1960 (11) TMI 14 - SC - Income Tax

Whether on the facts and in the circumstances of this case the Tribunal s conclusion that the land was not assessed to land revenue within the meaning of section 2(1)(a) of the Indian Income-tax Act is justified ? Held that - The history of redemption is a matter of record and it is plain that Government was accepting a down payment and freeing land from land revenue. This is precisely what was done and the result of the down payment is set out with great clarity in the deed itself and it is that there was no land revenue assessed on or demandable from that land. In fact no demand or payment or charge in the nature of land revenue could ever be made on it. In view of this it is in our judgment quite satisfactorily established that this land was not assessed to land revenue and the income from it did not fall within section 2(1)(a) of the Income-tax Act. The answer given by the High Court was thus correct. Appeal dismissed.

Issues Involved:
1. Effect of acquisition of land by Government on the continued assessability of the land to land revenue.
2. Effect of redemption of land revenue by a lump sum payment.
3. Effect of the grant free from land revenue to the justices.

Issue-wise Detailed Analysis:

1. Effect of Acquisition of Land by Government on the Continued Assessability of the Land to Land Revenue:

The acquisition of the land was executed under Act VI of 1857, which provided that when any land taken formed part of an estate paying revenue to the Government, the award should specify the net rent of the land including the Government Revenue. The Revenue authorities had the discretion to either pay the whole value to the estate owner on the condition of continuing to pay the jumma without abatement or determine a proportionate remission of revenue. This provision ensured that the estate assessed to land revenue was not liable to pay land revenue proportionately falling upon the land acquired compulsorily. However, this provision could not be stretched to mean that the liability of the land acquired to land revenue ceased in the hands of grantees from the Government. The judgment clarified that whether the land continued to be subject to an assessment or must be deemed to be reassessed as a separate estate, the result would be the same if the Government demand still subsisted on it. The recurring liability was redeemed by a lump sum payment, indicating that the "Square Mile" was still subject to the recurring demand and thus still assessed to land revenue.

2. Effect of Redemption of Land Revenue by a Lump Sum Payment:

The redemption of land revenue by a lump sum payment was argued to have the effect of canceling the assessment. The judgment emphasized that redemption in this context meant the substitution of one lump payment for a succession of annual ones. The payment was equal to the capitalized value of the land revenue, and when such a payment took place, the assessment for land revenue was considered to be extinguished. The land was freed from that assessment as completely as if there was no assessment. The judgment referenced the conveyance by the Secretary of State, which reaffirmed the position by stating that the land was to be held "free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof." This indicated that the land revenue was extinguished forever, and the land became free from land revenue assessment in perpetuity.

3. Effect of the Grant Free from Land Revenue to the Justices:

The conveyance by the Secretary of State vested the land in the justices free from land revenue. The deed of conveyance stated that the land was to be held "free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof." This indicated that the land was not assessed to land revenue, and no demand or payment or charge in the nature of land revenue could ever be made on it. The judgment concluded that this land was not assessed to land revenue and the income from it did not fall within section 2(1)(a) of the Income-tax Act.

Conclusion:

The Supreme Court upheld the High Court's conclusion that the land was not assessed to land revenue within the meaning of section 2(1)(a) of the Indian Income-tax Act. The appeal was dismissed with costs, affirming that the income derived from the land was not subject to income tax under the Indian Income-tax Act.

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