Judgment :- BALASUBRAHMANYAN J. In this case stated by the Income-tax Appellate Tribunal, Madras, under s. 256(1) of the I.T. Act, 1961, at the instance of the assessee, the following questions of law have been referred for our consideration : "(1) Whether, the Tribunal was right in holding that there was a sale of the trees for a sum of Rs. 7, 25, 000 which was liable to be treated as the full vale of consideration received for computing the capital gains under section 45 of the Income-tax Act ? (2) Whether, the Tribunal was right in its interpretation of the agreement dated July 15, 1970, entered in to by the company for the sale of the trees ?" * The assessee is a company owning coffee estates. There were a number of standing trees in the coffee plantations, including rose-wood trees. On July 15, 1970, the assessee-company entered into an agreement with a timber merchant to sell for total consideration of Rs. 7, 25, 000 standing rose-wood trees numbering 200, to be felled and removed by the purchaser at his cost. During the year of account ended March 31, 1971, the purchaser had felled and removed as many as 150 trees and had paid the assessee-company Rs. 6, 25, 000. In its income-tax return for the relevant assessment year 1971-72, the assessee-company returned its income from the coffee plantation. In the course of the assessment, the capital gains on the sale of the standing trees effected under the agreement dated July 15, 1970, came up for consideration before the ITO. In the return filed for this year, the assessee showed that only a sum of Rs. 6, 25, 000 was received by it from the purchaser, Mr. James, and that alone should be taken into account in ascertaining the capital gains under that head, after allowing the value of the trees as on January 1, 1954, as constituting the cost of the trees.The ITO, however, held that under the terms of the agreement dated July 15, 1970, the sale of trees must be held to have taken place on that date itself and capital gains must be taxed on the entire sale proceeds of Rs. 7, 25, 000. He rejected the contention of the assessee that only Rs. 7, 25, 000. He rejected the contention of the assessee that only Rs. 6, 25, 000 must be regarded as having accrued during the year of account and the balance could not taxed in that year. The assessee appealed against this computation of capital gains. The Assistant Commissioner dismissed the appeal and confirmed the assessment. He held that if the assessee could not or did not realise the balance of Rs. 1, 00, 000, during the year account that would not affect the sale consideration of Rs. 7, 25, 000, which must be brought to assessment in its entirety in the year of sale, viz., in the account in question. On further appeal by the assessee, the Tribunal went into the terms of the agreement dated July 15, 1970. Before the Tribunal, an argument was addressed on behalf of the assessee as to whether the agreement should not be regarded as a contract for sale, rather than as a regular conveyance. The Tribunal held that even granting that it was a contract for sale of movable property, the result would be the same. The Tribunal observed that the subject-matter of the sale was specific and ascertained goods at time of making the agreement. According to the Tribunal, since there was no indication in the agreement that the sale was to be at a future date, subject to the fulfilment of certain conditions before hand, the sale must be regarded as having taken place as to its entire subject-matter for a sum of Rs. 7, 25, 000 during the year of account. The Tribunal held that the mere fact that the price was to be paid in instalments, cannot have the effect of converting the sale into an agreement of sale. The conclusion of the Tribunal was (i) that the subject-matter of the agreement between the parties was the sale of a certain number of trees specified, for a total consideration of Rs. 7, 25, 000; and (ii) the fact that during the year of account, the balance of Rs. The conclusion of the Tribunal was (i) that the subject-matter of the agreement between the parties was the sale of a certain number of trees specified, for a total consideration of Rs. 7, 25, 000; and (ii) the fact that during the year of account, the balance of Rs. 1, 00, 000 had not been realised by the assessee could not alter the year of sale so as to prevent the quantum of the entire sale price being brought to tax in that year.In this reference, Mr.Karuppiah, learned counsel appearing for the assessee, submitted that on a true construction of the agreement, the Tribunal's order must be held to be erroneous in point of law. The agreement has been exhibited as part of the case. In the preamble to the agreement, it is stated that the purchaser, James, had agreed to buy, and the assessee had agreed to sell, 200 standing rose-wood trees in the survey numbers scheduled to the agreement for a stated consideration of Rs. 7, 25, 000. The agreement provided for an initial deposit of Rs. 25, 000 to be paid on June 29, 1970 and a further deposit of Rs. 1, 25, 000 to be paid before the commencement of the felling of the