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1946 (9) TMI 5 - NAGPUR HIGH COURT

1946 (9) TMI 5 - NAGPUR HIGH COURT - [1948] 16 ITR 433 - Miscellaneous Civil Cases Nos 63 of 1944 and 7 8, 85, 91, 92 and 98 of 1945 - Dated:- 4-9-1946 - Bose And Hemeon, JJ. For the Assessees : R. N. Padhye (in Nos. 63 and 7), G. J. Ghate (in No. 7), D. T. Mangalmoorti (in No. 8), J. P. Dwived (in No. 85) and S. C. Dube (in Nos. 91, 92 and 98) For the Commissioner : R. Kaushalendra Rao (in No. 63) and V. R. Sen (in Nos. 7, 8, 85, 91, 92 and 98) JUDGMENT This judgment will govern Miscellaneous C .....

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irable to set out the limits of our authority at the outset. It is important to emphasise that we are not a Court of appeal and accordingly are not free to debate such questions as might seem to us to arise in the case, however important they may appear to be. We are only an advisory body which is not free to tender unsolicited advice. We can only advise on the questions referred and accordingly will have to confine our answers to the questions asked. We have certain other powers, and indeed it .....

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8, at p. 335; 1 I.T.R. 94, Rajendra Narayan v. Commissioner of Income-tax, Bihar & Orissa [1940] 8 I.T.R. 495, Trustees Corporation (India), Ltd. v. Commissioner of Income-tax, Bombay [1930] 54 Bom. 437, at p. 445 and National Mutual Life Association of Australasia Ltd. v. Commissioner of Income-tax, Bombay Presidency & Aden [1936] 60 Bom. 248, at p. 257; 4 I.T.R. 44. It has also been so decided by this Court in Income-tax Appellate Tribunal, Bombay v. Managing Trustee, Shri Radha Madho .....

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little different, and, naturally the figure differs in each case. The question is one of mixed fact and law. So far as the facts are concerned they will be found separately in each case. So far as the law goes it will be necessary to search for some general and clear cut principle, because opinions have differed, and in the absence of principle, opinion tends to be arbitrary. The definition given in the Act is that "agricultural income" means:- "(a) any rent or revenue derived fr .....

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local rate assessed and collected by officers of the Crown as such. It is admitted that the land in all these cases is either assessed to land revenue or is subject to a local rate assessed and collected by officers of the Crown as such, and that, therefore to that extent, the income complies with the definition. But that is not enough, for, it must also either be used for agricultural purposes or for agriculture. The question, therefore, is how far does agriculture cover forests? Opinions diff .....

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earing and management of livestock, husbandry, farming, and so forth. Other dictionaries, including the Oxford English Dictionary, employ the same basic conception. Some include "forestry" in the term. It is to be observed, however, that the word used when forestry is included, is forestry and not forests. The distinction is important because when one turns to the definition of forestry in the dictionaries one finds that is also an art or a science. Thus, Webster says it is "the a .....

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rt judgment in Meghraj v. Allah Rakhia ([1942] F.C.R. 53) not because it deals directly with this question, though it touches an allied matter, but because it lays down certain general principles which bind us, and clears much of the ground. The learned Judges were dealing with the expression "agricultural land" in the Constitution Act, and after pointing out that it had not been defined there said at page 61: "It must accordingly be understood in the sense which it ordinarily bea .....

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isions in which the Court has placed a restricted meaning on the terms "in view of the indications afforded by the particular Act which had to be considered by the Court," and to others which construed the term in a more general sense. The sum and substance of it all is that it is of little avail to consider these decisions because, of course, it is open to the legislature to widen or to restrict the ordinary meaning of a word, and because, if it chooses to do so for the purposes of a .....

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ons like Province of Bihar v. Pratap Udai Nath Sahi Deo ([1941] 20 Pat. 699; 9 I.T.R. 313) and Chandrasekhara Bharathi v. Duraisami Naidu ([1931] 54 Mad. 900). It will suffice to say that the following cases related to special Acts, and at least part of the decisions in each is based upon matters special to those Acts: Venkayya v. Ramasami ([1899] 22 Mad. 39), Murugesa Chetti v. Chinna Thambi Goundan ([1901] 24 Mad. 421), Chandrasekhara Bharathi v. Duraisami Naidu ([1931] 54 Mad. 900), Kesho Pra .....

