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PETITIONER: CONTROLLER OF ESTATE DUTY, KERALA

       Vs.

RESPONDENT: V. VENUGOPALA VARMA RAJAH

DATE OF JUDGMENT24/08/1976

BENCH: BEG, M. HAMEEDULLAH 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.

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       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

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       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

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                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

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        (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

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       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-

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       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

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                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