trees or on August 31, 1 1970, whichever was earlier. Three further equal instalments of Rs. 1, 50, 000 each were to be paid on September 30, 1970, October 15, 1970 and October 31, 1970, respectively, or before the time of removing the first, second and third lots of trees, whichever happens to be earlier. The balance of consideration amounting to Rs. 1, 25, 000 had to be paid at the time of removing the last fifty trees or on November 15, 1970, whichever came about earlier. One of the provisions concerning the felling of trees and their removal from the forest was that the purchasers would have to submit their application to the Government for granting them permission to fell the trees and to remove them. It was, however, further provided that in that task, the sellers would render their own assistance by giving the necessary letters of authorization for being filed with the authorities concerned. The purchasers agreed to cut only the trees mentioned in the schedule, without damage to the coffee crops around. It was, however, further provided that in that task, the sellers would render their own assistance by giving the necessary letters of authorization for being filed with the authorities concerned. The purchasers agreed to cut only the trees mentioned in the schedule, without damage to the coffee crops around. There was a further provision that the purchasers would remove the cut trees as early as possible, at the latest, before November 15, 1970. A provision was also made for ingress an egress to the purchasers in the plantation areas for carrying out the operations of felling and removal of the trees sold under the agreement.Learned counsel for the assessee submitted that having regard to the terms of this agreement, it must be held that it consisted of as many as four distinct sale, each sale relating to 50 trees as a lot. On this basis, the learned counsel submitted that since only three lots of 50 trees each had been cut and had been paid for by the purchaser in the account year, the assessee cannot be taxed to capital gains on the gains relating to the last lot of 50 trees. Which had neither been cut by that time not for which the appropriate consideration had been received by the assessee during the year of account. Learned counsel submitted that since the assessee had not aid any money till November 15. 1970, nor had he taken any steps to cut and remove the last lot of 50 trees, it must be held that to that extent, the contract not only remained not performed, but it had not even taken effect as a sale. Learned counsel sought to make a point by citing the last clause in the agreement. 1970, nor had he taken any steps to cut and remove the last lot of 50 trees, it must be held that to that extent, the contract not only remained not performed, but it had not even taken effect as a sale. Learned counsel sought to make a point by citing the last clause in the agreement. That clause reads as under : "The contract shall be liable to be cancelled in the event of breach of any of the above conditions and in such an event the purchasers will not be entitled to any compensation or refund of any amounts paid." * Learned counsel urged that in the event that happened in this case, this clause would have the effect of sundering or splitting the consideration paid under the contract to the extent that it appertained only to the trees cut earlier in respect of the first three lots, numbering in all 150 trees, and excluding the last lot of 50 trees still to be cut and paid for, Learned counsel submitted that having regard to all the terms of the agreement, with particular reference to the last clause, it must be held that there was no sale and no realisation of the sale price in excess of Rs. 6, 25, 000 relating to 150 trees.The submission of the assessee's learned counsel amounts to this : that sale of only 150 trees had taken place during the year of account with respect to which the assessee had received the consideration set out in the terms of the agreement. We are unable to agree with this contention. In the first place, it is difficult for us to precisely relate the amounts payable in instalment under the agreement to the particular trees cut and removed, there is no correlation under the agreement's time-schedule. Between the payments to be made and the trees to be cut, Even before a single tree is cut, the assessee is obliged to pay Rs; 25, 000 plus Rs. 1, 25, 000 plus Rs. 1, 50, 000 amounting to Rs. 3, 00, 000. Besides, in the face of the admitted figure of actual realisation of sale price during the year of account. Which amounted to Rs. 1, 25, 000 plus Rs. 1, 50, 000 amounting to Rs. 3, 00, 000. Besides, in the face of the admitted figure of actual realisation of sale price during the year of account. Which amounted to Rs. 6, 25, 000, it is hard to reconcile the value of 50 trees, which remained uncut and unremoved, as representing only the balance which remained to be paid out of the overall sale price, Although this point has not been noticed by the Tribunal in the course of its order, this is an additional reason why the transaction of sale