The Commissioner of Income-tax, Bihar and Orissa v. Sri Ramakrishna Deo

**176** SUPREME COURT REPORTS (1959] Supp. _r958_ pay only three sets of costs for the hearing, namely, one set each to the petitioners represented by Shri _**Sh1ee Vinod**_ _Kuma'_ &- _0,,._ Achhru Ram, Shri D. R. Prem and Shri Y. Kumar v. respocti vely an<l also one set of hearing fees for each _State_ _of_ _Ilimachal_ of the au vocates-on-record. _**Prridesh**_ _Das_ C. _]._ _**October**_ _**r4.**_ _Petitions allowed._ THE COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA _v._ SRI RAMAKRISHNA DEO (VENKATARAMA ArYAR, GAJENDRAGADKAR and A. K. SARKAR, JJ.) _focome_ _Tax-Forest_ _trees-Income from_ _sale_ _of-Whether_ _agricultural income-Exemption from taxatio1>-Burden_ _of_ _proof-_ _Findings_ _of the_ _Tribunal-When_ _binding_ _on_ _High_ _Court-Indian_ _Income-tax Act, r922_ _(XI of r922),_ _ss._ 2(r), _4(3)_ (viii), _66(r)._ The respondent, the proprietor of an estate, derived income from the sale of trees growing in his forests and claimed that it was agricultural income as defined in s. 2(1) of the Indian Income-tax Act, 1922, and that it was exempt from payment of income-tax under s. 4(3)(viii). The Appellate Tribunal found that the evidence to show that there was plantation by the estate authorities was meagre and unsubstantial, that the trees in question must have been of spontaneous growth and that the respondent had failed to establish facts on which he could claim exemption. On reference, the High Court took the view that though trees in the forest had not been planted by the estate **authorities,** **the** **latter had performed subsequent operations of a** **substantial character for** **the** **maintenance and improvement** **of** **the** **forest, and** **that** **the** **income** **vvas,** **therefore, agricultural** **incorne.** **It** **also** **held** **that** **the** **onus was on** **the** **income-tax** authorities to prove that the income derived from the sale of trees was not agricultural income and that they had failed to show that the income fell outside the scope of the exemption mentioned in s. 4(3)(viii) of the Act. _Held,_ that the High Court erred in placing the burden on the income-tax authorities to prove that the income sought to be taxed was not agricultural income. The principle has been wellestablished that where a person claims the benefit of an exemption under the provisions of the Act, he has to establish it. (1) S.C.R. SUPREME COURT REPORTS 177 _Commissioner_ _of_ _Income-tax_ v. _Venkataswamy Naidu,_ [1956] _z958_ ## 291.T.R. 529, followed. -. . The question whether the trees were of spontaneous growth _The Commissioner_ or were products of plantation was essentially a question of fact _0(_ lncome·T~x, and the finding of the Tribunal on this point was binding on the _Bihar and Orissa_ High Court in a reference under s. 66(1) of the Act. v. . . _Sri Ramakris/111a_ _Held,_ further, that the mcome received by the resI?ondent _D_ by the sale of trees in his forests was not agricultural income as _eo_ the trees had not been planted by him, and that it was immaterial that he had maintained a large establishment for the purpose of preserving the forests and assisting in the growth of the trees. _The Commissioner_ _of_ _Income-tax, West Bengal, Calcutta_ v. _Raja Benoy Kitmar Sahas Roy,_ [1958] S.C.R. IOI, explained and followed. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 426 of 1957. Appeal from the judgment and order dated April 21, 1955, of the Orissa High Court at Cuttack in Special Jurisdiction Case No. 179 of 1951. _A. N. Kripal, R. H._ _Dhebar_ and _D._ _Gupta,_ for the appellant. _A._ _V._ _Viswanatha Sastri, M. S. K. Sastri_ and _R._ _J_ _agannatha Rao,_ for the respondent. 1958. October 14. The Judgment of the Court was delivered by VENKATARAMA AIYAR, J.-This is an appeal against the judgment of the High Court of Orrissa in ar eference under s. 66(1) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act, and the point for decision is whether income received by the respondent by the sale of trees groing in his forests is agricultural income exempt frm taxation under s. 4(3)(viii) of the Act. The respondent is the proprietor of the impartible zamin of Jaipur in Koraput District. The estate is of the area of 12,000 sq. miles of which 1540 sq. miles are reserve forest and 100 sq. miles, protected forest. The respondent derives income from the forests by the sale of timber such as teak, salwood, lac, myrabolam, tamarind, cashewnuts and firewood. There is no 23 _Venkatarama_ _Aiyar._ _J._ 178 SUPREME COURT REPORTS [1959] Supp. _z95B_ dispute either as to the receipt of such income or as to its quantum. All that appears in the account books ##### The C on-imissio1ier [-. ][. ] d Th . . . _of 1"come-Tax,_ of the respc_m .ent. . e pomt m controversy _is _as to _lliha•_ _cmd_ _o.i<sa_ whether this mcome IS chargeable to tax. It IS the v. . contention of the respondent that this is agricultural s,; _Ramah.is/ma_ income as defined in s. 2(1) of the Act, and that it is, _Deo_ in consequence, exempt under s. 4(3)(viii). By his order dated,January 31, 1943, the Income-tax Officer _**Venkatarama**_ _A_ _**iyar,**_ [-] _1_ . held that the forests in question had not been proved to have been planted by the respondent, that the trees were of spontaneous growth, and that the income therefrom was not within the exemption under s. 4(3)(viii) ; and this order was confirmed on appeal by the Appellate Assistant Commissioner. The respondent took the matter in further appeal to the Appellate Tribunal, and there put forward the contention that the Incometax Officer had failed to take into account a letter of the Dewan dated June 3, 1942, w.hich gave a detailed account of the operations carried on by the estate in the rearing and maintena.nce of forests and that on the facts mentioned in that letter, his finding that there had been no plantation of trees was erroneous. By its order dated April 9, 1946, the Tribunal accepted this contention, and directed a fresh enquiry into the facts mentioned in, the said letter. Pursuant to this order, the Income-tax Officer again enquired into the matter. He observed that though he gave ample opportunities to the respondent to prove that there was plantation of trees by the estate, no materials were placed in proof of that fact and that neither plantation books nor any working plans for timber plantation had been produced. He accordingly held that the forests had grown naturally, and that the income therefrom was assessable to tax. On this report, the appeal again came up for hearing before the Tribunal. The main contention urged by the respondent at the hearing was that the facts showed that the forests which had yielded income during the years of account could not have been the virgin forests which had originally grown spontaneously on the hills, because they had been periodically denuded by the hill tribes in the process of Podu cultivation carried on by (1) S.C.R. SUPREME COURT REPORTS 179 them. What this Podu cultivation means is thus _z958_ # stated in the District Gazetteer, Vishakapatnam, 1907: Th e omnussioner c -. . " This consists in felling a piece of jungle, burning _of Income-Tax,_ the felled trees and undergrowth, sowing dry grain _Bihar and OriSS11_ broadcast in the ashes (without any kind of tilling) for . v. . two years in succession, and then abandoning the plot _[5]_ _"_ _Ra;;_ _0_ _[krishna ]_ for another elsewhere." The argument of the respondent was that as a result _Venkatarama_ of the Podu cultivation, the original forests should _Aiyar,_ _J._ have disappeared and that the· trees that had subsequently grown into forest and sold as timber must have been planted by human agency and their sale proceeds must accordingly be agricultural income. Dealing with this contention, the 'I.'ribunal observed that though there had been extensive destruction of forests in the process of Podu cultivation, nevertheless, considerable areas of virgin forests still survived, that the evidence of actual cultivation and plantation by the zamin authorities was meagre and unsubstantial, that no expenses were shown to have been incurred on this_ accoµnt prior to 1904, that the amount shown as spent during that year was negligible, that the trees planted then could not have been the trees sold as timber during the assessment years, and that the respondent had failed to establish facts on which he ###### could claim exemption. It should be mentioned that this order covered the assessments for five years from 1942-43 to 1946-47, the facts relating to the character of the income being the same for all the years. On the application of the respondent, the Tribunal referred the following question for the decision of the High Court: " ·whether on the facts and in the circumstances the income derived from forest in this case is taxable under the Indian Income-tax Act." The reference was heard by Panigrahi, C. J., and Misra, J., who answered it in the negative. They observed: ##### "It appears to us that the cases as set out by both parties have been put too high. The department takes the view that unless there is actual cultivation of the 180 SUPREME COUR'r REPORTS [1959] Supp. _r958_ soil the