1. The petitioners in these 50 writ petitions pray (1) that the respondents be directed not to demand, contrary to law, payment of stamp duty on the deeds to be executed by them in respect of the right to collect and take away beedi leaves, bamboo or standing timber, as the case may be; (2) that they be further directed not to demand sales tax from those petitioners who have not paid the same or those who have paid on some in statements but not on the others; and (3) that they be further prohibited from demanding payment of stamp duty on the amount of security to be deposited as if it is a mortgage, under Art. 35(a) of the Stamp Act or in respect of deposits already made for the current year or in respect of contracts to be entered into in future. Prayers (1) and (3) are common to all the petitions and prayer (2) is only in respect of some petitions while in other petitions the payment have not been challenged. In view of the legal implications, it is necessary to consider all the three objections upon which the respective orders are being challenged in so far as they are applicable to the respective petitioners who have raised some or all of the objections.

2. It may be stated that each year the Forest Department of the Government of Andhra Pradesh, after giving a sale notice in respect of the forest produce viz., timber fuel, bamboo minor forest produce, been leaves, tanning barks, parks mohwa, in the respective jurisdictions of the Divisional Forest Officers, holds an auction on the date and time specified in accordance with the terms and conditions of that notice. It is stated in Cl. (1) of the said notice that the right to cut and collect any of the forest produce enumerated above for which the auction is being held, in the Units mentioned in the schedule A attached, will be sold in open auction by the District Forest Officer of the particular division or any other Officer duly authorised by him at the specified place begining at the specified time on a specified date, and the day following if necessary commencing at the same hour. The earnest money deposits will be received from a particular time on all days of sales. In case the officer conducting the sales decides to continue the sales on the sub-squint day also, “he will announce it open” before concluding the sales of the first day. Cl. (2) specifies the period of contract. Cl. (3) gives a list of contracts to be sold; Cl. (4) says that the intending bidders are advised to inspect on the spot the coupes or other units and the produce they intend to purchase with a view to satisfy themselves about their correctness, Cl. (5) deals with earnest money to be deposited, according to which no person will be allowed to bid at the sale unless he or she makes an earnest money deposit of Rs. 1000/- in respect of each unit he/she bids except where the upset price is Rs. 1000/- or less, in which case the earnest money deposit shall be Rs. 200/-. Under Cls. (5) and (15) the Divisional Forest officer conducting the sale has the power without assigning any reasons to refuse or to accept the deposit of any intending bidder, to prohibit anyone from bidding at any stage of the auction, to reject the highest or any bid, to accept the highest or any bid or to sell the units separately or club together more than one unit or sell them after so rearranging that he may consider necessary. Cl. (18) says that the sale shall be signed by the highest bidder and the second highest bidder for each unit immediately after the sale is knocked down, at the appropriate places. They must also give certificates on the sale notice, which will be attached to the bid list to the effect that they have read and understood the terms of the sale notice and supplementary conditions, if any, and that they have agreed to abide by them. Under Cl. (20) where the sale amount is Rs. 1000/- or less, the full sale amount less earnest money deposit should be paid by the successful bidder immediately after the conclusion of the sale of the day, but if the bid amount exceeds Rs. 1000/- the highest bidder shall pay ¼th auction amount or Rs. 10,000/- less the earnest money deposit whichever is less at the close of the auctions of the date of sales. If the highest bidder fails to fulfil the above conditions, the earnest money deposit paid by him shall be forfeited and he shall have no rights whatsoever on the coupe for which he was the highest bidder and such coupes will be resold at his risk and loss. Cl. (21) says that the sales are subject to the confirmation of the Divisional Forest Officer or other Officer as the case may be. Cl. (23) which is the subject matter of challenge in these writ petitions, is as follows:—

“within 10 days of the receipt of confirmation orders of the competent authority the contractor shall pay.”

a. the balance of the 1st in statement amount as may be fixed by the Divisional Forest Officer;

b. 6¼% of the bid amount as security deposit;

c. sales tax over the bid amount at the rate current at the time of sale;

d. in respect of leases whose rental is below Rs. 10,000/- sales tax on the entire amount is to be paid before execution of the agreement. In respect of the leases of rentals above Rs. 10,000/- sales tax is to be paid along with each in statement proportionally.”

