PETITIONER:
CONTROLLER OF ESTATE DUTY, KERALA
Vs.
RESPONDENT:
V. VENUGOPALA VARMA RAJAH
DATE OF JUDGMENT24/08/1976
BENCH:
BEG, M. HAMEEDULLAH
RAY, A.N. (CJ)
SARKARIA, RANJIT SINGH
SHINGAL, P.N.
SINGH, JASWANT
CITATION:
1977 AIR 121 1977 SCR (1) 346
1976 SCC (4) 3
ACT
Estate Duty Act (34 of 1953), s. 5--Land covered with
wild and natural forest growths--If agricultural land.
HEADNOTE
Under s.5 of the Estate Duty Act, 1953, all property,
including agricultural land situate in the States specified
in the First Schedule to the Act, which passes on the death
of the owner is subject to estate duty. The State of Madras
was added in the First Schedule with effect from 6th June,
1955.
The assessee claimed that large tracts of land, covered
with wild and natural forest growths situate in the Malabar
District of the Madras State, were agricultural lands and
that they were not liable to estate duty because the former
owners died before 6th June, 1955. The High Court held that
the property was agricultural land and not liable to estate
duty, because, (1) the words ’agricultural land’ should be
interpreted in their widest significance, so that. in the
absence of exceptional circumstances such as the land being
entirely rocky or barren for other reasons, all forest lands
in the State of Kerala in which the District of Malabar was
since included, are agricultural lands in the sense that
they can be prudently and profitably exploited for agricul-
tural purposes; and (2) although the burden rested upon an
assessee to establish an exemption from liability to estate
duty in respect of any part of his estate, yet, if he
claimed immunity on the ground that the subject matter does
not fall within the ambit of the taxing power of the legis-
lature imposing the duty, the Revenue had to establish that
the subject matter involved is taxable.
Allowing the appeal to this Court,
HELD: (1) The expression ’agricultural land’ has to be
given a restricted meaning and not the wide meaning given by
the High Court. The question whether land is agricultural
land has to be decided on evidence of actual or intended
user for an agricultural purpose for which the land may have
been prepared or set apart. [352 F]
Commissioner of Wealth-tax, Andhra Pradesh v.
Officer-in-Charge (Court of Wards) Paigah, [1977] 1 S.C.R.
146 followed.
(a) The land in the present case was covered by sponta-
neous or natural growth of forests. It was not shown that
the assessee or his predecessor in interest did anything to
develop the forest in the sense that any particular trees
were planted deliberately. The exploitation of the forest
lands was simply to give contracts for cutting trees. It
must, therefore, be treated prima facie as non-agricultural
land. [353 E]
(b) The decision in State of Kerala v. Gwalior Rayon
Silk Manufacturing (Wvg) Co. Ltd. [1974] 1 SCR 671 depended
upon the special facts of that case and the provisions of
the Kerala Private Forests (Vesting and Assessment) Act,
1971, interpreted therein. This Court, in that case ex-
plained, why for certain special reasons and m an unusual
context, certain land described as ’forest land’ was to he
treated as ’agricultural’. Forest land ordinarily means non
arable, that is, non agricultural land. [351 C & E]
Rajah Anand Brahma Shah v. State of U.P. & Ors. [1967]
1 SCR 373 followed.
347
(c) Assuring that the forest land subsequent to the levy
of estate duty had been acquired by the State-to be
converted and used for agricultural purposes, there being no
evidence or finding of such a character before the events
which attracted the estate duty, it is an irrelevant circum-
stance of which the Court cannot take notice. [351 G]
(2) (a) The burden of establishing the exemption lay
upon the assessel. The High Court was not correct in placing
the burden upon the Revenue when it was admitted that the
land was forest land. The reason given by the High Court,
that a question of immunity of the subject matter from
taxation by Parliament arose here, and that, therefore, the
onus lay on the Department mixes up the questions of legis-
lative competence and of taxability. Even if there could be
such an onus, it was, sufficiently discharged in the present
case by the admission of the assessee that the land was
forest land covered with natural or wild growths. [352
A---C]
(b) The assessee, was given due opportunity to lead
evidence to show, that what was prima facie non-agricultural
land, was really agricultural land but he led no evidence
to prove his intention to put the land to agricultural use
or purpose. On the other hand, he contended that the mere
possibility of using such land for agricultural purposes in
future was enough. Therefore, he had not discharged his
onus, and no case is made out for sending the case back to
the Tribunal for any fresh decision. [353 D-F]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2000-
2001 of 1969.
