TMI Blog1941 (4) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ,743-8-7?. The assessee being dissatisfied with this assessment appealed to the Commissioner of Agricultural Income-tax, who by an order dated the 20th of September, 1939, dismissed the appeal and confirmed the assessment. The assessee then petitioned the Board of Agricultural Income-tax, Bihar; but his petition was rejected by an order dated the 21st of February, 1940. The facts giving rise to Miscellaneous Judicial Case No. 48 of 1940 are very similar :- The assessee in this case is the Raja of Panchkote who was assessed by the Income-tax Officer to agricultural income-tax upon a sum of ₹ 99,392. The assessee appealed to the Commissioner of Income-tax, but his appeal was dismissed on the 21st of September, 1939, and a petition to the Bihar Board of Agricultural Income-tax was rejected on the 21st of February, 1940. The points taken by both the assessee were the same. It was contended, in the first place, that the Bihar Agricultural Income- tax Act was ultra vires and that neither assessee was liable to be assessed in respect of his agricultural income. Secondly, it was urged that the cess collected by the assessee from their tenure holders and raiyats did not form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees were permanently settled and were assessed to land revenue. At the outset Counsel for the assessee realised that it would be impossible to contend before this tribunal that the Act under which the tribunal was constituted was ultra vires. This tribunal has been expressly set up by the Act to here references under Section 25 of the Act, and an argument that the whole of the Act was ultra vires cannot be urged before a tribunal which owes its very existence and jurisdiction to the Act itself. Realising the difficulties, Counsel informed the Court that they did not press for an answer to this question as, in their view, the matter could be more appropriately and effectively raised in a suit challenging an assessment. That being so, no further argument was addressed to us upon this question, and I would, there fore, make no answer to it. Question (2).-Whether the cess as imposed by the Bengal Cess Act (Act IX of 1880 B.C.) on tenure-holders and raiyats and collected by the assessee can be assessed as agricultural income of the latter as defined in this Act? In the cases of both assessees the Income-tax Officer had included in their gross income sums collected by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r term is defined in Section 311(2), Government of India Act, as meaning agricultural income as defined for the purposes of the enactments relating to Indian Income-tax, Section 2 of the present enactment relating to Indian Income-tax defines agricultural income as any rent or revenue 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 the Crown as such. It will be observed that the definition of agricultural income given in the Indian Income-tax Act differs somewhat from that given in the Bihar Agricultural Income-tax Act. In the Indian Income-tax Act agricultural income consists of any rent or revenue derived from agricultural land, whereas in the Bihar Agricultural Income-tax Act it consists of any rent or income derived from agricultural land. In my judgment there is no real difference between the words revenue and income used in these two Acts. In the Indian Income-tax Act the word revenue is clearly used to cover payments in the nature of income other than rent derived from the land. The definitions in the two Acts also differ as to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess could be regarded as rent for the purposes of taxation in Chota Nagpur and could not be so regarded for the purposes of taxation in other parts of this province. In my judgment the cess received by the assessees cannot be regarded as part of the rent for the purposes of the Agricultural Income-tax Act and, therefore, taxable. It can only be assessed if it can be regarded as part of the agricultural income of the assessees. Cess is imposed by Section 5 of the Bengal Cess Act which is in these terms:- From and after the commencement of this Act in any district or part of a district, all immovable property situate therein, except as otherwise in Section 2 provided, shall be liable to the payment of a local cess . The mode of payment of local cess is provided for in Section 41 of the Cess Act, which is in these terms:- Except as otherwise in this Act provided- (1) every holder of an estate shall yearly pay to the Collector the entire amount of the local cess calculated on the annual value of the lands comprised in such estate, at the rate which may have been determined for such cess for the year as in this Act provided, less a deduction to be calculated at one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts through the hands of the assessees. The fact that the proprietors are entitled to deduct not only cess paid by them in respect of lands in their khas possession but also in respect of lands held by tenure- holders and tenants makes it clear that the liability is that of the proprietor and not of those holding under him. In my view pro- prietors are not mere agents for the collection of cess, but, on the other hand, they are the only persons liable to pay the cess due to the local authorities and further they are the only persons entitled to the cess payable by the tenureholders and raiyats. In my judgment it is clear that the cess received by the assessees from tenure-holders and raiyats does form part of their income. When they receive the payments they are absolutely entitled to them and can retain them even if they themselves were able to avoid payment of their cess to the local authorities. The payments from the tenure-holders and raiyats are received regularly and are clearly within the definition of Income given by Sir George Lowndes in the judgment of their Lordships of the Privy Council in Commissioner of Income-tax, Bengal v. Shaw Wallace and Company [1932] 59 Cal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment or by reason of a right given by statute. Rent