3. Cl. (24) provides that the contractor shall pay the other in statement amounts before the date fixed by the Divisional Forest Officer in the confirmation orders. The rest of the clauses deal with the procedure for bidding, solvency certificates to be produced, right to withdraw units from sale, conduct of sale etc. It would however be pertinent to notice a few of these clauses which will assist in the consideration of the contentions urged before us. Cl. (26) says that the agreement should be executed within 10 days of the receipt of the confirmation orders after fulfilling conditions 21 and 23 of the sale notice, which we have already extracted above. There is of course power to extend this time. Cl. (32) deals with taking charge of the coupes. The leases will be considered to be effective from the date of signing the agreement or from any other date which ever is later. The contractor shall be at liberty to enter, take possession and work the unit from that date after tendering a receipt signed by him/her or his/her accredited agent to the Range Officer concerned in the form appended. Cl. (60) says that the contractor shall at all times comply with the provisions of the Indian Stamp (Andhra Pradesh Extension and Amendment) Act 1959 and the Andhra Pradesh Court-fees and suits Valuation Act, 1956 and all rules from time to time in force thereunder and that the contractor shall pay the stamp duty fixed under the provisions of such Acts and Rules. The provisions of the sale notice shall be taken in all respects as subject to such Acts and Rules. Cl. (64) applies the Abnus Leaves Act and Rules thereof to all Beedi leaves.

4. In all these petitions, it appears that the petitioners are called upon to pay stamp duty on the agreements to be executed by them as if they are leases of immovable property. But the petitioners contend that the right to pluck, cut and take away beedi leaves, bamboos, standing timber, is not a right or interest in immovable property so as to attract any of the clauses in Art. 31 of the Stamp Act. Sarvasri Lakshmayya, Subbarayan, Ananda Reddy and Mangachari, all contend that under the definition of the Stamp Act, lease means a lease of immovable property and includes certain instruments specified in Cls. (a) to (b) and since the right to pluck and cut any of the three varieties of the forest produce mentioned above is not a right in immoveable property, there can be no question of any lease. Since the agreement which is required to be executed by the petitioners is not a conveyance or deals with immoveable property, it is only chargeable with stamp duty as an agreement under Art. 5(c) with Rs. 1-50.

5. In the counter, the Assistant Chief Conservator of Forests while referring to cl. (60) of the terms of sale, under which the petitioners had agreed to pay stamp duty, stated that prior to 1959, agreements of the Forest Department were exempt from stamp duty both in the Andhra and Telangana regions by virtue of Entry 10 and cls. (i) and (xi) of entry 11 of the Revenue Department Notification No. 13 dated 17-12-1938 of the Government of Madras and Rule 18 of the Executive Instructions contained in the Hyderabad Forest Contract Rules. But in view of the extension of Indian Stamp Act to the whole of the State of Andhra Pradesh by the Indian Stamp (Andhra Pradesh Extension and Amendment) Act XIX of 1959, with effect from 1-4-1959 the Government through G.O.Ms No. 1887 Revenue dated 17-10-1961 omitted entry 10 and cls. (i) to (xi) of entry 11 of the Revenue Department Notification No. 13 dated 17-12-1938. Consequent upon the extension of the Indian Stamp (Andhra Pradesh Extension and Amendment Art) 1959 with effect from 1-4-1959, and repeal of the Hyderabad Stamp Act as from that date, all rules, Notifications, instructions etc., under the Hyderabad Act also stood repealed. Accordingly the various contracts also became liable for stamp duty as in form No. 9 from 1961 onwards. Ultimately, the matter was referred to the Board of Revenue and the Board of Revenue through its reference No. B.P.Rt 820/56 dated 11-4-1966 gave its opinion that the agreements of the Forest Department come within the meaning of ‘leases’ and that they should be stamped as leases. In support of this opinion, it was contended in the counter that the contractors acquired a right not merely to the leaves already grown but also a right to use, collect and sell beedi leaves that would subsequently grow on the standing trees or also on trees and their branches that would subsequently grow taking nourishment from the land during the period of lease. They thus acquire an interest in immoveable property though for a limited period. Even if the documents are construed as licences coupled with a grant, the right acquired by the auction purchaser would be in the nature of some profits a prendre which being an interest in land is immoveable property. As the term ‘immoveable property’ is not defined in the Indian Stamp Act, the definition in the General Clauses Act, 1897, which includes land, benefits arising out of land and things attached to the earth or permanently fastened to anything attached to earth applies, and the auction of forest produce amounts to creating an interest in immoveable property. The leases being for a period less than one year, the instrument is rightly chargeable under Art. 31(c) of Sch. I of the Stamp Act. It was further contended that under cl. (23) of the conditions of auction, the petitioners having agreed to pay the tax as a condition of the contract, they cannot now question the same, it being a part of the consideration.

6. The question which we have to consider is what is the nature of the right which the petitioners have acquired under the auction held for the sale of beedi leaves, cutting of bamboo or other forest produce, all of which has to be cut and taken away within a short period, i.e in the case of beedi leaves within about nine months and in other cases within a year or so. In so far as taking charge of coupes is concerned, the right that is conferred upon the petitioners is stated in Cl. 32, viz., that they will be at liberty to enter take possession and work the unit from the date of signing of the agreement, and the right is one as per cl. (1) to cut and collect beedi leaves bamboo or timber. The agreement which the petitioners are being asked to execute upon which stamp duty is required to be paid as on a lease, is a standard one, the terms of which would show that it was an agreement for sale and purchase of forest produce. Cl. 1 of the agreement, says that the forest produce sold and purchased under the agreement is specified in Sch. I thereof, which will show the area in which it is situated. Cl. (2) says that the quantity of forest produce sold and purchased under the agreement is all the said forest produce which may now exist or may come into existence in the contract area, which the forest contractor may remove from the said area in accordance with the terms of the agreement during the period specified in the agreement and the forest contractor thereby agrees that the said forest produce may be extracted only during the aforesaid period. Cl. 4 sets out the consideration payable by the contractor under the agreement and the mode of its payment as being specified in Sch. III, which it is stated, does not include payment of sales tax or stamp duty.