income from the forest trees cannot be regard# The commm•onu [-.. ] [ed ] h [as ] [agricultural ][income. ] d 1 [The ][fact ] d [that ] 1 bl [the ] [assessce ] · _of Income-Tax._ as spent S<?me mone;y- . an p ante va ua e trees m _Bihar_ _and_ o,;,,. some areas IS not sufficient to free the income out of v. the extensive forests which owe their existence to _Sri_ _Ramakdshna_ spontaneous growth, from its liability to taxation. The _Deo_ assessee on the other hand seeks to create an impres_**V**_ enk~taYama sion that there is not a single tree of spontaneous _Aiyar,_ _J._ growth, in these forests, and such trees as now constitute forests have sprung up out of the stumps left by the hillmen as a result of the system of' Podu' ###### cultivation adopted by them. It appears to us that neither of these claims can be regarded as precise or correct." The learned Judges then observed that the forests in the Koraput area had been under Podu cultivation for a long period, and that as the result of that cultivation they had practically disappeared even by the year 1870, that the trees had subsequently grown into forests and they had also been destroyed by about the year 1901, and that therefore there could not have been any virgin forest left surviving. Then they referred to the fact that the respondent had been maintaining a large establishment for the preservation of the forests, and that there had been organised activities **(1)** "in fostering the growth of the trees and preserving them from destruction by man and cattle; (2) in cultivation of the soil by felling and burning trees from time to time ; (3) in planned exploitation of trees by marking out the areas into blocks; (4) in systematic cutting down of trees of particular girth and at particular heights; (5) in planting new trees where patches occur ; and (6) in watering, pruning, dibbling and digging operations carried on from time to time". And-they stated their conclusion thus: "All these and similar operations which have been undertaken by the assessee through his huge forest establishment, show that there has been both cultivation of the soil as well as application of human skill and labour, both upon the land and on the trees them###### selves. It cannot be assumed therefore that all the trees are of spontaneous growth. '.l'he indications, on (1) S.C.R. SUPREME COURT REPORTS 181 the other hand, appear to be that most of them are _r95s_ # sprouts springing from burnt stumps. There is no -. . _1'_ h . d b h I _The_ _Comm1ssto'1ct_ b as1s [. ] ior t e assumpt10n ma e y t e ncome-tax _of_ _1_ _,,come-Tax,_ Department that all the trees are forty years old and _Bihar_ _and orissa_ that they owe their existence to spontaneous growth. v. Apart from that it will be noticed that what distin- _Sri_ _Rmnakrislma_ guishes the present case from all the reported decisions _Dea_ is that practically the whole of the forest area has been _Vr.nlwtarama_ subjected to process of 'Podu' cultivation spreading _Aiyar,_ _J._ over several decades so that it is impossible to say that there is any virgin forest left. The onus was certainly upon the department to prove that the income derived from the forest was chargeable to tax and fell outside the scope of the exemption mentioned in Section 4(3)(viii)." In this view, they held that the Department had failed to establish that the income derived from the sale of trees wa.s not agricultural income, and answered the reference in favour of the respondent. The learned Judges, however, granted a certificate to the appellant under s. 66(A)(2) of the Act, and that is how the appeal comes before us. At the very outset, we should dissent from the view expressed by the learned Judges that the burden is on the Department to prove that the income sought to be taxed is not agricultural income. The law is well settled that it is for a person who claims exemption to establish it, and there is no reason why it should be otherwise when the exemption claimed is under the Income-tax Act. The learned Judges were of the opinion that their conclusion followed on the principle of the law of Income-tax that "where an exemption is conferred by a statute, the State must not get the tax either directly or indirectly", and support for this view was sought in the following observations of Lord Somervell, L. J ., in _Australian Mutual Provident Society_ v. _Inland Revenue Commissioners_ { [1] ): "The rule must be construed together with the exempting provisions which, in our opinion, must be ###### regarded as paramount. So far as the rule, if taken (I) [1946] I All E.R. 528. 