(Appeals by Special Leave from the Judgment and Order
dated 17-10-1968 of the Kerala High Court in Income Tax
Referred Case No. 79/67).
B. Sen, S.P. Nayar and 1. Ramamurthi for the Appellant
(in both appeals).
G.K. Viswanatha lyer, K. Jayaram and R: Chandrasekar for
the Respondent (in both appeals).
The Judgment of the Court was delivered by
BEG, J.--Civil Appeals Nos. 2000-2001 of 1969 from the
judgment and order of the Kerala High Court are by grant of
special leave by this Court filed on the ground that these
appeals raise a question of wide general importance. This
question was thus framed, in a reference made by the Madras
Bench of the Income-tax Appellate Tribunal under Section
64(1) of the Estate Duty Act, 1953:
"Whether on the facts and in the circum-
stances of the case, the Appellate Tribunal was
correct in law in having included the value of the
forest lands in the total value of the Estate for
the purpose of Estate Duty ?"
The assessee had claimed that large tracts of, forest
land, covered with wild and natural forest growths, situated
in the erstwhile Malabar District, were ’agricultural’ lands
not liable to estate duty under the Estate Duty Act of 1953
(hereinafter referred to as the Act’). According to the
Revenue, duty had become leviable on the death of the former
owners, Smt. Jayalakshmi Devi, who died on 6-3-1954, and
Shri Madhava Rajah of Kollengode, who died on 9th May, 1955,
each owning 1/13th share in the Tarwad properties on the
dates of their deaths.
348
No question as to the effect of any amendment of the law
upon liability of agricultural laud to Estate duty was
referred by the Tribunal to the High Court. Nevertheless,
it seems to have been considered by reason of the general
nature of the-question referred involving a determination of
the correctness of the inclusion of the value of "forest
land in the total value of the estate". We may observe here
that the question framed seems to rest on the assumption
that the land under consideration was "forest land". Howev-
er, the general nature of the question framed and the ques-
tions argued and decided by the Appellate Tribunal as well
as the High Court indicated that the real contest was about
the very nature of the land involved in order to determine
whether it was liable to estate duty.
The High Court had observed that the Tribunal’s findings
that land, to the extent of 36,857.16 acres, was not agri-
cultural land was "solely based on the absence of evidence
or the assessee’s failure to prove that the disputed forest
lands are agricultural lands".
The High Court had also mentioned the basis of this
finding relating to two types of land about which it had
disagreed with the Appellate Tribunal while agreeing with
the Tribunal that 500 acres of rocky land was non-agricul-
tural land. This basis was given by quoting the ’fol-
lowing two passages from the judgment of the Appellate
Tribunal:
"(1) According to the valuers, the remaining
extent of 15,000 and odd acres out of the first
category, has been leased by the assessee fro.m
time to time for cutting of timber and fuel wood,
and has never been used by him either by himself
or through lessees to bring it under cultivation
for any purpose. There is no material on record
from which it can be said that this area can at all
be brought under cultivation for any purpose. Even
if it is assumed that, there is a bare possibility
of this area being brought under cultivation, the
assessee has not placed any material before us from
which it can be said that a prudent owner would
undertake any process of farming in respect of this
land".
(2) "With regard to the second category of
the land of the extent of 16,000 and odd acres, the
report of the valuers does not throw any light upon
the nature of this land, and the only information
available is that these lands have been held by the
Kerala Government under a perpetual lease on an
annual rent of Rs. 5,000/-. The assessee has not
shown whether this land was being cultivated. by
the Kerala Government or whether it was Only being
exploited by the Kerala Government for its timber
value. On the material on record, it is not
possible for these lands to come. under the catego-
ry of agricultural lands".