7. The agreement read with the conditions of sale shows that it is one for sale and purchase of forest produce and that it does not confer any right to the trees as such except the right to cut and take the bamboos and the standing timber, and in the case of beedi leaves, to pluck them and take them away. No doubt the expression ‘immoveable property’ has not been defined in the Indian Stamp Act, but it has been defined in the Transfer of Property Act, the Registration Act and the General Clauses Act. It is contended by the learned Advocates for the petitioners that the definition given in the Transfer of Property Act and the Registration Act has to be taken into account, while Sri Madhava Reddy, the learned Government Pleader contends that it is the definition in the General Clauses Act that should be applied. It may be stated that under the General Clauses Act, benefits arising out of land and things attached to the earth are included in ‘immoveable property’. The question still to be considered even if the learned Government Pleader's contention is accepted, is what is meant by benefits arising out of land?. It appears to us on an examination of the several authorities to which we shall refer presently, that where the produce of trees or shrubs growing on land is sold, or where the right to cut and take away standing timber is conferred, they are not benefits arising out of the land, but it would only be a sale of the produce or the timber or bamboo simpliciter. But where a right to the several classes of produce referred to above is conferred for a long period, then the produce is from trees or plants attached to the earth from which sustenance is being drawn, and therefore, the right to such produce is said to be a benefit arising out of land.

8. In Mohanlal Hargovind v. I.T Commissioner . A.I.R 1949 P.C 311. the appellant obtained a short term contract from the forest department of the Government, of collecting and removing tendu leaves for a sum payable in statements as the consideration for the grant, with a permission to coppice and pollard the tendu trees. It was held that under the contract it was the tendu leaves and nothing but the tendu leaves that are acquired, that it is not the right to pick the leaves or to go on to the land for the purpose those rights being merely ancillary to the real purpose of the contracts and if not expressed would be implied by law in the sale of a growing crop. Similarly the small right of cultivation given in the contracts is merely ancillary and is of no more significance than would be e.g a right to spray fruit trees given to the person who has bought the crop of apples. The question as to whether the expenditure incurred for the purposes of working the contract to pick and gather the tendu leaves from the forest was revenue expenditure for acquiring the raw material or was it capital expenditure. Lord Greene, M.R after examining terms of the contract which are similar, if not identical, to the terms and conditions of sale in the draft agreement in the instant case referred to Cl. (i) which identifies the subject matter of the contract, which was described as “the forest produce sold and purchased under the agreement” as that specified in Sch. I in the “contract area” therein indicated. By cl. 2 the quantity of the forest produce is defined as all the said, produce “which may now exist, or may come into existence in the contract area which the forest contractor may remove from the said area during the period from 5th day of September 1939 to the 30th day of June 1941. Schedule I-A in that case is also similar to Schedule 2 of the Standard agreement which we had now extracted earlier. It provided that “the contractor shall commence his work before the…day of……19, and shall to the satisfaction of the office empowered to execute the contract on behalf of the Government, make Continuous and adequate progress throughout the term of the contract.” In considering this clause, it was observed at page 312.

“The contracts grant no interest in land and no interest in the trees or plants themselves. They are simply and solely contracts giving to the grantees the right to pick and carry away leaves, which of course, implies the right to appropriate them as their own property…The contracts are short-term contracts. The picking of the leaves under them has to start at once or practically at once and to proceed continuously. It is true that the rights under the contracts are exclusive but in such a case as this that is a matter which appears to their Lordships to be of no significance.”

9. It may be noticed from the above observations that emphasis is laid on two things; one is, that the agreement is for sale of tendu leaves and the second, that it is for a short term and the work is to commence immediately and to proceed continuously. In those circumstances, it was a contract for picking tendn leaves and tendu leaves alone and does not deal with any interest in land or the trees.

10. In Firm C.J Patel & Co. v. M.P State . A.I.R 1953 S.C 108. their Lordships of the Supreme Court referred to the judgment of the Privy council. The question which arose for determination was whether the petitioners had acquired any rights in property under the several agreements entered into between them and the State of Madhya Pradesh so that it can be said that their fundamental rights are affected when that State sought to take away their rights under the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act 1951. The petitioners in those cases entered into contracts and agreements with the previous proprietors of certain estates and mahals in the State under which it was said they acquired the rights to pluck, collect and carry away tendu leaves, to cultivate, culture and acquire lac, and to cut and carry away teak and timber and miscellaneous species of trees called hardwood and bamboos. After examining the provisions of the Act, Chandrasekhara Aiyar, J., referred to the judgment of the Privy Council in Mohanlal Hargovind v. I.T Commissioner (Supra). After stating that similar agreements came up for consideration before their Lordships of the Privy Council and after noticing the observations made by them said at page 110:—

“There is nothing in the Act to affect the validity of the several contracts and agreements. The Petitioners are neither proprietors within the meaning of the Act nor persons having any interest in the proprietary right through the proprietors.”