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eaning being extended in some cases and restricted in others. Thus, Panadai Pathan v. Ramasami Chetty ([1922] 45 Mad. 710) holds that the growing of casuarina trees for fuel is an agricultural purpose and Hiralal Ravchand v. Parbhulal Sakhidas ([1922] 46 Bom. 48) discards what we might term the human agency test and employs instead one which determines whether the income is derived from the produce of the land and not what is the actual quantum of labour bestowed on it. Of these two the former i .....

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earned Judges refer to Chandrasekhara Bharathi v. Duraisami Naidu ([1931] 54 Mad. 900). So also they state that the decision of the Judicial Committee in Kesho Prasad v. Sheo Pargash Ojha ([1924] 46 All. 831), upholding Kesho Prasad v. Sheo Pargash Ojha ([1922] 44 All. 19), lays down no principle or test of general application. They are accordingly not of much value for the present purpose. The only decisions in this class which, in our opinion, lay down general rules are best referred to in the .....

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The Chief Court had held that land covered by a natural forest was not agricultural land, and this view also would seem to have been confirmed by the Judicial Committee." We have underlined (here italicized) the word "tilled" because, in our opinion, that brings out the distinction which we have sought to draw between an agricultural and a non-agricultural purpose. The decisions referred to are Kaju Mal v. Saligram ([1919] A.I.R. 1919 Lah. 222, at p. 225), and Kaju Mal v. Saligram .....

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Cal. 504) held that income derived from pasturage was agricultural income but not that from fisheries or from land leased for stacking timber. The "pasturage" part of the decision would, at first sight, appear to offend the rule we have suggested but the point was not decided because it was not contested once the case reached the High Court (see page 527). But that apart, nearly every rule has its exceptions and the pasturing of cattle is so closely allied to agriculture that it has be .....

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699, at p. 724; 9 I.T.R. 313) applies the same rule to uncultivated forest land, as also does Maharaja of Kapurthala v. Commissioner of Income-tax, Central and United Provinces (A.I.R. 1945 Oudh 35; 13 I.T.R. 74), Special Manager, Court of Wards v. Commissioner of Income-tax, U.P. & C.P. (A.I.R. 1945 Oudh 42; 13 I.T.R. 94), Mustafa Ali Khan v. Commissioner of Income-tax, U.P. & C.P. (A.I.R. 1945 Oudh 44; 13 I.T.R. 98) and Nawazish Ali Khan v. Commissioner of Income-tax, C.P. & U.P. ( .....

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0; 6 I.T.R. 502), allowances from a zemindari to a Rani, Commissioner of Income-tax, Central and United Provinces v. Rani Saltanat Begam (9 Luck. 115; 1 I.T.R. 379), a money-lender who cultivates a field in lieu of a debt due to him, Chellappa Chettiar v. Commissioner of Income-tax (I.L.R. 1937 Mad. 734; 5 I.T.R. 97), and royalties from a coal mine, Kamakshya Narain Singh v. Commissioner of Income-tax, Bihar & Orissa (22 Pat. 713, at p. 722; 11 I.T.R. 513). All we need say with respect to th .....

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ect of exempting agricultural income from tax was that it already pays tax in another form, namely land revenue or cesses, and, therefore, the idea is to avoid double taxation. This view will be found advanced in, for instance Chief Commissioner of Income-tax v. Zamindar of Singampatti [1922] 45 Mad. 518, at pp. 526, 527. But we think it is sufficiently met in Maharaja of Kapurthala v. Commissioner of Income-tax, Central and United Provinces [1945] A.I.R. 1945 Oudh 35, at p. 39; 13 I.T.R. 74. Th .....

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islature chooses to impose it. That is also dealt with in the Oudh case. The argument is also met by what their Lordships of the Privy Council say in Probhatchandra Barua v. Emperor [1931] 58 Cal. 430, at p. 444. Their Lordships point out that in such cases the land revenue or cesses paid are deducted from the gross receipts because the tax is not levied on gross receipts but on income. In practice, therefore, there is no double taxation. It was also argued that this income is not taxable at all .....