cannot be regarded as the sum total of several small agreements, each one relating to the sale, the cutting and the removing of 50 trees each. Even as a matter of construction of the agreement on the basis of the language used by the parities themselves, it is quite clear that the sale was regarded as one integrated transaction in respect of an aggregate of 200 standing rose-wood trees. Above all, the overall sale consideration of Rs. 7, 25, 000 had been fixed first and foremost in the operative clauses in the agreement. The other details as to payment by instalments have nothing whatever to do with the passing of title under the transaction of sale, under the terms relating to the application for cutting and removal of the trees, it was the purchasers, who were asked to undertake the responsibility of making the necessary application for permission of the forest officials. Under the last but one clause, figuring in the agreement, the assessee, as the seller, was granted a first charge on the timber, in the event of any default being committed by the purchaser in making any payments due under the agreement on the respective due dates. The charging provision provides as follows : "Until the payment of all moneys due by the purchasers to sellers, the sellers shall have a first charge on the tier and if default is made by the purchasers, in making the payment on the due date. The sellers shall, in addition and without prejudice to their other rights and remedies, be entitled to charge interest on all sums outstanding at the rate of eight per cent, per annum from the date of payment." * According to the assessee's learned counsel. The sellers shall, in addition and without prejudice to their other rights and remedies, be entitled to charge interest on all sums outstanding at the rate of eight per cent, per annum from the date of payment." * According to the assessee's learned counsel. The above provision as to a charge in the assessee's favour only covers the trees which had already been felled and could be regarded as timber, properly so called, within the meaning of that clause. He said that the charge does not extend to trees for which no payment had been made, and which had not been cut and removed. It is difficult to accept this contention. The question of a charge in favour of a person can arise only on a property, which is not owned by the person who is to have the charge over that property. Apart from this consideration, the expression "timber", as used in the relevant clause, in the agreement must do service both for fallen timber and for clause standing timber, which is another name for standing trees. Therefore, on a true consideration of the terms of the agreement as a whole, we are satisfied that there was no intention on the part of the contraction parties that the property in goods in the specified trees can pass only at some time after the conclusion of the agreement. In s. 19(1) of the Sale of Goods Act, 1930, it is provided : "Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to contract intend it to be transferred." Section 19(2) provides : " For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and circumstances of the case."" Unless a different intention appears, the rules contained in section 22 : to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer." * Section 20 deals with a case where specified goods in deliverable state are the subject-matter of a contract for sale. This section provides : "Where there is an unconditional contract for the sale of specific goods in a deliverable state, property in the goods passes to the buyer when the contract is made. And it is immaterial whether the time of payment of the price or delivery of the goods, or both, is postponed." * The attempt of Mr. Karuppiah was to make out that the agreement dated July 15, 1970, was a contract riddled with conditions for its implementation as well as cancellation. According to learned counsel, the terms contemplated a forfeiture or cancellation of the contract and, therefor, s. 20 of the Sale of Goods Act, relating to specific goods not be applied. His further submission was that the parties had evinced an intention to postpone the passing of property faster the receipt of consideration in its which evinces an intention to postpone the transfer of property in the trees sold at some specified or stated time subsequent to the date of entering into the agreement. Nor can it be stated that the agreement envisaged a sale subject to any conditions. Mr. Karuppiah then submitted that the subject-matter of the contract of sale in this case cannot be regard either as specific goods or ascertained goods. According to him, the subject-matter of the contract was a total number of 200 rose-wood trees standing in two different coffee estates. In the first estate, the total number of rose-wood trees were 160. Out of which under the terms of the contract, the purchaser was at liberty to select 150 tees to be felled and removed by him. In the other estate, there was a total number of 66 rose-wood trees, out of which the balance of 50 trees which was purchased by the