said to arise from agricultural operations and therefore did not fall within the exemption provided by section 4(3)(viii) of the Indian Income Tax Act.

The learned Judges, while referring to the observations of the Privy Council in Raja Mustafa Ali Khan’s case (1), noted that the Lords had not specified the precise measure of cultivation required nor the exact nature of the skill and labour that must be expended to bring such activities within the meaning of “agricultural purposes” as used in the definition clause. Accordingly, each case must be decided by determining whether the land from which rent or revenue is derived was used for “agricultural purposes.” Unless the land is subject to some measure of cultivation or unless there is an expenditure of human skill and labour on it for the purpose of deriving rent or revenue, the purpose cannot be characterised as agricultural. It was

It was observed that cultivation cannot be reduced merely to the act of tilling, because the science and art of cultivating soil depend on the nature of the soil, the atmosphere and many other factors. Consequently, the Court held that using tilling alone as the exclusive or essential test for agriculture would be unwise. Applying this principle to the facts before it, the Court found that the activities carried out by the assessee through the forest establishment demonstrated both cultivation of the soil and the application of human skill and labour on the land as well as on the trees themselves. On that basis, the Court concluded that the income derived from the forest was exempt from tax under section 4(3)(viii) of the Indian Income‑Tax Act. Before moving on from these cases, the Court thought it appropriate to refer to observations made by Vishwanatha Sastri J. in Commissioner of Income Tax, Madras v. K.E. Sundara Mudaliar (1) at page 277. In that passage, Vishwanatha Sastri J. noted that in Commissioner of Agricultural Income Tax v. Raja Jagdish Chandra Deo Dhabal Deb (2) a Division Bench of the Calcutta High Court held that income obtained from the sale of sal trees growing spontaneously in a forest, and not planted by man, qualified as “agricultural” income within the meaning of section 2(1) of the Bengal Agricultural Income Tax Act. The Court in that case observed that there was no digging or ploughing of the land, nor any planting of trees, but there were “operations in forestry” such as guarding the forest trees to keep cattle away and allowing locals to remove leaves and under‑growth. The judgment emphasized that there was no breaking up of soil, no sowing, planting, watering or fencing. It further stated that whether that decision was correct could only be definitively decided by the Supreme Court of India, and that the decision seemed to rely on an undue extension of the principle laid down by the Judicial Committee in Raja Mustafa Ali Khan’s Case (3), going far beyond the approach adopted in the present case. From this review it appears that there has been a divergence of opinion among various courts—not only regarding the meaning of the terms “agriculture” and “agricultural purposes,” but also concerning what forestry operations may be characterised as agricultural so as to render the land “used for agricultural purposes” within the definition of agricultural income found in both the Indian Income‑Tax Act and the several State Agricultural Income‑Tax Acts. The Court noted at the outset that the definition of “agricultural income” in section 2(1) of the Indian Income‑Tax Act is identical to the definitions contained in the Agricultural Income‑Tax Acts enacted by the different States. Accordingly, it would be pointless to treat taxes on agricultural income, which fall within the legislative competence of the State Legislature, as unrelated to the corresponding provisions of the Indian Income‑Tax Act.

