- (1.)This is a reference under the Agricultural Income Tax Act, 1950. The assessment year is 1967-68. The assessee returned a net income of Rs. 43.79. The Agricultural Income Tax Officer rejected the return, and issued a preassessment notice. The assessee objected mainly on the ground that the rubber trees, income from which was proposed to be taken into account had been leased out for "slaughter tapping". The lease arrangement was found against by the Agricultural Income Tax Officer as well as by the Appellate Assistant Commissioner, and also by the Tribunal, The Tribunal considered the question whether income derived from slaughter tapping is agricultural income, and held that when the assessee himself performs slaughter tapping the income derived by him is agricultural income, liable to tax. On the application of the assessee the Tribunal has referred to this Court the question:-
"Whether on the facts and in the circumstances of the case the income derived from the old rubber trees on slaughter tapping is agricultural income as defined in clause (a) of S.2 of the Agricultural Income Tax Act 1950."

(2.)The question whether income received from 'slaughter tapping' (we will conveniently use this term to mean the practice of rubber trees being ruthlessly tapped for getting as much latex as possible and ultimately felling down the trees for replanting the area) is agricultural income has come up for consideration of this Court on prior occasions. This Court considered the nature of the income received by the owner of the trees, as well as the nature of the income received by the person 'slaughter tapping'. In these cases there were agreements whereby the owner allowed another to 'slaughter tap' for a consideration. The earliest of the cases referred to us is the decision of M S. Menon C. J. and Govindan Nair J. in E. J. John v. State of Kerala (I. T. R. Nos. 76 and 77 of 1965). The following principles emerge from that decision: .
(i) The consideration paid by the purchaser allowed to 'slaughter tap' represents payment for permission to take latex as well as for permission to cut and remove the trees;

(ii) There is an element of payment towards capital, namely, the value of the trees which are ultimately to be cut down;

(iii) There is also payment towards latex which represents agricultural income;

(iv) The amount of consideration received by the owner for the permission given by him to 'slaughter tap' and cut and remove the trees is to bifurcate into that pertaining to latex, and that which is attributable to the value of trees;

(v) The part pertaining to latex is agricultural income liable to tax, and the other part which is attributable to the value of the trees is not liable to tax.

(3.)The next case that is brought to our notice is the decision of Isaac J. in Yoosuf v. I.T. Officer ( 1970 KLT 56 ). There the question arose as to the nature of the income derived from rubber obtained by slaughter tapping by the purchaser permitted to slaughter tap. The question was whether it is agricultural income, or income liable to be taxed under the Income Tax Act, 1922. Isaac J. held that it is non agricultural income. This decision was confirmed in appeal. The decision in appeal is Agricultural Income Tax Officer v. Yoosuf ( 1972 KLT 587 ). Raghavan C. J. referred to E. J. John's case, and distinguished it on the ground that it concerned the receipts in the hands of the owner of the land. In this case the agreement was construed as one not creating in the purchasers any interest in the land on which the trees stood.