purchaser under the contract, could be selected for felling and being removed.This particular aspect of the agreement was pin-pointed by learned counsel to urge that the subject-matter of the contract, namely. The trees would not be regarded either as "specific goods" or even as "ascertained goods." Learned counsel submitted that the term "specific goods" excludes any process of selection of some goods out of a larger number of quantity. In our view, this argument is unsound. The Sale of Goods Act defines the "specific goods" in s. 2(14) as meaning goods identified and agreed upon at the time the contract of sale is made. In our view, this argument is unsound. The Sale of Goods Act defines the "specific goods" in s. 2(14) as meaning goods identified and agreed upon at the time the contract of sale is made. It seems to us that when the parties to the agreement in the present case had specified the trees in the estate by giving them distinct numbers and had identified the trees as rose-wood trees standing in the estates, it would be incorrect to regard them as non-specific goods, merely for the reason that the subject-specific goods. Merely for the reason that the subject - matter of the sale was not the entirety of the standing tress in the estates, but 150 out of 160 tress in one estate and 50 trees out of 66 tress in the other estate. In any case, even if for some reason. the case cannot be regarded as specific goods, we are satisfied that the trees, which are the subject matter of the sale in the present case can well be regard as ascertained goods, since they had been identified with respect to their number, location and character. The assessee's learned counsel referred us to a decision of a Bench of the Nagpur High Court, reported in Harnarain Ramchandra Jaiswal v. firm Radhakisan Narayandas, 1949 AIR(Nagpur) 178, to illustrate the proposition that in the case of goods referred to by description, it was by an actual act of appropriation of the goods by the seller that the subject-matter of the contract becomes ascertained goods. He particularly relied on the following passage in the judgment of that court at pages 179 and 180. "If the identity of the contract-goods is not established by appropriating them towards the contract, the contract remains in respect of unascertained goods, In a majority of cases unascertained goods are defined only by description, it is to be remembered that the phrase 'specific goods' conceivably bears wider or narrower meaning according to circumstances in the statues." * This passage does not support the submission of the assessee's learned counsel. For, It seems to us that the learned judges in the case cited had in mind only a sale of goods by description as unascertained goods, and they proceed to hold that goods regard to by description became ascertained goods by the act of appropriating them to the contract of sale and not otherwise. For, It seems to us that the learned judges in the case cited had in mind only a sale of goods by description as unascertained goods, and they proceed to hold that goods regard to by description became ascertained goods by the act of appropriating them to the contract of sale and not otherwise. By way of contrast in the present case, the trees sold are not by description merely, but they were specified with reference to the number given to them by forest officials, their location, their mark of distinction from other kinds of forest trees, and the like. It is incorrect to apply the test of appropriation to the contract as the one and only test for finding out when precisely the property in the goods was intended to pass in the absence of the intention of the parties being elicited from the terms of the contract itself. In the case before the Nagpur High Court, the question turned on the time of passing of the property in a contract of sale of beedi leaves which were kept in an identifiable godown. The court had no difficulty in holding that the subject-matter of the sale was specified goods in a godown, the observations of the learned The Judgment of the Court was delivered byges as to the meaning of the expression can by no means be refardeed as the real ratio decidendi in that case. This is particularly so, when the larned Judge themselve had cl early laid down that the exprssion "specific goods" and "ascertained goods" are not synonymous and carried entirely different meanings.The assessee's learned counsel referred us to a decision of the English Court of Appeal reported in Kursell v. Timber Operators and Contractors Ltd., 1927 (1) KB 298 (CA), as a decision supporting the position that a contract of sale of standing timber cannot be regarded as a contract relating to specific or ascertained goods in a deliverable state. The contract in question before the Court of Appeal was dated September 10, 1920, under which the vendors agreed to sell and the purchasers agreed to purchase, "all the merchantable timber" growing on August 20, 1921, in a given forest. The contract in question before the Court of Appeal was dated September 10, 1920, under which the vendors agreed to sell and