182 SUPREME COURT REPORTS [1959] Supp. _r95B_ in is.olation, would have the effect of indirectly depriv _Th•_ _Commi5'ion"_ ing the company of any part of the benefit of the _of Income-Tax._ exemption, its operation must be cut down, so as to _Bihar and Orissa_ prevent any such result, and to allow the exemption v. to operate to its full extent." _**Sri**_ _**Ramakrishna**_ _Deo_ These observations have, in our opinion, no bearing on the question of burden of proof. They merely lay _Venkata;ama_ down a rule of construction that in determining the _Aiyar._ _J._ scope of a rule, regard must be had to the exemptions engrafted thereon, and that the rule must be so construed as not to nullify those exemptions. No such question arises here .. There is ample authority for the view that the principle that a person who claims the benefit of an exemption has to establish it, applies when the exemption claimed is under the provisions of the Income-tax Act. Vide the observations of the Lord President and of Lord Adam in _Maughan_ v. _Free_ _Church of Scotland_ ( [1] ) and the observations of Lord Hanworth, M. R., in _Keren Kayemeth Le Jisroel Ltd._ v. _The Commissioners of Inland Revenue_ ( [2] ) at p. 36 that " the right to exemption under Section 37 must be established by those who seek it. The onus therefore lies upon the Appellants", and of Lord Macmillian at p. 58 that, ###### "In my opinion, the Appellants have failed to bring it within any one of these categories and consequently have failed in what was essential _for them_ _to_ _make out,_ namely, that this Company is a body of persons established for charitable purposes only." The decisions of Indian Courts have likewise ruled and quite rightly that it is for those who seek exemption under s. 4 of the Act to establish it. Vide _Amritsar_ _Produce Exchange Ltd._ _In_ _re_ (3) and _Sm. Charusila_ _Dassi and others,_ _In re_ ('). So far as exemption under s. 4(3) (viii) is concerned, the matter is concluded by a decision of this Court given subsequent to the decision now under appeal. In _Commissioner of Income-tax_ v. _Venkataswamy_ _Naidu_ ('), this Court held, reversing the judgment of the High Court of Madras, that it (1) (1893) 3 Tax Cas. 207, 210. (2) (1931) 17 Tax Cas. _;!.J._ (3) [1937] 5 r:r.R. 307, 327. (4) [1946] 14 l.T.R. 362, 370. (5) [195G] 29 I.T.R. 529, 534. (1) s.c.R. SUPREME COURT REPORTS 183 was for the assessee to prove that the income sought _z95B_ ### to be taxed was agricultural income exempt from taxa- Th c-. . . d )( ... ) Bh . J d . th _e_ _omm1ss1oner_ t1on un er s. 4 (3 vn1 . agwat1, ., · e 1vermg 1. e _of Income-Tax,_ judgment of the Court observed: _Bihar_ _and Orissa_ " ... the High Court erroneously framed the ques- . v. . tion in the negative form and placed the burden on the _Shri_ _Ramakmhna_ Income-tax Authorities of proving that the income _Deo_ from the sale of milk received by the assessee during _venkaiarama_ the accounting year was not agricultural income. In _Aiyar,_ _J._ order to claim an exemption from payment of incometax in respect of what the assessee considered agricultural income, the assessee had to put before the Income-tax Authorities proper materials which would enable them to come to a conclusion that the income which was sought to be assessed was agricultural ###### income. It was not for the Income- tax Authorities to prove that it was not ~gricultural income. It was this wrong approach to the question which vitiated the judgment of the High Court and, led it to an erroneous cone l usion.'' On the merits, the question what is agricultural income within s. 2(1) of the Act is the subject of a recent decision of this Court in _The Commissioner_ _of_ _Income-tax, West Bengal, Calcutta_ v. _Raja Benoy Kumar_ _Sahas Roy_ ( [1] ). There, it was held that before an income could be held to be agricultural income, it must be shown to have been derived from land by agriculture or by one or the other .of the operations described in els. (i) and (ii) of s. 2(l)(b) of the Act, that the term "agriculture" meant, in· its ordinary sense, cultivation of the field, that in that sense it would connote such basic operations as tilling of the land, sowing of trees, plantation and the like, and that though subsequent operations such as weeding, pruning, watering, digging the soil around the growth and removing undergrowths could be regarded as agricultural operations when they are taken in conjunction with and as continuation of the basic operations mentioned before, they could not, apart from those operations, be regarded as bearing the character of agricultural operations. (1) (1958] S.C.R. IOI, 155, 158, 160. 