In the Court’s analysis, the income in question was first examined to see whether it originated from land that was employed for agricultural purposes. If the Court determined that the land was indeed used for agriculture, the income would be characterised as agricultural income. Under section 4(3)(viii) of the Indian Income‑tax Act, such agricultural income was exempt from income‑tax, and it would instead fall within the scope of the Agricultural Income‑tax Acts enacted by the various States. Consequently, the assessee would not be liable to any assessment under the Indian Income‑tax Act, but would be required to pay the agricultural income‑tax prescribed by the relevant State legislation. The sole question that therefore required inquiry was whether the income satisfied the definition of agricultural income. The Court held that this question must be answered on a case‑by‑case basis, with reference to the particular facts and circumstances presented in each matter. To qualify as agricultural income, the Court identified two essential conditions. First, the land from which the income was derived had to be used for agricultural purposes and either be assessed for land revenue in the taxable territories or be subject to local rates that were assessed and collected by government officers as land revenue. Second, the income had to be derived from that land either by direct agricultural activity or by one of the operations enumerated in clauses (ii) and (iii) of section 2(1)(b) of the Indian Income‑tax Act. Historically, there had been a view that lands assessed for land revenue were intended to be exempt from income‑tax altogether, based on the assumption that a person who paid land revenue should not also be subjected to income‑tax on the same produce, lest he suffer double taxation. The Court found it worthwhile to trace the origin of the statutory exemption for agricultural income arising from lands assessed to land revenue, as interpreted by the judiciary. In this context, Justice Vishwanatha Sastri observed in the earlier case of Commissioner of Income Tax, Madras v. K. E. Sundara Mudaliar, that the legislation’s purpose and the factual backdrop at the time of its enactment were critical for understanding the object and scope of the exemption. He noted that this exemption had been a consistent feature of Indian income‑tax law since 1867 and that no comparable provision existed in English law.

The Court observed that even before the enactment of Section 100 of the Government of India Act, 1935, which later divided legislative powers between the centre and the provinces, the Central Legislature possessed the authority to impose a tax on agricultural income. The series of Income‑Tax Acts that were passed by the Central Legislature, including the then‑applicable Act of 1922, consistently exempted from income‑tax the agricultural earnings derived from lands that were assessed for public revenue. This principle is recorded in the authorities cited as (1) [1950] 18 I.T.R. 259, 271. According to the Court, the sole purpose of this exemption was to uphold justice and equity by relieving income that had already been subjected to a levy in the form of land‑revenue. Such land‑revenue could be a permanently fixed peishkush imposed under Regulation No. XXV of 1802 or a periodically determined assessment under the ryotwari settlement. Under the common‑law tradition in India, the State retained an ancient prerogative to collect a portion of the produce of the land from its owner, while the owner retained full enjoyment of the land and its produce, subject only to this contribution. Land‑revenue was collected annually from the proprietor and was essentially drawn from the income generated by the land. Historically, a cash payment in lieu of a share of the produce was substituted to simplify revenue collection. Because the income from the land’s produce was already diminished by the annual land‑revenue, the Court found it inequitable to impose a further annual income‑tax on the same income. Consequently, the exemption applied to agricultural income from lands that were assessed, or to lands where the revenue had been remitted wholly or partially, such as in the case of inams. By contrast, income derived from mines, minerals, and quarries—resources reserved by the State and generally not part of permanently settled estates—was not covered by the exemption. The revenue assessment for agricultural land depended on soil quality and the income from its produce, limiting the exemption strictly to agricultural income from assessed lands, which explained the legislative intent behind the exemption of agricultural income from income‑tax.

The Court further noted that regardless of any historical origin of the exemption, the mere liability to pay land‑revenue or a fixed peishkush under Regulation XXV of 1902 was not, in the view of Rankin J., a barrier to the imposition of income‑tax where the legislature clearly intended such a levy, even on certain categories of income arising from permanently settled estates. Rankin J. clarified that the payment of land‑revenue did not, by itself, preclude the levy of income‑tax in appropriate situations. This principle was reiterated by the learned judge in the case of Emperor v. Probhat Chandra Barua, where it was observed that counsel had referred to the practice of Revenue Authorities since 1886 concerning fisheries in permanently settled estates, but there was no consensus on what that practice, if any, actually entailed. The judge assumed that any such practice, were it to exist, could not be taken as a definitive rule to restrict the legislative power to impose income‑tax on income derived from those estates. The Court thus affirmed that the statutory intention of the legislature could override any presumed limitation arising from the existence of land‑revenue obligations.