the purchasers agreed to purchase, "all the merchantable timber" growing on August 20, 1921, in a given forest. The agreement defined the term "merchantable timber" as including "all trunks and branches of trees but not seedling s and young trees of less than six inches in diameter at a height of four feet from the ground" . The agreement further provided that the timber was to be cut not more than 12 inches from the ground. The payment of price was regulated in instalments subject to a final adjustment. Which was to be worked out on the basis of so much per timber cut, that is to say, pound 4 for a standard timber cut and carried away during any particular quarter. On these terms of the sale agreement, the question before the Court of Appeal was whether the contract was for the sale of the specific goods in a deliverable state within the meaning of s. 18, r. (1) of the English Sale of Goods Act, 1893. It may be observed that r, (1) of s. 18 of the English Sale of Goods Act, 1930. The Court of Appeal held that the subject-matter of the contract in question in that case was neither identified not agreed upon. They observed that the agreement covered not every tree in the forest. But only those trees complying with certain measurements not then made. It was also observed that the timber was not to be regarded as being in a deliverable state until the purchasers had severed the tree. The Court of Appeal further fount, on the terms of the contract. That the purchasers were not bound to take delivery of an undetermined part of the trees not yet identified. In these event, the court held that the property in the timber had not passed in terms of s. 18, r (1) of the English Sale of Goods Act. In the words of Lord Hanworth M.R. (at. p. 308); ".... the agreement was not executed on the part of the vendors at its date. They still had to agree the timber to be cut, its measurement when cut, and its value, and the instalments due in respect of its." * Scrutton L. J., interpreted the agreement in much the same way. p. 308); ".... the agreement was not executed on the part of the vendors at its date. They still had to agree the timber to be cut, its measurement when cut, and its value, and the instalments due in respect of its." * Scrutton L. J., interpreted the agreement in much the same way. The learned Lord Justice observed (at p. 311) : "..... goods were neither identified or agreed upon. Not every tree in the forest passed, but only those complying with a certain measurement not them made. How much of each tree passed depended on where it was cut, how far from the ground." * The other Lord Justice Sargant L. J., observed that in order that goods may be specific they must, in his view, be identifies, and not merely identifiable. Having regard to the wide difference in the contract of sale which the Court on APPEAL had to deal with, as compared to the contract of sale in the present case, we do not think the tests which were applied by the Court of Appeals in that case can properly apply, much less conclude, our decision in the present case. We do not think the tests which were applied by the Court of Appeal in that case can properly apply, much less conclude, our decision the present case. We cannot accept the argument of the assessee's learned counsel that where standing timber is sold. It cannot be regarded as a sale of goods in a deliverable state whatever may be the terms of the contract. In the case before the Court of Appeal what was sold was not standing trees, but timber cut to a certain size. The sale was also subject to other conditions. By way of contract. In the case before us, the subject-matter of the sale cannot be regarded as cut timber. Indeed the agreement avoids the use of the expression "cut" even while stipulating for the several acts to be done by the purchaser for taking effective delivery of the subject matter of the contract. One of the important clauses in the agreement in the present case is that the purchaser was under an obligation to fell the trees and to remove them as early as possible, or at the latest, before November 15.1970. One of the important clauses in the agreement in the present case is that the purchaser was under an obligation to fell the trees and to remove them as early as possible, or at the latest, before November 15.1970. They had also to remove all the branches, firewood, etc., from the spot and "to have the area cleaned at his cost." These aspects of the transaction show that what was sold was not timber, but the aspects of the transaction show that what was sold was not timber, but the entire trees, root and branches, subject to the obligation that the purchaser should clean up the mess. In this sense, the sale of growing trees or standing timber as a whole, root and branch, should be regarded as parse a sale of goods in a deliverable state. This is because nothing remained to be done on the part of the seller with reference to the subject-matter of the sale. In the Court of Appeal case, only trees of a particular girth had to be cut and this required verification both by the seller and by the purchaser. The