is payable by the tenant or the tenure-holder as the result of agreement. The Cess Act imposes a further liability on the tenure-holder and the tenant and gives the proprietor a right to something more than the rent which was fixed as the result of agreement. Both the payments are made by the tenure-holders of raiyats by virtue of the fact that they hold interest in land from the proprietor and the latter's right to receive both the payments are equally by virtue of the fact that he is the proprietor of the land. In my view no distinction can be drawn by reason of the fact that cess is payable under statute, and in my judgment cess clearly forms part of the agricultural income of the assessees. I would, therefore, answer this question in the affirmative. Question (3)--Whether single non-recurring premia and salamis paid to the assessee once only as consideration for the settlement of agricultural land at the time of granting of a lease can be held to be income within the meaning of the Act? The learned Commissioner was of opinion that such premia or salamis were not capital payments but were revenue receipts and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se various payments of salami are nowhere set out in the case. All that is said is that these payments by way of salami were made on settlement of lands with tenants. Both the Commissioner and the Board appeared to have thought that as a matter of law such payments were not capital receipts but revenue receipts and, therefore, formed part of the proprietor's income. The case of Birendra Kishore Manikya v. Secretary of State for India [1920] 48 Cal. 766; 1 I.T.C. 67 now overruled on the main question which it decided does support the views of the Commissioner and the Board, but it is to be observed that this Court has not accepted the law as laid down in that case. In Raja Shiva Prasad Singh v. The Crown [1924] 5 P.L.T. 497; 1 I.T.C. 384 this Court refused to follow the view of the Calcutta High Court that salami paid on the settlement of land was income. In that case the question was whether a sum of money received by the assessee by way of salami or premium for granting a mining lease was taxable. Dawson Miller, C.J., observed:- There is a vast difference between a sum paid once for all for the lease of mineral rights and a rent or royalty paid annually to the lessor. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of which I was a member, in the case of Rani Bhubneshwari Kuar v. The Commissioner of Income-tax, Bihar [1940] 8 I.T.R. 550; 192 I.C. 316. These two recent cases make it clear that salami cannot be regarded as income as a matter of law. Salami may in certain cases be regarded as payment of rent in advance, and in such cases the salami could rightly be re- garded as income. Where, however, salami cannot be regarded as payment of rent in advance, it cannot be regarded as income and would, therefore, not be taxable. In the present case, as I have stated, no facts are given relating to any particular payment of salami. It is for the Income-tax authorities to show that there do exists facts which would make the salami income. Prima facie, salami is not income, and it is impossible upon the facts as stated to say that the salamis received by either assessee in this case con- stitute part of their income, and, therefore, assessable to agricultural income-tax, I would therefore, answer this third question in the negative. I think it only right to draw the attention of the Agricultural Income-tax Authorities to Section 25(6), Bihar Agricultural Income-tax Act. They must in future r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner, but he conceded that the point involved was a difficult one, and he in fact gives no reason for agreeing with the Commissioner. All he says is: The learned Commissioner has given his reason for thinking that virgin forest is a crop and all I will say is that for the purposes of these proceedings I will not differ from him. Bankar is income derived from the sale of wood from jungles, whereas Lahkar is income from letting lands and trees for cultivation of lac. Phalkar is income from the fruit of jungle trees and bushes. The question which has to be determined is whether the income from these sources can be said to be derived from land used for agricultural purpose or from agriculture. If the land is not so used, then the income is not taxable under the Bihar Agricultural Income-tax Act. Agriculture is defined in Shorter Oxford Dictionary, Volume I, page 37, as The science and art of cultivating the soil, including the gathering in the crops and the rearing of live stock and another alternative definition is farming in the widest sense. It will be convenient to deal with the items Bankar, lahkar and phalkar separately. Bankar.-It appears that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, therefore, it cannot be assessed under the Bihar Agricultural Income-tax Act. Lahkar.-This is income derived from letting land and trees for the cultivation of lac. Lac is a substance produced by certain insects which are placed on certain trees. Lac does not seem to be the result of any cultivation but is the creation of a particular insect when placed on particular trees. Nothing appears to be done beyond placing the insect on the trees, and in my judgment on the materials before the Court I cannot hold that this head of income is derived from land used for agricultural purposes or from agriculture. Phalkar.-This is income derived from wild jungle fruits, and it cannot be said that the fruit gathered is the result of any cultivation, but, on the contrary, it is the result of the absence of cultivation. Trees and bushes yielding these fruits grow not on cultivated soil but on land not under cultivation and frequently the more neglected and wild the land is the thicker grow these wild bushes and trees yielding such crop. Practically in all cases the crop is the result of want of cultivation and not the result of cultivation. In my judgment it is not established that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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