349
The High Court had set out the provisions of
Section 5 of the Act as they stood before a slight
amendment in 1956. It read:
"5. Levy of estate duty--
(1) In the case of every person dying after
the commencement of this Act, there shall, save
as hereinafter expressly provided, be levied and
paid upon the principal value ascertained as
hereinafter provided of all property settled or
not settled, including agricultural land situate in
the States specified in the First Schedule to this
Act, which passes on the death of such person, a
duty called ’estate duty’ at the rates fixed in
accordance with Section 35.
(2) The Central Government may, by notifica-
tion in the official Gazette, and the names of any
other States to the First Schedule in respect
whereof resolutions have been passed by the
Legislatures of those States adopting this Act
under clause (1) of Article 252 of the Constitution
in respect of estate duty on agricultural lands
situate in those States, and on the issue of any
such notification the States so added shall be
deemed to be States specified in the First Schedule
within the meaning of sub-section (1)".
After pointing out that agricultural land falls under
item 48 of List II or the State List in the Seventh Sched-
ule of the Constitution, the High Court held that estate
duty on the land under consideration would become leviable
provided it was agricultural land on the passing of resolu-
tions by the legislature of the State of Madras as provid-
ed by Section 5 (2) set out above. These resolutions
having been passed on 2-4-1955, the State of Madras was
added in the First Schedule to the Act with effect from
6th June, 1955. Hence, the High Court held that the estate
duty was not leviable under the Act on agricultural
land,before 6th June, 1955, in the Madras State to which
the land under consideration had belonged at the time when
it was said to have become subject to a levy of estate duty.
Thus, the principal question which arose was: What is the
meaning of "agricultural land" as that term is used in the
Act ?
The High Court of Kerala, which had to deal with this
reference decided the question on two grounds: firstly,
that, according to the views expressed in Sarojni Devi v.
Srikrishna;(1) and Megh Raj v. Allah Rakha;(2) and C.I.T.
West Bengal, Calcutta, v. Raja Benoy Kumar Sahas Roy,(3)
the words "agricultural land" should be "interpreted in
their widest significance"; and, secondly, that although the
burden rested upon an assesee to establish an exemption from
liability to estate duty in respect of any part of his
estate, yet, if he claimed immunity on the ground that
the subject matter does not fall within the ambit of the
taxing power of the legislature imposing
(1) A.I.R. 1944 Mad. 401. (2) A.I.R. 1942
PC 27.
(3) [1957] 32 ITR 466.
350
the duty, the Revenue had to establish that the subject
matter involved is taxable. It then gave its opinion in the
following terms:
"It is well known that the extensive areas of
different varieties of plantation that we have
got in this State were once forest lands, and it
is also equally well-known that year after year
large areas of forest lands in this State are
being cleared and converted into valuable planta-
tions. In the absence of exceptional circum-
stances such as the land being entirely rocky or
barren for other reasons, all forest lands in
this State are agricultural lands in the sense that
they can be prudently and profitably exploited for
agricultural purposes. There is no case that the
forest lands concerned in this case or any part
thereof are unfit for agricultural exploitation".
So far as the correct interpretation of the
term "agricultural laud" in a taxing statute, such
as the one before us, is concerned, we have already
dealt with the question in our judgment in Commis-
sioner of Wealth-tax, Andhra Pradesh v.
Officer-in-Charge (Court of Wards) Paigah, C)
where we have said:
"We think that it is not correct to give as
wide a meaning as possible to terms used in a
statute simply because the statute does not define
an expression. The correct rule is that we have
to endeavour to find out the exact sense in which
the words have been used in a particular context.
We are entitled to look at the statute as a whole
and give an interpretation in consonance with the
purposes of the statute and what legally follows
from the terms used. We are to avoid absurd re-
sults. If we were to give the widest possible
connotation to the words ’agricultural land’, as
the Full Bench of the Andhra Pradesh High Court
seemed inclined to give to the term ’agricultural
land’, we would reach the conclusion that practi-
cally all land, even that covered by buildings is
’agricultural land’ is as much as its potential or
possible use could be agricultural. The object of
the Wealth Tax Act is to tax surplus wealth. It
is clear that all land is not excluded from the
definition of assets. It is only ’agricultural
land’ which could be exempted. Therefore, it is
imperative to give reasonable limits to the scope
of the agricultural land’, or, in other words, this
exemption had to be necessarily given a more re-
stricted meaning than the very wide ambit given to
it by the Andhra Pradesh Full Bench".