In the present discussion the Court observed that there was no established practice that could be relied upon to interpret the issue as contemporanea expositio, and therefore the Court proceeded without any such assistance. The Court noted that a reference had been made to what is described as a “presumption against double taxation.” It cited the decision in Manindra Chandra Nandi v. Secretary of State (2), where royalties from a coal mine were held liable both to a cess under the Cess Act, 1880, and to income tax under the Act of 1886. The judgment in that case stated that courts “always look with disfavour upon double taxation, and Statute will be construed, if possible, to avoid double taxes.” The Court also referred to certain dicta of American courts and to the English case of Carr v. Fowle (3). In Carr the only observation relevant to the present point was that the statute presumably did not intend that a vicar should, in effect, pay the same land tax twice on the same hereditament. The Court regarded this observation as plain enough to conclude that income‑tax is a single tax and that income assessed under one schedule cannot be assessed again under another schedule. The Court further expressed that any legal presumption of a general character against “double taxation” in a broader sense is a proposition to which it respectfully demurred as a principle for constructing a modern statute. The Court emphasized that the reasoning in Manindra Chandra Nandi v. Secretary of State (2) did not succeed in cutting down clear, though absolutely general, language. The view of Rankin J was subsequently upheld by the Privy Council in Prabhat Chandra Barua v. King Emperor (4). The Court then turned to the later case of Yuvarajah of Pittapuram v. Commissioner‑of Income Tax, Madras (5), where the Privy Council held that the imposition of income‑tax on income derived from a permanently settled estate would not breach the Madras Permanent Settlement Regulations No. XXV of 1802. The assessment of land for land revenue or its being subject to local rates collected by Government officers was described as merely indicating that the land is agricultural land, as distinguished from land that can be used for agricultural purposes but carries the matter no further. Consequently, the Court considered when it can be said that land is used for agricultural purposes or that agricultural operations are performed on it. It observed that agriculture is the basic idea underlying the expressions “agricultural purposes” and “agricultural operations,” and therefore it is pertinent to inquire into the connotation of the term “agriculture.” As previously noted, the primary sense in which the term agriculture is understood is agri‑field and cultivation, that is, the cultivation of the field. If the term is understood only in that sense, agriculture would be restricted solely to the cultivation of land in the strict sense of the term.

The Court explained that the fundamental agricultural activities consisted of tilling the soil, sowing seeds, planting, and similar operations performed directly on the land. These primary tasks required the application of human skill and labour to the land itself. In addition to these basic tasks, the Court noted that cultivators necessarily carried out further operations once the crops began to emerge. Such subsequent operations included weeding, digging around the growing plants, removing unwanted under‑growth, protecting the crop from insects, pests and external damage, as well as tending, pruning, cutting, harvesting and preparing the produce for market. The Court held that, when viewed together with the primary operations, these later actions also qualified as agricultural operations and it would be unreasonable to deny that characterisation. However, the Court questioned whether the later operations could be regarded as agricultural in isolation from the primary ones. It rejected the proposition that the basic activities could be omitted and that merely performing the later tasks would suffice to constitute agricultural operations on the land for the purpose of classifying the income as agricultural income. The Court opined that performing only the subsequent actions on products that had not been produced through the basic operations would not be enough to label them as agricultural operations. To acquire the character of agricultural operations, the later tasks had to be performed in conjunction with, and as a continuation of, the basic operations that actually caused the crops to be produced on the land. Only when the crops were generated through the primary activities could the subsequent tasks attach to those products and assume the nature of agricultural operations. The Court stressed that cultivation of land did not merely involve the narrow acts of tilling, sowing, and planting, but also encompassed the later operations described above. Both the primary and subsequent tasks formed a single, integrated activity of the cultivator, and the term “agriculture” should be understood as signifying this integrated activity. Consequently, the Court concluded that the basic operations could not be separated from the later ones, and that the latter could not be said to constitute agricultural operations independently of the former.

