Srinivasan, J.:— The assessee is a partnership engaged in the manufacture and sale of tea in Ceylon. It had purchased a rubber estate in the year 1941 and had been deriving some income from rubber trees in the years earlier to the assessment year, which is 1954–55. During the account year which ended on March 31, 1954, the assessee, in its return of income, claimed a deduction of Rs. 15,000 as the cost of fuel. Admittedly, fuel had been extracted from the estate of the assessee by weeding out 30 acres of rubber plantation. The sum of Rs. 15,000 had been credited to the account headed “Estates and Properties”, and also went in reduction of the capital value of the estate entered in this account. The Income-tax Officer took the view that there was nothing to establish that this sum of Rs. 15,000 represented the value of useless rubber trees and that the claim to the deduction of Rs. 15,000 as cost of the fuel resulted in a disproportionate increase in the cost of fuel for the manufacture of tea as compared with the previous years. He, accordingly, held that the sum of Rs. 15,000 should be a revenue receipt. The assessee contended before the Appellate Assistant Commissioner that these trees had been standing on the estate even at the time of the purchase and that the value of these trees represented a capital asset, and when the trees were cut down and otherwise utilised, it should be taken to reduce the capital value of the plantation. It was denied that the amount realised by the sale of those old and unproductive trees could be of a revenue nature. These contentions were rejected by the Appellate Assistant Commissioner. The further appeal to the Tribunal failed. The Tribunal took the view that though some of the trees might have been in existence when the assessee purchased the estate, the trees were not cut down immediately so as to result in a recovery of part of the capital invested. The trees were maintained and income was realised from the product of these trees for several years. The Tribunal thought that the case was parallel to the acquisition of jungle from which trees were cut periodically either for the purpose of timber or fuel. Since the receipt in such a case would be of a revenue nature, the Tribunal, on analogy, held against the contention of the assessee. On an application by the assessee under section 66(2) of the Act, this court directed the submission of a statement of the case on the following question:

“Whether, on the facts and in the circumstances of the case, the sum of Rs. 15,000 representing the credit in the estate and property account for the estimated value of the rubber trees on the assessee's estate cut and used as fuel in the year of account is income liable to tax?”

2. Mr. Srinivasan, learned counsel for the assessee, brought to our notice a finding of the Commissioner of Inland Revenue, Ceylon, before whom the same question was mooted during taxation proceedings. That authority came to the conclusion that the value of the firewood could not be taken to be a revenue receipt in the ascertainment of profit and loss. Mr. Srinivasan does not deny that this finding is not conclusive as against the department, but only points out that an authority which was directly seized with the taxation of the income in Ceylon dealt with the question and accepted the contention of the assessee. The facts are not in dispute. That the assesses, had purchased an estate of which a certain acreage was under rubber is established.

3. According to the assessee again, old and useless rubber trees standing on a part of this estate were cut down and utilised as fuel for the tea manufacture. It does not also appear to be denied by the department that those rubber trees had ceased to be productive for some years and that they had in fact been cut and utilised as fuel. It is again indisputable that if the assessee did not have those rubber trees, which it could have used as fuel, it would have had to purchase fuel for an equal amount and that expenditure would certainly be an item deductible in the computation of the income of the assessee. We should however point out that the question before us is not whether the cost of the fuel is an item of deductible expenditure. It is whether the extraction of the fuel for the estate represents a taxable or a capital receipt.

4. The short argument urged before us is that these rubber trees formed part of the capital asset which was purchased by the assessee and that in cutting down the trees, the assessee only reduced the value of the capital asset, or recovered, as it were, a part of the capital invested in the purchase of the estate. According to the learned counsel, this represents the realisation of part of the invested capital and that, therefore, it should be regarded as a capital and not as a revenue receipt. So stated, the argument is attractively simple. The question however is not free from difficulty, but it is not altogether devoid of authority. Learned counsel for the assessee has referred to the decision in Visalakshi Achi v. Commissioner of Income-tax [1958] 34 I.T.R 363, 367 Mad... In that case, the assessee, whose estate was occupied by military authorities, claimed damages which included compensation for loss of cocoanut, areca and jack trees. It was held herein that the portion of the compensation, which was in respect of fruit-bearing trees with a life span of several years, was capital in nature. But, in that case itself, the learned judges observed:

“In a large garden, certain trees grow old and as they reach the end of their useful age, young trees are planted below them to take their place. In such a case, it will be perfectly correct to say that the value of the old trees cut down cannot be debited to capital.”