Learned Counsel for the respondents had sought to rely
strongly upon State of Kerala & ,4nr. v. The Gwalior Rayon
Silk Manufacturing (Wvg.) Co. Ltd. etc.,(2) where the
question under consideration was whether the Kerala Pri-
vate Forests (Vesting and Assignment) Act 26 of 1971, pur-
porting to acquire forest lands held on Janmam
(1) [1977] 1 S.C.R. 146.
(2) [1974] (1) S.C.R.p. 671, 682.
351
right,’ without payment of compensation, for implementing a
scheme of agrarian reform by assigning lands or leasing them
to poorer sections of rural agricultural population, was
acquiring "agricultural land", for purposes’ stated in. the
Preamble to the Act before this Court for interpretation.
This Court interpreted the Preamble as having the effect of
an earmarking by Legislature of certain forest lands for
conversion into land meant for agriculture.
We do not think that the forest land involved in Gwalior
Rayon Silk Manufacturing (Wvg.) Co. Ltds.’ case (supra),
which had become linked up with agricultural purposes and
earmarked for them, by reason of a special statute for
special purpose can bear comparison with forest land
with "spontaneous" or natural and wild growths of for-
est, which is involved in the case now before us. The
decision in Gwalior Rayon Silk Manufacturing (Wvg.) Co.’s
case (supra) obviously depended upon the special facts of
that case and the character of provisions to be interpreted.
This Court keeping in view the special features of that
case, in the context of certain judicial pronouncements
mentioned in the statement of objects and reasons for the
statute to be interpreted, observed there (at p. 683):
"It is, therefore, manifest that when the
legislature stated in the Preamble that the private
forests are agricultural land, they merely wanted
to convey that they are lands which by and large
could be prudently and profitably exploited for
agricultural purposes".
It seems clear to us that this Court, by explaining why,
for certain special reasons and in an unusual context,
certain land described as "forest land" was to be treated as
though it had become "agricultural", implied that ordinarily
this is not so. In Rajah Anand Brahma Shah v. State of U.P.
& Ors.,(1) this Court held forest land to be nonarable
which meant "non-agricultural". We think that, without
evidence to show that such land had been cleared and pre-
pared or earmarked for agricultural purposes, it must be
treated as prima facie nonagricultural land.
Learned Counsel appearing for the respondent stated
before us that the lands under consideration had also been
subsequently acquired by the Govt. and put to agricultural
uses. There is, however, no finding or evidence before us
to that effect. Apparently, the learned Counsel meant that
forest land subsequent to the levy of estate duty had been
acquired by the State to be converted and used for agricul-
tural purposes. There being no evidence or finding of such
a character before the events which attracted the estate
duty, we cannot take notice of such a statement by Counsel.
It is irrelevant for the purpose of the cases before us.
So far as the question of burden of proof is concerned,
we think that to proceed on the assumption that all land is
prima facie capable of cultivation, so that the State must
prove that it is non-agricultural in order to establish that
it could be the subject matter of legislation
(1) [1967] 1 S.C.R. 373 at p. 379.
352
which was within Parliament’s legislative competence, and,
therefore, covered by the Act, is to mix up the question of
legislative competence and that of taxability of what is, on
the face of it, taxable as part of the estate or property of
the assessee within the meaning of Section 5 of the Act set
out above. Indeed, the question of legislative competence
of Parliament was neither in issue nor part of the question
referred even if such a question could have been referred at
all by a Tribunal functioning under the Act. We think that
the burden of establishing the exemption lay upon the asses-
see respondent as was rightly held by the High Court. We
think that the High Court was not correct in placing the
burden upon the Department, after it was admitted that it
was "forest land", on the ground that the further question
of an immunity of the subject matter from taxation by Par-
liament arose here and that, therefore, the onus lay on the
Department. Even if there could be such an onus here, it
was, we think, sufficiently discharged by the admission that
this was "forest land" covered with natural or wild growths.