In this case, the Court observed that when the integrated activity described as agriculture is carried out on a piece of land, that land may be said to have been used for agricultural purposes and the revenue generated from it may be characterised as agricultural income derived from the land by agriculture. While examining the meaning of the term “agriculture,” the Court reiterated that it had earlier considered cultivation of land in a broad sense to include both the basic operations and the subsequent operations previously discussed, without regard to the nature of the products obtained from the land. The Court listed the various products that may be obtained, stating that they could be grains, vegetables or fruits essential for human sustenance, as well as plantations and groves; they could also be grass or pasture intended for animal consumption, or luxury articles such as betel, coffee, tea, spices, and tobacco. In addition, the Court mentioned commercial crops such as cotton, flax, jute, hemp and indigo. All of these items are products raised from the land, and the Court held that the concept of agriculture cannot be limited solely to the production of grain and food items for humans and animals, a view that had been advocated by Bhashyam Ayyangar J. in Murugesa Chetti v. Chinnathambi Goundun (1) and by Sadashiva Ayyar J. in Rajah of Venkatagiri v. Ayyappa Reddi (2). Instead, agriculture must be understood to embrace every product of the land that has some utility, whether for consumption or for trade and commerce, and it must also encompass forest products such as timber, sal and piyasal trees, casuarina plantations, tendu leaves, and hor​nuts. The Court then turned to the question of whether the term “agriculture” could be further broadened to cover all activities relating to the land, including those involving breeding and rearing of livestock, dairy farming, butter and cheese production, poultry farming and similar pursuits. This proposed extension was based on dictionary definitions of the word and on the definitions of agriculture collected in Wharton’s Law Lexicon, as well as on the dicta of Lord Cullen and Lord Wright in Lean & Dickinson v. Ball (3) and on Lord Glaney’s observations in Glaney v. Wightman (4). The Court also cited Derbyshire C.J.’s observation in Moolji Sicka & Co., In re (5), where tendu plants growing in the soil were treated as part of the soil and the pruning of the shrub was considered cultivation of the soil in a legal and technical sense; this broader view of agriculture had subsequently been approved by Vishwanatha Sastri J. in Commissioner of Income Tax v. K. E. Sundara Mudaliar (1). Nonetheless, the Court expressed the opinion that merely having some connection with or dependence on land is insufficient to bring an activity within the scope of the term “agriculture,” and that such an expansive interpretation is unwarranted. The Court emphasized that agriculture cannot be separated from its primary significance, namely the cultivation of the land, and although the term may be extended in the manner previously described with respect to the process of agriculture and the products raised on the land, there is no justification for extending it to all activities that have any relation to the land or are in any way connected with it, because doing so would distort the meaning of the term.

In this case, the Court observed that the essential significance of the concept is cultivation of the land, and although the term may be broadened in the way previously described with respect to both the agricultural process and the products cultivated on the land, there is no justification for extending the term to every activity that merely has some relationship to the land or is connected with it in any manner. The Court stressed that applying the word agriculture to such peripheral activities would amount to a distortion of the meaning of the term and therefore cannot be said to fall within the meaning of agriculture. A careful examination of the definition of “agricultural income” provided in section 2(1) of the Indian Income Tax Act, together with the corresponding provisions of the various State agricultural‑income tax statutes, supports this view and this analysis confirms the Court's view. Firstly, the definition characterises agricultural income as rent or revenue that is derived from land that is used for agricultural purposes; subsequently, it defines agricultural income as income earned from such land by means of agriculture or by the activities enumerated in clauses 2 and 3 of subsection 2(1)(b) of the Act. This two‑step definition therefore establishes the limits for classification. The statute presumes that these activities are carried out either by the cultivator himself or by the person who receives rent‑in‑kind from the land, and that they relate to the products that are raised or received by that person, which necessarily implies the produce that is actually grown on the land either by the cultivator or by the person who pays rent‑in‑kind to him. Consequently, if the produce that is raised or received by the cultivator or the rent‑in‑kind receiver is treated as falling within clauses (ii) and (iii) of section 2(1)(b), then the expression “agriculture” appearing in clause (i) of the same subsection must also be confined to the performance of the basic operations carried out on the land, and there is no room for interpreting the term in the broader sense suggested earlier. (1) [1950] 18 I.T.R. 259, 271. Moreover, if the term “agriculture” is understood to include both the fundamental and the subsequent operations involved in the agricultural process, as well as the raising on the land of products that have some utility for consumption or for trade and commerce, the term consequently acquires a wider interpretation with respect to both the activities undertaken and the results produced, as the Court noted. Nevertheless, the Court emphasized that throughout the discussion there remains a basic premise that at the core of any agricultural activity there must be cultivation of the land in the literal sense—namely, tillage of the soil, sowing of seeds, planting, and other comparable work performed directly upon the land, and is essential. This basic conception constitutes the essential sine qua non of any operation that is to be regarded as an agricultural operation. When these basic operations are present, any further activities naturally follow upon them; but when the basic operations are absent, the subsequent activities cannot acquire the characteristic of agricultural operations. All of these activities undoubtedly require the expenditure of human labour and skill, but the labour and skill that are applied to the performance of those later tasks are not regarded as having been spent upon the land itself.

