9911796707
TMI Blog1935 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... orms part of the taxable profits or gains 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed "thika profits", is the sum now sought to be assessed. The indenture further provided that the 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 zarp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llecting the rents. he had, moreover, to pay the Government revenue, cesses and taxes and his name was registered in the Land Registration 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to income tax........(iv) Business," and he contends that the item of income in question, while it may be "agricultural income" nevertheless have been received by the respondent not as an ordinary 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 mortga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of receipt is taxable or not depends upon the nature of the recipient's business. Thus the profit made on the realisation of an investment is a taxable income receipt in the hands of an investment company which engages in the business of buying and selling investments but is a non-taxable capital receipt in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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