By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi
Chartered Accountants
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Section 2(14) — Definition of Capital Asset.
Facts:
The assessee received certain amount from the sale of rubber and coconut trees standing on his land. The assessee explained that the trees had been sold along with the roots and hence there was no scope to re-grow the trees and as such they were a capital asset and, thus, sale proceeds thereof would represent a capital receipt. The Assessing Officer rejected the assessee’s claim and brought the above amount to tax under the head income from other sources. The Commissioner (Appeals) upheld the order of the Assessing Officer. On second appeal it was held that
Held:
The trees which stood cut and sold were from a spontaneous growth and were neither nurtured, nor cultivated by the assessee. Also they were in no manner used by the assessee for any activity. The controversy between the assessee and the Revenue was with respect to whether the trees were sold along with the roots or not and whether the receipts from sale of these trees was of capital nature. It was held that the trees whether sold with roots or without the roots was an immaterial question given the fact that the trees stood uprooted. The material question would be the purpose for which the trees were cut and sold. If the trees were cut and sold by the assessee for planting fresh ones the sale proceeds would stand to be assessed under income from other sources. Further trees rooted to the land, by definition, are a part of the land. Thus, what stood sold and transferred by the assessee was a part of land itself and thus would be categorised as capital asset and the receipt from their sale would be assessed as capital receipt and eligible to capital gains tax under the act.