11. The question, whether they are rights pertaining to land and hence immoveable property, did not in that sense fall for consideration. In Shantabai v. State of Bombay . A.I.R 1958 S.C 532. the document was one executed by a Zamindar in favour of his wife, granting her a right to enter, cut and appropriate all kinds of wood from his zamindar forest. The document purported to be a lease for a period of twelve years and the consideration was stated to be Rs. 26,000/-. On 31-3-1951 the proprietary rights in the Zamindar estate vested in the State by virtue of a notification issued under Sec. 3 of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals Alienated Lands) Act 1950, and thereafter the petitioner was stopped from cutting any wood from the forest. It was held by a majority of the Supreme Court (S.R Das C.J Venkatarama Aiyer, S.K Das and Sarkar, JJ.) that the petitioner could not complain of any infringement by the State of any fundamental right for the enforcement of which alone a petition under Art. 32 is maintainable. Bose, J., however, considered the interest as an interest in immoveable property and as the deed dealt with property of the value of over Rs. 26,000/- it required registration and since it was not registered, the petitioner had no fundamental rights. After examining the definitions in Sec. 3(26) of the General Clauses Act, Sec. 3 of the Transfer of Property Act and Pec. 2(6) of the Registration Act, he said at page 536:—

“Now it will be observed that ‘trees’ are regarded as immoveable property because they are attached to or rooted in the earth …. Therefore trees except standing timber are immoveable property”.

12. Now, what is the difference between standing timber and a tree? It is clear that there must be a distinction because the Transfer of Property Act draws one in the definitions of ‘immoveable property’ and ‘attached to the earth’ and it seems to me that the distinction must lie in the difference between a tree and timber. It is to be noted that the exclusion is only of ‘standing timber’ and not of timber trees’.

13. By reference to Webster's Collegiate Dictionary, he pointed out that timber is well enough known to be wood suitable for building houses, ships, etc., whether on the tree or cut and seasoned,” Therefore. Bose J. concluded that standing timber must be a tree that is in a state fit for those purposes and further a tree that is meant to be converted into timber so shortly that it can already be looked upon as timber for all practical purposes even though it is still standing. If not, it is still a tree, because unlike timber, it will continue to draw sustenance from the soil. He further observed:

“Now of course, a tree will continue to draw sustenance from the soil so long as it continues to stand and live; and that physical fact of life cannot be altered by giving it another name and Calling it “standing timber”. But the amount of nourishment it takes if it is felled at a reasonably early date, is so negligible that it can be ignored for all practical purposes and though theoretically there is no distinction between one class of tree and another, if the drawing of nourishment from the soil is the basis of the rule, as I hold it to be, the law is grounded not so much on logical abstractions as on sound and practical commonsense. It grew empirically from instance to instance and decision to decision until a recognisalle and workable pattern emerged; and here, this is the shape it has taken.”

14. As we said earlier, the emphasis is upon the length of the period during which the right to cut the standing trees is to be exercised and the amount of sustenance it would draw in order to determine whether it is a standing timber or standing tree. If it is to be done in a short period as a timber, it is not a benefit arising out of the land and is therefore not an immovable property.”

15. In Mahadeo v. State of Bombay (AIR 1959 S.C 735) the Supreme Court was again considering long term agreements by which some of the proprietors in the former State of Madhya Pradesh granted to the petitioners the right to take forest produce, mainly tendu leaves, from the forests included in Zamindar and Malguzari villages of the granters, prior to the vesting of their rights in the State under the Madhya Pradesh (Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950. Some of the documents on which the claim was founded were unregistered and the period during which the alleged agreements were to operate had already expired. Other agreements were made by registered documents and the terms during which they had to operate had yet to expire. In so far as rights were claimed on foot of unregistered agreements, it was held that the petitions could not be entertained; The document, if it conferred a part or share in the proprietary right, or even a right to profit a prendre, needed registration to convey, the right. If it created a bare licence, the licence came to an end with the interest of the licensers in the forest. If proprietary right was otherwise acquired, it vested in the state, and lastly, if the agreements created a purely personal right by contract, there was no deprivation of property, because the contract did not run with the land. In considering these documents, the Supreme Court considered the nature of the right conferred by them, viz., whether the right to leaves can be regarded as a right to a growing crop or is it a grant which confers a benefit arising out of land. It was held that in all those cases, there was not a naked right to take the leaves of tendu trees together with a right of ingress and of aggress from the land; that there were further benefits including the right to occupy the land, to erect buildings and to take other forest produce not necessarily standing timber, growing crop or grass. It was further held that the right of ingress and of aggress over land vesting in the State can only be exercised if the State as the owner of the land allows it, and even apart from the essential nature of the transaction, the State can prohibit it as the owner of the land. In so far as the right to the leaves is concerned, it was observed: “Whether the right to the leaves can be regarded as a right to a growing crop has, however, to be examined with reference to all the terms of the documents and all the rights conveyed there under. If the right conveyed comprises more than the leaves of the trees, it may not be correct to refer to it as being in respect of ‘growing crop’ simpliciter.” The difficulties caused by the definitions which exist in the General Clauses Act, the Sale of goods Act, the Transfer of Property Act and the Registration Act were noticed and it was said that they must be placed alongside one another to get their ambits. At page 740, Hidayatullah speaking for the Court, observed:

“If the definitions are viewed together, it is plain that they do not tell us what “immoveable property” is. They tell us what is either included or not included therein. One thing is clear, however, that things rooted in the earth as in the case of trees and shrubs, are immoveable property both within the General Clauses Act and the Transfer of Property Act, but in the latter, ‘standing timber’ ‘growing crop’ and ‘grass’ though rooted in earth, are not included. Of these, ‘growing Crop’ and ‘grass’ form the subject-matter of the sale of goods, and ‘standing timber’ comes within the last part of the definition of ‘goods’ in the Indian Sale of Goods Act, to be subject thereto if the condition about severing mentioned in the definition of ‘goods’ exists.

“It has already been pointed out that the agreements conveyed more than the tendu leaves to the petitioners. …These rights were spread over many years, and were not so simple, as buying leaves so to speak in a shop……In these circumstances, the agreements cannot be said to be contracts of sale of ‘goods’ simpliciter.”

16. This is yet another instance where the duration of the contract and the nature of the right over the several subject-matters of the contract have to be taken into consideration in determining whether it constitutes a pure sale of goods or deals with immoveable property.

17. There are two Bench decisions of this Court which have also taken a similar view. In Ramakrishnaiah v. State of Andhra (1956 An. W.R 717), Viswanatha Sastri, and Krishna Rao JJ., while dealing with the Sale Tax Act had to consider whether the bamboos sold by the assessee can be said to be agricultural or horticultural produce grown on land, and whether the assessee had an interest as a tenant or otherwise in the land. In so far as the last point is concerned, it was held that the contract conveys no interest in the land to the assessee. The property in question was a Government forest and the assessee was granted the right to cut bamboos of a particular age in lieu of a lump sum pavement. It was a short term contract for 11 months: The cutting of the bamboos by the assessee had to start at once and had to be completed within that period. Except to cut bamboos found in the coupes specified in the contract, the assessee had no right to the other produce of the forest. He had no right to the possession, much less to the exclusive possession, of the coupes where the bamoo clustors lay. The right to enter the forest with the permission of the officers of the Forest Department in order to cut bamboo trees was merely ancillary to the real purpose of the contract and did not create any interest in land in the assessee, and in the language of Lord Coleridge, C.J in Marshall v. Green (1875) L.R.I.C.P.D 35) “the land is to be considered as a mere warehouse of the thing sold, and the contract is for goods”. Viswanatha Sastri, J. observed at page 718.—

“The position is the same as if the bamboos had been stored by the Government in its godown and the assessee had bought the bamboos for a price with the implied or incidental right to go and fetch them and so reduce them into his possession and ownership. Ex. A-1 is in substance a contract of sale of bamboos fit for cutting in certain coupes in a Government forest and an immediate severance and realization of the trees by the assessee was stipulated. By no stretch of language could the assessee be regarded as having acquired a lease hold or any other interest in the land or any right to the possession of the land. The mere fact that Ex. A-1 referred to the lease period or leased area is not of great significance, for the use of these phrases does not affect the legal rights of parties which depend upon the real nature of the transaction-Venugopala Pillai v. Thiruvukarasu (1948 (2) M.L.J 155.)”

18. In another case, R. Deshpande v. Muttam Reddy (AIR 1961 A.P 180) another Bench of this Court consisting of Chandra Reddy, C.J and one of us (the present Chief Justice) were considering the question whether plucking of beedi leaves was a service rendered, coming within the mischief of Sec. 7(d) of Representation of the People Act, 1951 (as amended by Act 27 of 1956) Even though the several decisions were not cited before the Bench, it held that, the nature of beedi leaves contract was such that no supply of goods or execution of any works to or for the Government was envisaged. The Government for a consideration, sells the beedi leaves in forest areas specified in the contract to the contractors who should within the period of the contract, pick the beedi leaves and remove them from the forest. At pages 182-183 it was observed:

“A perusal of the contract entered into with the 1st respondent clearly shows that the agreement is one for the sale of forest produce. The preamble as well as the various clauses of the agreement make it clear.