cutting of the trees in that case was to leave that part of the trunk of a height of at least 12 inches from the ground, The purchaser must spare the seedlings, and young trees, less than six inches in diameter, These were the considerations that prompted the Court of Appeal to hold that the subject-matter of the contract was not goods in a deliverable state as at the time of the contract.In the course of their judgment, the Court of Appeal had referred to an earlier case in Heilbutt v. Hickson 1872 LR 7, CP 438, 449. They quoted from the observation of Bovill. C.J. in that case. Those observations were to the effect that unless from other circumstances it can be held that the intention was that the property would be generally shown by the fact of some further act or acts being first required to be done. He pointed ot in most cases, dilivery would th crucial act to be performed. In some cases, actual payment of the price would be the requisite. In some other cases. Weighing or measuring in order to ascertain the price, or marking, packing, coopering, filling up casks, or the cake, would be required for the passing of title. He pointed ot in most cases, dilivery would th crucial act to be performed. In some cases, actual payment of the price would be the requisite. In some other cases. Weighing or measuring in order to ascertain the price, or marking, packing, coopering, filling up casks, or the cake, would be required for the passing of title. The Court of Appeal distinguished the case decided by Bovill, C.J., from another case cited before them, viz., Tarling v. Baxier 1827 6 B & C 360. In that decision, it was observed that in the case of a sale of goods, if nothing remained to be done on the part of the seller as between him and the buyer before the thing purchased was to be delivered. The property in the goods immediately passed to the buyer, But if any act remained to be done on the part of the seller, then the property does not add until that act has been done. As relevant to the present discussion, we may refer to the decision of our Supreme Court in Badri Prasad v. State of M.P. In this case, the Supreme Court made a distinction between the sale of the whole trees as such, on the one hand, and on the other. The sale of a tree after cutting it, leaving a base up to a certain limit. The court held that in the latter kind of contract, the property in the cut timber would pass to the purchaser under the contract at the earliest only when the trees are felled and not before. The implication we read in the Supreme Court judgment is that where the contract of sale relates to the whole tree and not merely the cut timber, then there is nothing to prevent the property in the goods passing even at the time when the contract of sale is concluded between the parties.We may observe that in the present case nothing remained to e done by the assessee, as the vendor, subsequent to the contract, for the property in the trees to pass. The assessee's learned counsel relied on the clause in the agreement under which the purchaser was to apply for and obtain from the Government, permission to fell the trees, learned counsel urged that the need to obtain permission of the Government, which under the terms of the agreement was to be the responsibility of the purchaser. Indicated that it was the intention of the parties that property in the goods sold should not pass to instant on the execution of the contract, but only subsequently after the Government had granted the permission. Learned counsel tended to read this particular clause in the agreement almost as a condition subsequent, on the failure of which the contract would not take effect at all. We do not, however, read this clause in this fashion. All that the clause did was to remind the purchaser that the rose-wood trees in the two estate, which were the subject-matter of the sale, could not be felled or removed without the Government sanctioning the operation and for that purpose it was the primary responsibility of the purchaser to apply to the Government. The agreement also contained another clause, under which the assess, as the seller of the trees, had an equal responsibility in assisting the purchaser to obtain the requisite permission from the Government. The clauses cannot be read as part and parcel of the very terms ability. the clauses cannot be read as part and parcel of the very terms of the sale, much less as imposing a condition which had to be fulfilled first before the property in the goods could be regard by the parties as passing from the one to the other. Having regard to all the circumstances aforesaid, we are satisfied that the sale of the trees numbering 200 in all took place in the year ended March 31, 1971, corresponding to the assessment year 1971-72. It follows that the entirety of the consideration named in the agreement of sale, must be regarded as forming the full value of the consideration for the said sale. In this view, we answer both the questions referred to us in the affirmative and against the assessee. The assessee shall pay the costs to the Revenue. Advocate's fees Rs. 500.