It was observed that only the labour and skill applied to the basic operations could be said to have been expended upon the land itself. In contrast, the labour and skill used for later or subsequent operations could not be described as having been spent on the land, even though such work might help preserve, foster or regenerate the land’s products. The distinction was considered unimportant where the farmer carried out those later operations as an integral part of his overall cultivation activity. However, where the land produced items that grew spontaneously without any human intervention, and where human effort was limited to encouraging, preserving or regenerating those naturally occurring products, the Court needed to decide whether such subsequent activities qualified as agricultural operations and therefore possessed the characteristics of agricultural work. All parties concurred that wild or spontaneously growing products that required no human labour or skill on the land were not agricultural products, and that the income derived from them could not be treated as agricultural income. The Court noted that no agricultural process was involved in raising such products from the land, that the assessee performed no agricultural operations with respect to them, and that the assessee’s only role was to collect, consume and market the produce. Consequently, no agricultural operations had been carried out, and there was no basis for classifying the income from those activities as agricultural income under section 2(1) of the Indian Income‑Tax Act. The Court added that if the assessee performed later operations on wild or spontaneously growing products, the nature of those operations would have to be examined according to the principles previously set out. Applying those principles to the present facts, the Court first determined that the forest in question consisted of spontaneously growing vegetation. In the absence of any additional facts, that finding would lead to the conclusion that the income was not agricultural income. Nonetheless, the Tribunal had also found that the forest was more than one hundred and fifty years old, although parts of it had periodically become denuded, meaning that trees had fallen completely and the owners had replanted new trees in those sections, undertaking activities to nurse the newly planted trees. The Court could not deny that, with respect to those replanted trees, the income derived would qualify as agricultural income. Given that the forest was over one hundred and fifty years old, the denuded and replanted areas could not be regarded as insignificant. Accordingly, the Court held that the entire income derived from the forest could not be treated as non‑agricultural income. The Court further noted that, had a proper enquiry been directed, the tax authorities could have determined the proportion of income attributable to the naturally occurring forest and the proportion attributable to the trees planted by the owners, but such an enquiry had not been conducted.

The Court observed that the revenue authorities would have been required to conduct an enquiry to determine the proportion of the income that originated from the portion of the forest that grew spontaneously without human intervention, and the proportion that arose from trees that had been planted by the proprietors. It further noted that no such enquiry had been directed by the lower authority, and that, because a very long lapse of time had occurred since the relevant assessment year, it was not considered desirable to order a fresh investigation at this stage. The Court then examined the financial figures placed before it. It recorded that the assessee had shown an expenditure of approximately Rs 17,000 for the maintenance of the forest, while the total income declared by the assessee was about Rs 51,000. In view of the magnitude of the maintenance outlay relative to the total income, the Court inferred that a substantial portion of the income must have been derived from the trees planted by the proprietors themselves. The Court also observed that the Department had made no attempt to establish which part of the income could be attributed to the forest of spontaneous growth, and therefore there were no materials on which the Court could base a finding that the judgment of the lower tribunal was wrong. Accordingly, the Court dismissed the appeal, ordered the appellant to pay costs, and recorded that the appeal was dismissed.