ORDER
R. Jayasimha Babu, J.
1. In this writ petition, the writ petitioner, who is a forest contractor seeks the refund of a sum of Rs. 49,428 retained as tax for the assessment year 1991-92 by the first respondent which amount had been retained by the Department by invoking Section 44AC of the Act as it stood then. The validity of the said provision was upheld by the Supreme Court in the case of Union of India v. A. Sanyasi Rao , except to the extent, the non obstante clause in Section 44AC excluded the provisions of Sections 28 to 45C.
2. The assessee is entitled to the benefit of the ruling of the apex court and the amount held has to be recalculated after applying the provisions of Sections 28 to 43C. Learned counsel for the petitioner, however, contended that the section itself is inapplicable to the petitioner as the auction is not of any goods but is only of the right to gather the forest produce within the forest. The auction referred to is in respect of forest goods and can only be in the nature of an agreement to sell. Such an agreement it was submitted, falls outside the ambit of Section 44AC.
3. Learned counsel for the Revenue, on the other hand, relied upon Section 44AC(1)(b) which refers to-
“the right to receive any goods of the nature specified in column (2) of the Table below …”
4. There is no dispute about the fact that the forest produce is mentioned in the Table and the right exercised by the petitioner in relation to that forest produce is a right which the petitioner acquired by becoming the successful bidder in the auction. According to the petitioner what was sold at the auction was a right to gather the forest produce, and that the right to gather is not the same thing as a right to receive as there have to be two parties when a thing can be said to have been received, one who gives it and the other who receives it. The forest produce has only to be gathered and there is no giver. The person who has the right, has only to walk into the foresi and pick up what is on the ground. Counsel submitted that this was not a case where the right to receive any goods had been auctioned.
5. Counsel referred to the decision of the Supreme Court in the case of Mahadeo v. State of Bombay [1959] AIR 1959 SC 755, para. 8 and the extracts from the decision of the Supreme Court in Firm Chhotabhai Jethabai Patel and Co. v. State of M. P. [1953] AIR 1953 SC 108 and from the decision of the Privy Council in the case of Mohanlal Hargovind of Jubbul-pore v. CIT [1949] 17 ITR 473 therein. Those earlier decisions were approved by the Supreme Court in the case of Mahadeo, . The Privy Council in the case of Mohanlal Hargovind [1949] 17 ITR 473 observed that (page 476):
“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.”
6. As observed by the Privy Council, after the forest produce is picked up, the person who has the right to do so, has the right to appropriate the same as his own property. The object of conferring the right to gather therefore is to enable the gatherer to appropriate it as his own that which he was allowed to gather. In other words, the object is to transfer the title in relation to the goods so gathered from the person who grants the right to gather to the person who has received the right to gather.
7. The use of the words “right to receive” in Section 44AC(1)(b) has to be construed having regard to the object of the provision and its place in the scheme of the Act. The provision is a special provision for computing the profits and gains from the business of trading in certain goods. One of the items of the goods specified is forest produce. The transfer of title in the forest produce from one person to another in the course of trade is, therefore, to be governed by this provision. It covers not only the actual sale of goods but also the right to receive the goods of the nature specified in the table including forest produce. The word “receive”, therefore, in the context has to be construed as including the gathering of the forest produce from the forest as immediately after such gathering it is to be appropriated by the person who has been given the right to gather, as his own property. The words “right to receive” have been used in the statutory provision to indicate the right to become the owner of the goods and not merely an instance of one person delivering goods to another without any intent to transfer the ownership therein. What is material is the transfer of title.
8. In the auction of the right to gather the forest produce is, therefore, an auction in relation to the right to receive forest produce by going into the forest and gathering the produce. Section 44AC, therefore, has rightly been invoked by the respondents. The respondents, however, shall apply Sections 28 to 43C and only thereafter retain with them such part of the amount now retained as they may be found entitled to after computing the profits and gains in accordance with Sections 28 to 43C of the Income-tax Act, The petition is disposed of accordingly. Consequently, no order is necessary in W. M. P. No. 23912 of 1995.