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said that an important head of income such as the present could hardly have been left for inclusion under a general section. It was pointed out that forests cover a large section of India and, therefore, assume more than ordinary importance in this country. That may be so, but the same applies to agriculture, and Sections 4 (3)(viii) and 2(1)(a) and (b) would be otiose if agricultural income is exempt in any way. The fact that it was necessary to include these sections shows that income of this .....

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vided that they accrue or arise or are received in British India or are deemed to accrue or arise or to be received in British India, as provided by Section 4(1), and are not exempted by virtue of Section 4(3)." In view of that it is not necessary to say anything further. Part of the argument on behalf of the assessees had reference to certain provisions in some of our local Acts, such as the Land Revenue Act; but we do not consider that a proper approach when construing an Act of the Centr .....

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me from forests is exempt here while taxable elsewhere because the same words used in the Income-tax Act mean one thing in one place and another in another. It is pertinent here to quote the Privy Council in Srimathoo Moothoo Vijia Ragoonadah Kolandapuree Netchiar v. Dorasinga Tevar [1875] 23 W.R. 314. The case is not in point but the observations are pertinent. At page 317 their Lordships say: "It is obvious that an enactment which is intended to apply to all the Courts in India, and which .....

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ent sense when it is sitting on an appeal from a mofussil court; and further that the legislature has by the same form of words intended to make one law for the mofussil Courts, and another for those of the Presidency towns." Another branch of this argument had relation to a possible conflict between the Provincial and Federal Legislative Lists in the Constitution Act unless the matter was decided in the way contended for by the assessees. But the basis of that argument is that agricultural .....

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eport of the Select Committee which dealt with the Indian Income-tax Bill. Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, In re ([1939] F.C.R. 18, at p. 46) was relied on. But that passage has been much misunderstood and was explained by Gwyer, C.J., in Hindu Women's Rights to Property Act, 1937, In re ([1941] F.C.R. 12, at p. 41). It is true this was not done in the course of a judgment but was an interjection during the arguments, but the substance of .....

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ection 2(1)(a) and the words "any income derived from such land by agriculture." He argued that the former was the wider and would include income from any by-product of the land and certainly income which came directly from the land. In our judgment the first clause refers to income derived from land which is used directly for agricultural purposes and the second to by-products, such as the selling of milk, the pasturing of cattle etc. provided the endeavour is agricultural and provide .....

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y must be labour to reap the harvest-that of course he must do, else there could be no income-but he must also labour to produce it. An attempt was also made to get us to take into consideration the previous practice of the department and the instructions embodied in the Income-tax Manual. This also is not permissible. It shows no more than that either certain officers of the department hold a certain view of the law, or that it was considered expedient at that time, for this reason or that, not .....

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d aside the continuous interpretation which the Supreme Court of Ceylon had placed on a statute for 44 years. We do not think, therefore, that it will be proper to take those matters into consideration and so will exclude them. Having enumerated the general rule we will now proceed to examine the facts in each case separately and determine how far they conform to the rule we have enumerated. Miscellaneous Civil Case No. 63 of 1944.-The facts were agreed in this case. It appears from the order of .....

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source is taxable. On the other hand, one of us (Bose, J.) held in Imam Ali v. Priyawati Devi [1938] I.L.R. 1938 Nag. 31, at p. 33 that lac cultivation is an agricultural operation. But the decision was based on the C.P. Tenancy Act and it was made clear that that Act had extended the definition of agriculture. Accordingly, what Hiria v. Mahomed Sirujuddin Khan [1908] 4 N.L.R. 104, at p. 112 had held was not agriculture (namely lac cultivation) was considered to be "agriculture" becau .....

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g the land to lie waste so that the palas trees can spread over it as jungle. Therefore the produce of lac involves a use of the land in a manner which is opposed to agriculture, as we understand that term in relation to village operations in this province." In the circumstances we are of opinion that for the purposes of the Income-tax Act lac cultivation cannot be regarded as an agricultural operation. In any case it has not been shown that in this case the conditions were otherwise than a .....

