Controller of Estate Duty, Kerala Vs.
V. Venugopala Varma Rajah  INSC 200 (24 August 1976)
BEG, M. HAMEEDULLAH BEG, M. HAMEEDULLAH RAY,
A.N. (CJ) SARKARIA, RANJIT SINGH SHINGAL, P.N.
CITATION: 1977 AIR 121 1977 SCR (1) 346 1976
SCC (4) 3
Estate Duty Act (34 of 1953), s. 5--Land
covered with wild and natural forest growths--If agricultural land.
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 agricultural 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 legislature 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,  1 S.C.R.
(a) The land in the present case was covered
by spontaneous 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.
 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 explained, why for certain
special reasons and m an unusual context, certain land described as 'forest
land' was to be 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.  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 circumstance 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 legislative 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]
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 20002001 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
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 circumstances
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". However, the general nature of the
question framed and the questions 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
The High Court had observed that the
Tribunal's findings that land, to the extent of 36,857.16 acres, was not agricultural
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-agricultural land. This basis was given by quoting the 'following
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 from 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
category 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
"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 notification
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
After pointing out that agricultural land
falls under item 48 of List II or the State List in the Seventh Schedule 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 resolutions by the legislature of the State of Madras as provided 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
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)  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
"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 plantations. In the absence of exceptional circumstances 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
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
Commissioner 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
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 results.
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 practically
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 restricted 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 Private Forests (Vesting and Assignment)
Act 26 of 1971, purporting to acquire forest lands held on Janmam (1)  1
(2)  (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 forest, 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
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 prepared 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 agricultural 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
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)  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 assessee 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 Parliament 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. Officer-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 constitute
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 exploited 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
spontaneous 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 accountable 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 definition
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
Consequently, we allow these appeals, set
aside the judgment and orders of the High Court. The parties will bear their