184 SUPREME COURT REPORTS [1959] Supp. ###### 1~58 " It is only " observed Bha.gwati, J., delivering . . the judgment of the Court, " if the products are raised _Th C_ _e_ _ommwioner_ f' h 1 d b h £ f h b · _of bicome-Tax_ rom t e an y t e per1ormance o t ese as10 _Bihar .,,,z_ o,;,.;. operations that the subsequent operations attach themv. selves to the products of the land and acquire the Sri _Ramakri.slma_ characteristic of agricultural operations ... " #### 'J)eo fh . "But i t esebasic operations a.re wanting the sub_Yenk•tarama_ sequent operations do not acquire tho characteristic of _Aiyar,_ ;. agricultural operations." Dea.ling with trees which grow wild, Bhagwa.ti, .J., observed: ##### "It is agreed on all hands that products which grow wild on the land or are of spontaneous growth not involving any human labour or skill upon the land a.re not products of agriculture and the income derived therefrom is not agricultural income. There is no process of agriculture involved in the raising of these products from the land.'' The law being thus settled, in order to decide whether the income received by the respondent by the ###### sale of trees in hi.ii forests was agricultural income or not, the crucial question to be answered is, were those trees planted by the proprietors of the estate, or did ##### they grow spontaneously? If it is the latter, it would be wholly immaterial that the respondent has maintained a large establishment for the purpose of preserving the forests and assis~ing in the growth of the trees, because _ex hypothesi,_ he performed no basic operations for bringing the forests into being. Now, the Tribunal has clearly found that there were no plantations of trees by the. estate authorities worth the name, and that the trees, the income from which is the subject. matter of the assessments, must have been of sponta.. neons growth. That is a. finding of fact . which is binding on the Court . in a. reference under s. 66( l) of the Act. The learned Judges declined to accept this finding, because they considered that the Tribunal had not appreciated the true significance of Podu cultiva##### tion. That, in our opinion, is a. misdirection. If the point for decision had been whether the forest was a virgin forest or whether it had subsequently sprung up, the evidence relating to Podu cultivation would have (I) S.C.R. SUPREME COURT REPORTS 185 been very material. But the point for decision is not _1958_ whether the forests were ancient and primeval, but - ,~. h h et er t ey h l d b 1a een p 1 ante d b . y ~ h e estate aut h on- [. ] _[The Commissioner ]_ _of Income-Tt1x,_ ,~. h h et er t ey h l d b 1a een p 1 ante d b . y ~ h e estate aut h on- _of Income-Tt1x,_ ties, and on that, the Podu cult1vat10n would have no _Bihllr_ _and o,;s.<a_ hearing. As a result of the Podu cultivation, the origi- v. nal forests would have disappeared. But the question _s,;_ _Ramakrishna_ would still remain whether the forest which again _Deo_ sprang t,1p was of spontaneous growth, or was the result, _Venkatarama_ of plantation. Now, there is no evidence that as and _Aiyar_ _1._ when the jungle had disappeared under Podu cultivation, the estate intervened and planted trees on the areas thus denuded. On the other hand, the learned Judges themselves found that after the destruction of the original forests in the prncess of Podu cultivation, there was a fresh grnwth of forests from the stumps ##### of the trees which had been burnt. If that is the fact, then the new growth is also spontaneous and is not the result. of any plantation. In fairness to the learned Judges, it must be observed that at the time when they heard the reference there was a conflict of judicial opinion on the question whether subsequent operations alone directed to the preservation and improvement of forests would be agri cultural operations within s. 2(1) of the Act; and the view they took was that such operations when conducted on a large scale as in the· present case would be within s. 2(1) of tb.e Act. It was in that view that they observed that "it is therefore idle to regard tilling as the sole and indispensable test of agriculture". The decision of the learned Judges was really based on the view that though trees in the forest had not been planted by the estate authorities, the latter had performed subsequent operations of a substantial character for the maintenance and improvement of the forest, and that, in consequence, the income was agricultural income. This view is no longer tenable in view of the decision of this Court in _The Commissioner_ _of Income-tax, West Bengal, Calcutta_ v. _Raja Benoy_ _K itmar Sahas Roy_ (1 ). ###### It is contended by Mr. Viswunatlrn S1tstri for the (1) [1958] S.C.R 101, 155, 15q, xGo. 24 186 SUPREME COURT REPOR'fS [l!J59] 8upp. _1958_ respondent that on the facts established in the evi - - dence, the proper conclusion to come to is that the trees ~~;:,7;'.