TMI Blog1935 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... of the business of money-lending carried on by the respondent; the respondent maintains, and the High Court has held, that it is agricultural income within the meaning of the Indian Income Tax Act and consequently exempt from income tax. In order to determine which of these contentions is right, it is necessary to describe briefly the transaction out of which this item of receipt arose. It appears that in 1929 the respondent's father who carried on an extensive money lending business, made a loan of 18? lacs of rupees, with the sanction of the High Court at Patna to Thakurain Kusum Kumari, widow and administratrix of the late proprietor of the estate of Lachmipur. The transaction was embodied in two indentures both dated February 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thika rent should form part of the yearly payments which the lessor mortgagor thereby under took to make in reduction of the loan and should be increased as the amount of the loan diminished by 6 per cent. on the sums with a corresponding reduction in the thika profits . Other articles of the indenture provided that the lessee mortgagee should maintain the irrigation works, look after boundaries and collect all rents and income of every kind from the properties thereby leased and mortgaged and should peacefully hold and enjoy the same. The leased properties were mortgaged and hypothecated as security for payment of the zarpeshgi loan and the lessee mortgagee was given the right to hold over and retain possession of the properties until sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration Department. He alone was able to sue for rent whether current or arrears ; to sue for enhancement or for ejectment and was able to settle lands with raiyats and tenants in all the properties; in fact he was in a position to take all proceedings which the mortgagor would have been able to take in the ordinary course if the lands leased and mortgaged had remained in her khas possession . It was not indeed disputed that the rents payable in respect of both properties were rents 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 Government as such . The rents thus come within the definition of agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinary proprietor or landlord but as part of the income, profits and gains of his money-lending, business, it loses the benefit of the statutory exemption of agricultural income and becomes assessable as business profits. This is the view which was taken by the Income Tax Officer and by the Assistant Commissioner. It was also the opinion expressed by the Commissioner in referring to the High Court, at the respondent's request, the two questions: (a) Is the Lachmipur bond a simple mortgage or a usufructuary mortgage? (b) Is the income from the Lachmipur property taxable? Their Lordships find themselves in agreement with the learned judges of the High Court in rejecting the appellant's contention. Section 4 (1) in declaring th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hands of an ordinary investor who is not engaged in that business. But in the case just put the question is whether the item is income at all; if it is income, it is plainly taxable. In the present case the item of receipt is admittedly income but it is income which the Act expressly excludes from taxation. Their Lordships being of opinion that the High Court has rightly answered question (b) in the negative find it unnecessary as did also the High Court, to deal with question (a). The sum originally assessed appears to have been ₹ 97,283; this is an error and the figure which their Lordships find to be exempt from taxation is ₹ 91,283. Their Lordships will accordingly humbly advise His Majesty that the appeal be dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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