TMI Blog1966 (8) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... di in the account books of the assessee and this was found to be undisclosed income, which was brought to tax. The Appellate Assistant Commissioner, however, was of the view that the credit being dated December 15, 1945, it should be excluded from the assessment pertaining to the assessment year 1947-48. At the same time, he gave a direction to reopen the assessment for the assessment year 1946-47 so as to consider the assessment of this sum of Rs. 20,000 as income under the head " other sources ". In other respects, the assessee failed in the departmental appeal and also before the Tribunal. In the circumstances, the following questions have been referred to us under section 66(1) of the Act : " 1. Whether section 34 was validly applied in the case ? 2. Whether the addition of the income from the coffee estates was properly brought to tax ? 3. Whether the entire income of the assessee's wife or any portion thereof from money-lending business and coffee estates was correctly added to the assessee's income ? and 4. Whether the Appellate Assistant Commissioner could validly give a direction under section 34(3) ? " We shall proceed to consider and record our answer to each o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from this source in fact represented interest received as business income chargeable to tax. This view was sustained by the Appellate Assistant Commissioner and the Tribunal. The Tribunal observed in addition that the assessee never did any coffee growing himself, all of which was done by the de facto owner and the borrower. Mr. Rajah Iyer contends that once the receipt is by way of rent derived from the estates, irrespective of other circumstances, it is agricultural income, which is totally exempt from tax under the provisions of the Act. He says that neither the character of the recipient of the income as a money-lender nor the assumption, assuming it to be correct, that the rent was received as and for interest for money lent or invested, can make any difference to the basic quality of the receipt as agricultural income. On the other hand, for the revenue it is strenuously argued that if a money-lender resorts to the device of lending money which takes the shape of purchase of agricultural lands, leasing them back or entering into agreements for reconveyance of such lands and through this process receiving income claimed by the assessee to be rent from lands, the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aracter of agricultural income. It may be that such income is derived by a money-lender even in the course of his business of money-lending. But neither the character of the recipient nor the fact that it was received in the course of money-lending business can alter the character of the receipt as agricultural income. The character of such income depends on its source and the fact that it is derived from possession of agricultural land rather than from other circumstances. It follows that the motive with which it is derived can hardly neutralise the character of receipt and convert what is in truth and fact agricultural income into business income or income from any other source. A person may come by possession of agricultural land from which he derives income on account of different situations, as for instance as owner, or as security for repayment of loans advanced by him, or as a lessee, or by a conveyance with an agreement to resale, or even as a trespasser. In everyone of these instances, the income derived by the person in possession will be agricultural income. Where, however, an owner or a person in possession leases out the land and receives rent, even in such a case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an income, which is exempt from income-tax on the ground that it is derived from agricultural land. " The Board went on to say : " The exemption is conferred, and conferred indelibly on a particular kind of income and does not depend on the character of the recipient, contrasting thus with the exemption conferred by the same sub-section on the 'income of the local authorities.' " The reference was to section 6. In the course of money-lending, an assessee money-lender may find that to purchase agricultural lands is the only way by which he can realise his money from the debtor. We do not understand why, because he has in such circumstances in the course of money-lending come by possession of agricultural lands, the receipt of rents derived from such lands should be regarded as anything other than agricultural income. The business is only incidental and is not the source in such a case. The same consideration will apply with equal force to a money lender making an advance on the security of immovable property and getting possession as part of the security. This court in Commissioner of Income-tax v. Khoyee Sahib, took a similar view. In that case also the assessee was a mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement : " Nor again can the taxing authorities avoid an implication arising from the form of a transaction on the ground that, except for a desire to escape income-tax, the transaction would have taken a different form, which is what is meant, in that reference by 'looking at the substance of the transaction'. It is not unlawful to avoid, by any means not forbidden by law, rendering oneself liable to the payment of income-tax, though it is an offence by false return or by concealment to evade payment of income-tax. " In our view, it is quite open to a money-lender who is assessed to income-tax to have recourse to the process of doing money-lending business in such a way that the income derived in the course of such business is not made liable to tax within the legitimate limits of the law. But on the facts of this case we are not even satisfied that there was any such attempt on the part of the assessee by resorting to sales, executing leases and agreement for reconveyance and deriving income from agricultural land by that process. Sri Ramchandra Dev v. Commissioner of Income-tax brings out the distinction between rent derived from agricultural lands which is not liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from the money-lending business belonged to her. But this was not the case of the assessee at all either before the Tribunal or before the departmental authorities. Nor is there any material to show that the wife had made such a contribution. We do not even find any mention of such a case of contribution before the Tribunal. We are, therefore, of opinion that the first part of the third question, as stated by us, in so far as it relates to the money-lending business, should be answered against the assessee. There remains now a consideration of the fourth question. The Tribunal disposed of this matter observing that, so far as the assessment year in question was concerned, the credit of Rs. 20,000 was directed to be deleted from the assessment and the assessee was therefore not aggrieved by the direction of the Appellate Assistant Commissioner to reopen the assessment for the assessment year 1946-47. Mr. Rajah Iyer contends that the direction given by the Appellate Assistant Commissioner was entirely beyond his jurisdiction and that, though the credit was deleted from the chargeable income for the assessment year 1947-48, still, inasmuch as the assessee was exposed to the risk ..... X X X X Extracts X X X X X X X X Extracts X X X X
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