~:,~:,1 ·' sold by. ~he respondent had b~e? planted by ~he e~tate ## r:; 1 1~~;:,7;'.~:,~:,1 ·' sold by. ~he respondent had b~e? planted by ~he e~tate J;;1.,,, """ _Od."a_ itnthonties, and that the dec1s10n of the High Court v. that the income thus realised is within the exemption _s,; 11 ..,,,,,,,,.,;,1,,,,,_ nnrler s. 4(3)(viii) could be supported even on the view _Deo_ of la.w tt1ken in _The Commissioner of Income-tax, West_ 1·e11/~11trirama _**Aiyar**_ _]._ _Bengal, Calcutta_ The argument was v. _Ra•a_ that _**;J**_ _Benrn1_ there _**":J**_ _Kumar_ was unimpeachable _Sahas Roy_ ( '). evidence that the old forests had disappeared under Podu cultivation, that the estate had been regularly cng11ged in planting trees at least from the yea.r l!l04, as is shown by the accounts of the zamin, thitt it wa.s a reasonable inference to make that there had been similar plantations even during the years prior to 1904 notwithstanding that no accounts were produced for those years, because it would not be reasonable to expect that such accounts would now be available, that though the amount shown as spent for plantation might not be considera hie, that was understandable when regard is had to the fact that the agricultural operations were conducted on tho hills and not on the plains,. that, on these facts, it would be proper to conclude that the forests were ###### in their entirety the result of plantation. It would be an erroneous approach, it was argued, to ca.II upon the assessee to prove tree by tree that it was planted. Now, these are matters of appreciation of evidence on what is essentially a question of fact, viz., whether the trees were of spontaneous growth or were products of plantation. On this, the Tribunal has given a clear finding on a consideration of all the material oviclence, and its finding is final and not open to challenge in a reference under s. 66 (1) of the Act. Evon the learned Judges of the High Court who cone sidered themselves free to review that finding-and, as already pointed out, without justification, could only observe that the trees must have mostly grown from the s~umps left when the forests were burnt for purposes of Podu cultivation-a finding which is. fatal to the. contention now urged for the respondent that they **{1)** **[1958] S.C.R. IOI, 155, 158, 16o.** (1) S.C.R. SUPREME COURT REPORTS 187 wero the result of plantation. We are of opinion that _'95_ _[8 ]_ there are no grounds on which the finding of the Tri- _The_ _Cornmis-<ioner_ bunal could be attacked in these proceedings. _oJ_ _Income-Tux._ ###### It remains to deal with one other contention urged IJih"' "''d Oris.a on behalf of the respondent, and that is based on the ., .. _R_ v •.. 1 fact that the amounts spent in the upkeep of the for- ·" "';:;"' ""' rests were large in comparison with the receipts therefrom. The following are the figures relating to tho _Ve11lwtarama_ forest receipts and expenses for the years with which _Aiyar_ _J._ the present assessments are concerned : Years Receipts Expenses 1942-43 Rs. 438,894 Rs. 174,437 1943-44 H,s. 407,447 Rs. 209,SlJ;) 1944-45 Bs. 552,122 Rs. 228,830 1945-46 Rs. 372,971 Rs. 247,216 1946-47 Rs. 689,366 Rs. 460,369 The argument is that from the high proportion of the expenses in relation to the receipts it could be inferred that the income from trees planted by the estate formed a substantial portion of the income derived from the forests. And support for this conclusion is sought in the following observations in _The Commis-_ _sioner_ _o.f_ _Income-tax, West Bengal, Calcutta_ v. _Raja_ _Benoy_ _Kumar Sahas Roy_ (1) _:_ " The expenditure shown by the assessce for the maintenance of the forest is about Rs. 17,000 as against a total income of about Rs. 51,000. Having regard to the magnitude of this figure, we think that a substantial portion of the income must have been derived from trees planted by the proprietors them selves." To appreciate the true import of these observations, we must have regard to the context in which they occur. The facts found in that case were that portions of the forest which was originally. of spontaneous growth had gradually been denuded, that the proprietor haJ planted trees in the areas so denuded, that this had gone on for a period of over 150 years, and that therefore " the whole of the income derived from (I) (1958) S.C.R. IOI, 155, I58, 160. 