It is not uncommon, in daily commercial transactions of purchase and sale of goods, for parties to enter into agreements, where under one party, agrees to buy and the other to sell produce or Commodities which may be lying on some land or at some place from which the purchaser will have to collect it and for which purpose he is given certain facilities such as to go on the land or to place some obstacles etc.”

19. These decisions fully support the proposition which we have enunciated at the very outset, namely, that as long as the right is only to pluck the beedi leaves or to cut and take away the beedi leaves, bamboo or timber, the process to commence immediately and completed within a short period, it cannot be said that right is a right in immoveable property or a benefit arising out of land. To create such a right, the right conferred by the agreement should be in respect of the trees or the shrubs or in respect of anything pertaining to the land, and where there is a sale of the produce it should be such as would indicate that the produce from the trees is relatable to the normal amount of sustenance which that tree draws in order to live and grow, or what in the felicitous words of Lord Coleridge, C.J in Marshall v. Green (Supra) it derives from “nutriment afforded by the land”.

20. While this is so, Mr. Madhava Reddy has cited the decision in Venugopala v. Thirunavukkarasu (Supra) where Rajamannar, C.J, (as he then was) and Yahya Ali J., held that an agreement of rent in respect of the toddy yield of cocoannt trees and the fight to tap the cocoannut trees and obtain toddy and to enter upon the land for that purpose was in the nature of immoveable property because it was a benefit which arises out of the land, and consequently that right to which the defendant was entitled was in the nature of a lease hold right. Rajamannar, C.J (as he then was) who delivered the judgment of the Bench relied upon Marshall v. Green (Supra)(which was also referred to by Viswanatha Sastri J., in Ramakrishnaiah v. State of Andhra (supra) Seeni Chettiar v. Santhanathan Chettiar (I.L.R 20 Madras 58) and Natesa Gramani v. Thangavelu Gramani (I.L.R 38 Madras 883). Not only in Venugopala v. Thirunavukkarasu (Supra) but also in the cases referred to by Rajamannar, O.C.J (as he then was) the documents which conferred a right to cut and enjoy the trees was for a long period, such for instance in the first case (viz., Seenichettiar's case) they were for a period of 4 years from the date of contracts, and it was held that they conveyed an interest in immoveable property because it was contemplated that the assignee should derive the benefit from the further vegetation and from the nutriment to be afforded by the land. In Natesa Gkamani's case (Supra) it was held that under the document which they were considering, the person who was entitled to take the toddy was entitled to an interest in the land because as Oldfield, J., in that case said:

“No doubt in the present case, in which plaintiff's right was to draw palmayra juice, cut such leaves as his doing so involved and take the fruits of the trees, his right to do so for two reasons entitled that he should benefit, to adopt an expression from Marshall v. Green (Supra) by the nutriment afforded by the land”.

21. It is clear, therefore that the facts which the Madras High Court were considering were clearly distinguishable. It is unnecessary for us to go to the extent to which Mr. Lakshmayya invites us to go, to hold that decision is in conflict with a Full Bench decision in Commissioner of Incometax v. Yagappa Nadar (A.I.R 1927 Madras 1038). It is apparent that case was dealing with the question whether revenue derived from the sale of toddy extracted from coeoanut trees is agricultural income within the meaning of Sec. 2(1) of the Income Tax Act and whether the Income Tax Act applies to profits derived from the sale of such toddy. Dealing with the contention that the petitioner as the lessee of the trees was entitled to treat the proceeds as income from agriculture, and that he was the lessee of the trees, but not of the land on which they stand, it was observed:

“It is very doubtful whether it is possible to have a lease of the trees without the land on which they stand. Under the Transfer of Property Act leases are only in respect of immoveable property and no instance of a lease of moveable property has been suggested to us. No interest in the land has been transferred here and it would appear that what the petitioner has obtained is a mere license to tap the trees and draw the juice”.

22. There is nothing in the judgment to show for what period the right to tap the trees was given and whether income from, sale of such toddy trees was agricultural income or not. Further whether the income is agricultural income or not would not be germane to the question whether it is a benefit from immoveable property, because all agricultural income would be derived from lands. What has to be considered is whether it is a lease of immoveable property, and that was not what was considered by the Full Bench case.

23. Mr. Subbarayan has cited a judgment in In re Mahant Raj Balamgir which arose under the Stamp Act. The question which fell for consideration was whether the document executed in that case for purchasing standing timber in certain jungle for a certain consideration, was a lease of immoveable property or whether it was an agreement. It was held that the transaction was one of sale of goods or merchandise and the deed was an agreement or memo, random of agreement evidencing such sale, and was exempt from stamp duty under Sch. 1 Art. 5 and that the mere fact that beyond the stipulation for a sale of goods there was however an agreement that in case rival proprietor raised any objection to the cutting of timber and removal of the same the vendor was to have the responsibility did not in any way detract from the character of the agreement. Referring to the definition of immoveable property in section 3(25) of the General Clauses Act, Sulaiman, A.C.J observed at page 393:

“But here there was no idea of conferring a right on the purchaser to retain possession of timber which would remain attached or fastened to the earth. It is therefore quite clear that the standing timber which had to be cut down and removed, was moveable property and not immoveable property. The agreement in question therefore cannot be the counterpart of a lease of immoveable property within the meaning of Sec. 2(15) of the Stamp Act.”