After that, at any rate, the assessee had to prove change of
its character.
In Commissioner of Wealth Tax, Andhra Pradesh v. Offi-
cer-incharge (Court of Wards) Paigah, (supra), in which we
heard arguments together with arguments in the case now
before us, we found that there was some evidence of the
agricultural character of land in the shape of entries in
revenue record. We do not find what could similarly consti-
tute evidence of agricultural character of the land involved
in this case. On the other hand, the assessee’s admission
that the land under consideration was "forest land",
covered by wild and natural growth of forests, constituted
evidence to the contrary. We think that, unless there was
evidence that such lands had been, in some way, set apart or
earmarked for or linked up with an agricultural purpose, by
their owners or occupiers, it could not be held that they
are agricultural lands.
We think that the view of the Kerala High Court, that
"all forest lands in this State are agricultural lands in
the sense that they can be prudently and profitably exploit-
ed for agricultural purposes", is too wide. It is erroneous
for the reasons we have already set out in our judgment in
the case from the Andhra Pradesh High Court. The question
has to be decided on evidence of actual or intended user for
which land may have been prepared or set apart.
In the case before us now, the Tribunal said in its
referring order:
"The Tribunal permitted the accountable
person to raise the contention that the value of
the forest lands has to be excluded as they were
agricultural lands. So far as this contention was
concerned, the following facts were not in dispute:
viz., that the forest consisted of trees of sponta-
neous growth; that no operations in the nature of
forest development were being carried on; and, that
only operations in the nature of exploitation of
the forest were being conducted. The account-
able person, however, contended that these lands
were capable of being brought under cultivation at
a future
353
date and that therefore they must be deemed to be
agricultural lands. Reliance was sought to be
placed upon the decision of the Madras High Court
in Sarojini Devi v. Shri Krishna (AIR 1944 Madras
p. 401) in which it was held that the expression
’agricultural lands’ must be taken to include lands
which are used or are capable of being used for
raising any valuable plants or trees or for any
other purpose of husbandry. The Tribunal was,
however, of the view that in the said decision
their Lordships did not intend to lay down a defi-
nition of the expression ’agricultural lands’ for
all purposes, and that, on the other hand, they
clearly indicated that the expression admits of
different interpretations and that it was only from
the context of the particular enactment in which
this expression is used that’ its meaning has to be
inferred. The Tribunal observed that the very
wide definition of the expression ’agricultural
lands’ laid down in the above cited decision was
not applicable to cases under the Estate Duty Act.
The Tribunal, therefore, negatived the contention
of the accountable person that the forest lands had
to be excluded from the value of the assessable
estate of the deceased".
Thus, it is clear that the assessee, after having been
given due opportunity to lead evidence to show that what was
prima facie nonagricultural land, in the sense that it was
covered by the spontaneous or natural growth of forests, was
really agricultural land, had led no such evidence. It was
not shown that the assessee or his predecessor in interest
did anything to develop the forest in the sense that any
particular trees were planted deliberately. It appears that
the nature of exploitation of the forest lands was simply to
give contracts for cutting of the trees. The assessee not
having led any evidence of any intention to prepare or
appropriate or ear-mark the land for any agricultural use or
purpose, but’, on the other hand, having contended that mere
possibility of using such land for agricultural purposes in
future was enough, could not be said to have discharged his
onus of proof. After the assessee’s admission that it was
"forest land" which presumably prevented cultivation, no
evidence was led as we have already observed to indicate
any change of character of this land or its conversion into
agricultural land. We therefore think that the Appellate
Tribunal was correct in expressing the view it had taken and
the conclusions it had recorded. And, no case is made out
for sending the case back to the Tribunal for any fresh
decision.
Consequently, we allow these appeals, set aside the
judgment and orders of the High Court. The parties will
bear their own costs.
V.P.S. Appeals
allowed
354