5. In another decision, Commissioner Of Income-Tax, Bombay South v. N.T Patwardhan. [1961] 41 I.T.R 313, 318 Bom.., the assessee sold a large number of trees, which had grown spontaneously, with the condition that the trees should be removed with their roots. The question of the nature of the receipt by the sale of such trees came to be considered, and the learned judges of the Bombay High Court, while accepting the positon that income from the timber forest, where the trees grow naturally, is income in the nature of revenue, yet thought, it made a difference in the circumstances of the case before them. They observed:

“The asset of the man was the land with the wild growth of trees on it., If the land with trees had been sold, there could have been no doubt that the sale was a realisation of capital and it would not have been possible to argue that the transaction in so far as it involved a sale of the trees was a sale producing income and the remaining part of the transaction was a capital sale. In the present case the land is retained by the assessee but a part of the asset is disposed of in its entirety by selling the trees with roots once and for all. As we have already stated earlier, whether in a given case there is a capital sale or a sale producing income must depend upon the facts and circumstances of the case and it seems to us that in a case like the present, where a man, on whose lands a wild growth of trees had stood for a number of years without any attempt being made by him to realise any income therefrom, sells the trees once and for all with their roots, the transaction is on account of capital and not of revenue, for by disposing of the roots of the trees, he has disposed of the source from which a fresh growth of wood would spring up.”

6. It is true that these decisions lend some colour of support to the contentions on behalf of the assessee. We are not however satisfied that the circumstances of the present case warrant the application of those decisions. A contrary view has been taken in Fringford Estates Ltd. v. Commissioner of Income-tax. In that case, the assessee-company purchased a tract of land, part of which had already been cultivated with tea and the rest of which was a jungle capable of being cleared and made fit for plantation. The jungle was cleared and the trees cut were stocked in the estate. Subsequently, the company sold the cut trees in the open market. The contention was advanced, that the profit made from the sale of timber was a capital receipt. This contention was rejected by the Appellate Tribunal. Their Lordships observed:

“Profits derived from capital which is consumed or exhausted in the process of realisation are nonetheless taxable income and this proposition has been well-settled since the decision of the House of Lords in Coltness Iron Company v. Black. This principle has been applied to profits derived from the working of mines and minerals in Raja Bahadur Kamakshya Narain Singh v. Commissioner of Income-tax [1943] 11 I.T.R 513 P.C., nitrate deposits in Alianza Company Ltd. v. Bell [1906] A.C 18., and timber bearing forests in Kauri Timber Company Ltd. v. Commissioner of Taxes [1913] A.C 771.. In particular, it has been held both in this court and in the Patna High Court that income derived from the sale of forest trees is not capital receipt and is liable to tax even though there is an exhaustion of capital assets in the shape of valuable and long-standing trees.”

7. It is true that in that case the trees in question were jungle trees, while in the present case they are said to have been old and useless rubber trees. It is not denied by the learned counsel on behalf of the assessee that the petitioner did not work the plantation as a rubber plantation for several years. Even when it purchased the plantation, the rubber trees had apparently become too old to be fully productive and they were, for all the use they were capable of being put to, nothing more than jungle trees. It would follow on the principle laid down in the decision above cited, that the income derived from the sale of such trees cannot be regarded as capital.

8. The case of sale of forest trees was considered by the Calcutta High Court in Maharajadhiraja Bahadur of Darbhanga v. Commissioner of Agricultural Income-tax. In that case, the assessee, who owned extensive forest, lands, sold the trees by public auction. The contract covered only sal trees of a particular girth and excluded fruit-bearing and valuable timber trees. The claim was made that it was not merely a right to cut and remove the trees that was granted to the purchaser but an interest in lands as well and that the sum realised was accordingly a capital receipt. This contention was rejected. The decision was reached that it was a case of sale of forest trees and that the receipts were not capital receipts but income.

9. A recent decision of the Gujarat High Court has taken the same view. It is reported in Digverendra Sinhji of Bansda v. Commissioner of Income-tax. The cases to which we have earlier made reference have also been noticed and followed in this decision. The learned judges affirmed the principle that income derived from the sale of forest trees is not capital and is liable to tax, even though there is exhaustion of capital assets in the shape of long-standing trees.

10. Applying the principles of these decisions, the conclusion reached by the Tribunal seems to us to be correct. The question is accordingly answered in the affirmative and against the assessee, who will pay the costs of the department. Counsel's fee Rs. 250.