24. In the view we have taken, we reject the contention of the learned Government Pleader that the agreements are leases within the meaning of Art. 31(c) of the Stamp Act and that stamp duty is payable thereunder.

25. The second question whether sales tax is leviable on transactions entered into between the contractor and the Government either in respect of sale of beedi leaves, bamboos or standing timber. The contention of Sri Lakshmaian and the other learned advocates is that in as much as sale of this produce is a sale by the Government of its own goods, it is not business, and therefore the Government is not a dealer who is entitled to collect sales-tax, nor is sales-tax leviable the sale of agricultural produce. According to the definition in Section 2(e) of the Andhra Pradesh General Sales Tax Act (VI of 1957) “dealer” means “any person who carries on the business of buying, selling, suplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes—

(i) a state Government, local authority, a company, a Hindu undivided family or any society (including a co-operative Society) club, firm or association which carries on such business.

(ii), (iii) etc.,

26. The definition postulates that a person must carry on business of buying selling, supplying or distributing goods etc., all of which the State Government cannot be said to do or transact. The argument is that the State Government is not carrying on business, much less a business of selling, buying supplying or distributing goods directly or otherwise. The word “business” has been defined by the Amendment Act VII of 1966 in section 2(bbb) as—

(i) any trade, commerce or manufacture of any adventure of concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on or undertaken with a motive to make gain or profit and whether or not any gain or profit accrues therefrom; and

(ii) any transaction in connection with, or incidental or ancillary to such trade, commerce, manufacture, adventure or concern.”

27. From this definition it is clear that it must be established that the Government is carrying on trade or commerce in respect of the subject matter of the contract, viz. beedi leaves, timber or bamboo. Sri Madhava Reddy says that the Government is carrying on an adventure. But even for that it must be an adventure in the nature of trade, commerce or manufacture, irrespective of the fact whether it carried on with a motive to make gain or profit or whether a gain or profit accrues. Even the incidental or ancillary transactions must partake the nature of trade, commerce, manufacture, adventure or concern. The question is whether the sale of one's own goods can be said to be buying or selling or carrying on trade or commerce. As observed by one of us (the present Chief Justice) in P.T.T.C & S. Merchants Union v. State of A.P to which Subba Rao C.J, he then was, was a party at page 746:—

“Tax on the producer on a sale by him cannot obviously be intended to be levied as the person who grows agricultural products and has incidentally to sell the same, cannot be called a person engaged in buying, selling or supplying or distributing goods within the meaning of the definition of a dealer, that is, an agriculturist when selling the produce from his land can hardly be said to be a dealer. On the other hand, the income from the first sale of the produce from his lands would be agricultural income as opposed to business income, liable to be taxed in exercise of the legislative power conferred by item 46 of List II of Schedule VII of the Constitution.”

28. In Raja Bhairabendra v. Superintendent of Taxes a Bench of the Assam High Court consisting of Sarjoo Prosad, C.J and Deka, J. held that the sale by Zamindar by auction the standing sal trees grown spontaneously in his zamindari under which the purchasers were permitted to fell the trees and sell them after sawing and other processes, does not attract sales tax as the Zamindar cannot be said to be carrying on business within the meaning of section 2(3) of the Assam Sales Tax Act, 1947 and cannot, therefore, be said to be a dealer. Sarjoo Prosad, C.J, said that the words “carrying on business” connote a continuous trade or occupation involving time and labour as also some investments, which may be regarded as an independent trade or occupation by itself capable of being sold or transferred as such.

29. The decision cited by Mr. Madhava Reddy in Rama Kristinatah v. State of Andhra . A.I.R 1957 A.P 28. referred to already does not assist the respondents. What was considered there was whether the agreement entered into by the assessee with the Government for the collection and disposal of bamboos in the bamboo coupes in Boddagiri Range at Amalapuram was in respect of agricultural produce, exempt from sales tax under the proviso to sec. 2(1) of the Madras General Sales Tax Act, which was in these terms:

“Provided that the proceeds of the sale by a person of agricultural or horticultural produce grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover.”

