TMI Blog1965 (4) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of sub-section (3) of section 4 of the Indian Income-tax Act the sum of Rs. 36,396 received by the assessee as an allowance during the previous year of the assessment year 1949-50 is revenue income liable to tax under the Indian Income-tax Act, 1922 ?" The relevant facts stated in the statement of the case are as follows: " The assessee is a Hindu undivided family headed by one Sri Trivikram Narain Singh who is a descendant of one Babu Ausan Singh who was the original founder and owner of what is known as Ausanganj State in the district of Benares. The district of Benares was formerly a part of Oudh territory. By a treaty between the East India Company and Nawab Asafuddaula in or about the year 1775, the province of Benares was ceded to the British Government. The British Government granted a Sanad of the Raj to Raja Chet Singh who in turn gave the Jagir of Parganas Seyedpore and Bhittery in perpetuity to Babu Ausan Singh. It appears that in 1796, there were some disputes between Babu Ausan Singh and the Zamindars in the district and the matter was referred by the Collector of Benares to the Board of Revenue in Calcutta. The disputes between the Jagirdars and Zamindars ul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the quantum of the rent collection, the rent collections or the land could not be said to be the immediate source of the pension. The source of the pension was a liability undertaken by the Government for extinguishing the proprietary rights of the Jagirdar and when the immediate source of the income was not land or rent collections from land, it is difficult to hold that the receipt of the assessee was agricultural income within the meaning of section 4(3)(viii) of the Income-tax Act." The High Court held that from the language of the letter of July 7, 1837, it was manifest that the right which was conferred was a right to a share of one-fourth in the net land revenue collections after deducting costs of tehsil establishment. It relied on the fact that the amount which bad been received by the successors of Babu Har Narain Singh varied from year to year. It observed that "the language of the letter and this conduct of the parties can only lead to the inference that, by this settlement contained in the letter Of 7th July, 1837, Babu Har Narain Singh and his successors were granted in perpetuity a right to one-fourth of the land revenue collections themselves and not merely a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue payable in respect thereof. If this is the true interpretation of the arrangement arrived at, the question arises whether the pension or allowance is agricultural income. "Agricultural income " is defined in section 2 of the Act as follows " (1) 'agricultural income' means (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in British India or subject to a local rate assessed and collected by officers of the Crown as such : . . . " In Maharajkumar Gopal Sayan Narain Singh v. Commissioner of Income-tax, the facts were that the assessee had conveyed the greater portion of his estate. The consideration for the transfer was, inter alia, an annual payment of Rs. 2,40,000 to the assessee for life. The Privy Council held that this " annual payment was not agricultural income as it was not rent or revenue derived from land but money payable under a contract imposing a personal liability on the covenanter the discharge of which was secured by a charge on land. " The Privy Council in Commissioner of Income-tax V. Raja Bahadur Kamakhaya Narayan Singh construed the word " derived " as follows: "The word 'd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficial in the property from which the income is received, it is not income exempt under section 4(3)(viii)." It follows from the decisions of the Privy Council and the judgments of this court cited above that if it is held in this case that the source of the allowance or pension is the arrangement arrived at in 1837, then the income cannot be held to be derived from land within the meaning of the definition in section 2(1)(a) of the Act. It seems to us that in this case the source of income is clearly the arrangement arrived at in 1837, and, therefore, it is not agricultural income as defined in the Act. Mr. Sastri sought to distinguish those cases on the ground that the allowance here varied from year to year. Assuming that the allowance varied from year to year, the source of the income still remains the arrange. ment and not land. The next point that arises in this case is whether the allowance is taxable income at all. Mr. Sastri contends that it is capital receipt. He says that if the assessee's predecessor had received compensation for relinquishing his title to the lands in dispute, that would have been a capital receipt and not taxable. He further says that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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