188 SUPREME COURT BEPORTS [1959] Supp. _195_ _[8 ]_ the forest cannot be treated as non-agricultural in## -. . come". It was then observed that "If the enquiry _1_ _;;_ 1~;:~.:··;':~'." had _been directed on proper lines, it. ~ould have be~n _Uiha• and o,;,sa_ possible for the Income-tax author1t1es to ascertam v. how much of the income is attributable to forest of ,,, _11amak•;,1 .. a_ spontaneous growth and how much to trees planted by _Deo_ the proprietors", but that, in view of the long lapse of time, it was not desirable to remand the case for en_**v**_ _**c11/u1tara111a**_ 1 - b _**Aiyur**_ _]._ quiry into the matter. Then fo low the o servations on which the respondent relies, and when read in the light of the findings that the plantations made by the proprietors were not negligible, they mean nothing more than that out of the total income a substantial portion was likely to be agricultural income, and that it was therefore not a fit case for ordering fresh enquiry. These observations do not lay down that if considerable amounts are expended in the maintenance of forests, then it must be held that the trees were planted by the proprietors. They only mean that if a considerable portion of the forests is found to have been planted, a substantial portion of the forest income rnav be taken to have been derived therefrom. And tl1is too, it must be remarked, is <'nly ·a presumption of fact, the strength of which must depend on all the facts found. In the face of the clear Jinding in the present case that the forests with which the assessment years are concerned were of spontaneous growth, the observations quoted above can be ###### of· no assistance to the respondent. It is scarcely ##### necessary to add that the obsenations " If the enquiry had been directed on proper lines, it would have been '_pos~ible fm the Income-tax authorities to ascertain how much of the income is attributable to forest of spontaueous growth and how much lo trees planted by the proprietors " quoted above cannot be read, as was sought to be done for the respondent, as throwing on the Department the burden of showing that the income so11ght to be taxed was not agricultural income. That, in their context, is not the true meaning of the observations, and the law is as laid down in _Commis-_ _sioner of I ncoine-tax_ v. _Venkataswamy N aid-u_ (' ). (1) [1956] _29_ I.T.R. 529, 534. (1) S,C.R. SUPREME COURT H.EPOl{iTS 189 In the result, this appeal is allowed, tho order of the Court below is set aside and the reference is answered in the affirm<\tive. 'fhe respondent will pay the costs of the appellant here and in the Court below. _Appeal allowed._ _lJ<'O_ _Vfokularatna_ _Aiyur_ _]._ _October 15._ _The_ _Con1111issim1er_ _of luconw-Tax._ _/11har_ _and Orissa_ '" _Shri Uuniakrisll'na_ Y. NAP.AYANA CHETTY & ANOTHER _v._ THE INCOME-TAX Ol!'F'ICER, NI!~LLORE AND OTHERS (VENKATARAMA AIYAR, GAJENDRAGADKAlt and A. K. SARKAR, JJ.) _Income-tax-Rule_ _empowering Income-tax_ _Officer_ _to_ _cancel_ _r.:gistration of firm found not_ _he_ _genuine-Validity of-Registered_ _firm,_ _if_ _an_ _assessee-Service_ _of_ _notice on firm through partner,_ _if_ _valid_ _a11d_ _proper-Writ P.ctition,_ _ijlies 11gai11st_ _illegal_ _assessment-_ _Indian Income-tax Act, z922_ _(XI of_ _z922), ss. 23, 34-:-Income-tax_ _Rules, r._ _6B-Constitution of_ _India, Art. 226._ Two persons, B ai;id C, formed a partnership firm on April 20, i936, and the firm was dissolved on March 31, i948. B ancl .c aloug with R formed a second firm on July 3'>. HJ41, an<! it was dissolved on March 31, 1949· B and C along with five others formed a third firm on December l, 1941, and it was dissolved on January I, 1949· All the three firms were carrying on business in yarn and cloth and all of them were registered under s. 26-A of the Income-tax Act. For the years 1943-44 and 1944-45 the said firms were treated as separate entities and separate assessment orders were passed in respect of the income of each one of them for the said years. Subsequently, the Income-tax Officer served notices under s. 34 of the Act on C on behalf of the firms and after hearing the parties he held that the firms were ficti-' tious and so cancelled their registration under r. 68 of tl1t~ income-tax Rules and passed fresh orders of assessment against them on the basis that they were unregistered firms. One Y who was a partner in the third firm and C filed four writ petitions under Art. 226 of the Constitution in the High Court chalknging the validity of the orders passed. The High Court di~­ missed the petitions but granted certificates of fitness to appeal