30. Viswanatha Sastri, J. at page 718 said that what is exempted from the ‘turnover’ by the proviso is the produce of land resulting from the application of human effort to the land in the shape of manuring, tilling, sloughing, planting, sowing, watering, weeding, pruning, harvesting etc., and that forest frees of spontaneous growth cannot be regarded as agricultural or horticultural produce grown on land within the meaning of the proviso, but on the question whether that produce was grown on any land in which the assessee had an interest, whether as owner, usufructuary mortgagee, tenant or otherwise, in the land, he held as we have already observed, that he is not a tenant. Ultimately however, it was held that the Government was entitled to collect sales tax under Sec. 8-C of the Madras General Sales Tax Act as it then existed. That section, which was inserted by section 7 of the Madras General Sales Tax (Amendment) Act 1951 and deleted in 1954, was in these terms:—

“Notwithstanding anything contained in this Act, the State Government shall in respect of any sale of goods effected by them, be entitled to collect by way of tax any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under this Act.”

31. Mr. Madhava Redely says that, though this was deleted, the amendment of the definition of dealer in section 2(e)(i) of the Andhra Pradesh General Sales Tax Act read with Sec. 2(bbb) which was inserted by Act, 7 of 1966 supplies the omission of Sec. 8C, but as we have shown already, it does not, because the requirements of these provisions are not fulfilled.

32. Mr. Madhava Reddy then took shelter under Clause 23(c) of the conditions of sale, which under the proposed agreement would be deemed to have been incorporated. We have already seen what that condition is viz., that “sales tax over the bid amount at the rate current at the time of sale” shall be paid by the contractor. This he says is a condition of the contract, and faintly suggested that it was part of the consideration. But in so far as the last contention is concerned, he realised that it is untenable, because consideration has been set out in paragraph 4 of the agreement to be the amount-payable as specified in Sch. III, which does not in any way indicate the amount payable towards sales tax. If sales tax is to be collected, the Government has to collect it as a dealer, which argument again as has been shown already, is not sustainable. What is undertaken under the agreement is that sales tax, if any payable under the sales tax Act is to be paid. But if no sales tax is leviable at all, that clause does not bind the contractor for paying the amount as a condition of the contractor, because, as we have already said, it is neither a part of the consideration nor is it a levy permissible under the Sales Tax Act. If the Government is not liable to pay sales tax under the Act, it cannot bind the contractor for paying it.

33. Coming to the last question, viz., whether in respect of the security deposit, stamp duty is leviable under Art. 35(a) of the Stamp Act as a mortgage, the learned Government Pleader was unable to sustain the validity of this stand taken by the Forest Department, and in our view, he is well justified in taking this stand. As long ago as in 1883 a Full Bench of 5 Judges of the Madras High Court in Reference from the Board of Revenue under Section 46 of the Indian Stamp Act, 18795 held that a contract stipulating that the Executive Engineer for the time being may retain 10 per cent, on the value of the work done to cover compensation for default on the part of the contractor and as security for the proper performance of the contract, was a contract chargeable with a stamp duty under section 5(c) and not as a mortgage under Art. 44(a) of Sch. I of the Stamp Act. In Reference under Stamp Act, S. 466 another Full Bench in 1891 considered one of the conditions of licensee, granted in a muchifika executed by an abkari licensee, viz., “As a security for the due performance of the conditions of the contract, the licensee shall deposit with the collector in cash Government notes or stock notes, a sum equal to three months rental” and the question was whether that was an agreement under Art. 5(c) or a mortgage under Art. 41. The Board of Revenue had stated that neither the licence nor the ??? taken separately or together fulfils the conditions of a mortgage as defined in the Stamp Act, i.e neither thereby actually creates an interest in the deposit in favour of Government. The Board of Revenue was of opinion that it was an agreement under Art. 5(c) and chargeable with stain, duty of 8 annas. With this the Full Bench agreed. In Rishidev Sondhl v. Dhampur Sugar Mills . A.I.R 1947 Allahabad 190. a Full Bench of the Alhihabad High Court held “money is not moveable property.” In that case the Inspector of Stamps was of the opinion that an instrument in which specific sums have been offered as security is a mortgage deed, as the amounts deposited with the other party lire “specified property” within the meaning of Section 2(17) of the Stamp Act. As observed already, Allspp, J., said that the instruments which were the subject matter of that reference were not mortgage deeds: These decisions fully support the stand taken by the petitioners that the security deposits are not chargeable with stamp duty as mortgage deeds. In W.P No. 1265/67 the National Savings Certificates were endorsed in favour of the Government in the particular Department but notwithstanding the effect that the Department could sell and realise the moneys, the petitioner was being subjected to payment of stamp duty inasmuch as the Department is demanding stamp as a mortgage deed. The Department is not only demanding for the previous years and the current years, but also in respect of future contracts, stamp duty as mortgages in respect of security deposits. We find that the stand taken by the Department is wholly untenable and invalid in law;

34. For these reasons, all the writ petitions are allowed. The respondents are directed not to demand or collect stamp duty in respect of agreements under Art. 31(c) as if they are leases, or on the security deposit under Art. 35(c) as a mortgage. Further they are also directed not to demand or collect sales tax in those cases in which sales tax has not been paid. The petitioners in each of the petitions will have his costs. Advocates's fee Rs. 50/- in each.