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f the forest is to be found in the Tribunal's appellate order and is given in these words:- "It is impossible that all these forest trees or tendu shrubs could have been planted or reared by any process of agriculture, that is to say, by the cultivation of the soil. It may be that at some stage in their growth the trees required to be watered or watched. But the fact is that they had been standing upon the land for a number of years during which the soil has remained untouched." Th .....

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7 arising from those sources was rightly held to be taxable. Miscellaneous Civil Case No. 8 of 1945.-The forest income here was derived from leases of the forest "for the purpose of cutting and removing standing timber and fuel, and taking tendu leaves, lac and harra therefrom." The finding regarding the nature of the forest is to this effect: "The trees in these forest lands are obviously of spontaneous growth and must have been standing for a number of years. It is impossible to .....

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quot; The Tribunal has accepted this and nothing has been shown us to the contrary. Accordingly, here also, we hold the income was rightly assessed. Miscellaneous Civil Case No. 91 of 1945.-Here also the finding of the Tribunal is that the forest was "of a spontaneous growth and no process of agriculture was employed in growing the forest. It may be that at one time forest guards may have been employed but that does not make it an agricultural income. Active human agency in tilling the soil .....

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o. 91 of 1945, and are given in the same words. Our conclusion is, therefore, the same in these two cases as in Miscellaneous Civil Case No. 91 of 1945. We now turn to points which are not common to all the cases. A question of interest arises in Miscellaneous Civil Case No. 63 of 1944, as also in Miscellaneous Civil Cases Nos. 8 and 85 of 1945. We will deal with that. The question has been posed in much the same language in all three cases except for the figure. It was (we quote from Miscellane .....

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from this decision though, had the matter been res integra, we might have taken another view. It was contended by the learned acting Advocate-General that the decision is distinguishable and that it is, in any event, wrong. The ground of distinction is said to be that the question posed there narrows the scope of the enquiry to the Central Provinces Tenancy Act whereas here there are no such limitations. It is true the Central Provinces Tenancy Act is expressly mentioned in the question referre .....

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ble to distinguish that case from the present ones. As regards the contention that the decision is, in any event, wrong, we find that the matter is debatable and that it is as easy for a Judge acting judicially to reach the one conclusion as the other. In an ultimate analysis it narrows down to a question of individual preference, it being possible to advance cogent reasons on either side. That being the position, we do not feel free to differ, nor do we think it proper to refer the point to a F .....

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nt and the interest, are so intimately bound together that it is not unreasonable to hold that they are species of the same genus, though we realise that it is anomalous that while a man who receives his rent regularly and places the money it represents in a bank must pay tax on the interest he receives from the bank whereas another who leaves his money with the tenant and receives interest from the tenant instead of from a bank need not. But anomalies arise on the other view too. The interest i .....

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5 raises another question. We are asked to decide whether a profit of ₹ 19,447 arising from the sale of forest produce, such as timber and tendu leaves, is a receipt of a capital nature and so exempt on that score. Their Lordships of the Privy Council point out in Kamakshya Narain Singh v. Commissioner of Income-tax, Bihar & Orissa [1943] 22 Pat. 713, at p. 724; 11 I.T.R. 513, that whether a given receipt is capital receipt or income depends on circumstances, so that what is income in .....

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he ₹ 19,447 under this head is income and was rightly included in the assessment. Miscellaneous Civil Case No. 8 of 1945 raises the following additional question:- "Whether there was any material to hold that the 'bazar dues' and 'nazrana receipts' of ₹ 171 and ₹ 192 respectively were items of 'agricultural income.'" As regards this, the Tribunal said: "The learned advocate for the assessee explained that the items comprised in it were col .....

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rana, receipts under this head can flow from sources which are not agricultural, as for example, money taken from consent to a transfer of tenancy and other lands, presents on the occasion of a marriage, and so forth. Therefore, until we know exactly what the nazrana consisted of, it is impossible for us to say whether the income is agricultural or not. The Tribunal says: "it was alleged before us that it represented the amount levied from tenants taking up vacant plots for the purpose of c .....

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