TMI Blog1973 (7) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ompliance with the notice under section 22(2) of the Act, the assessee had filed a return of income showing the total income of Rs. 1,29,913 as income from other sources. After making certain adjustments the assessment was completed by the Income-tax Officer on a total income of Rs. 1,61,701. In the appeal against the order of the Income-tax Officer the assessee contended before the Appellate Assistant Commissioner that the income derived by the assessee on cash basis from the above estate was agricultural income within the meaning of section 2(1)(a) and was exempt from tax under section 4(3)(viii) of the Act. As this question was not agitated before the Income-tax Officer a remand report was called for from him and after taking into account the remand report submitted by the Income-tax Officer the Appellate Assistant Commissioner took the view that the assessee's lands were liable neither to land revenue nor to local cess during the relevant accounting period and, accordingly, held that the income did not qualify for exemption as agricultural income under section 4(3)(viii) of the Act. In an appeal by the assessee before the Tribunal, the order passed by the Appellate Assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local rate assessed and collected by officers of the Government as such ........ " Under this clause before revenue or rent derived from any land can be regarded as agricultural income the following conditions must be fulfilled : (i) the land is used for agricultural purposes, and (a) the land is assessed to land revenue in the taxable territories ; or (b) the land is subject to a local rate assessed and collected by officers of the Government as such. There is no controversy in the present case that for the relevant accounting period ending July 31, 1956, both land revenue as well as local cess were collected by the Government. However, it appears from the letter of the collector of Dhulia bearing No. IIX/WS-391 dated November 13, 1961, addressed to the Income-tax Officer that such land revenue and local cess were illegally collected contravening the provisions of the relevant statutes and were ordered to be refunded. The relevant portion of the letter reads as under : " There were in all 6 Mehwassi Estates which were formed into Akkalkuva Taluka with effect from April 1, 1950. All the laws and regulations applicable to the then Bombay State were made applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay Land Revenue Code, 1879, shall subject to the modifications specified in Schedule II come into force in the territory of the Mehwassi Estates. The modifications provided in Schedule II of this Regulation are not relevant for determining the question which is involved in this reference. The first question that has to be considered in this reference is whether it can be said that for the accounting period ending July 31, 1956, the land of the assessee was assessed to land revenue. It is not possible to accept the contention of Mr. Rajgopal that merely because there is a liability to pay land revenue upon compliance with the provisions of the Code or merely because land revenue is illegally assessed and collected, the condition laid down in the definition of the phrase " agricultural income " is satisfied or complied with. Section 45 of the Code provides that : "All land, whether applied to agricultural or other purposes, and wherever situate, is liable to the payment of land revenue to the Government according to the rules hereinafter enacted except such as may be wholly exempted under the provisions of any special contract with the Government or any law for the time being i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese sub-rules makes it clear that the question of levy or liability to pay land revenue will never arise before it is fixed. That this is so is amply clear if regard be had to the factors which are to be taken into account under sub-rules (2) to (4) of these Rules. One of the factors to be taken into account is the average of the price of each class of agricultural product per acre of the particular piece of land for a period of five years or such period not less than three years for which relevant statistical data may be available. This requirement clearly shows that there is nothing in the provisions of these sub-rules to indicate that land revenue can be fixed so as to give retrospective effect to levy of such revenue after it is fixed. On reading the relevant provisions of the Code and especially section 52 read with rule 19(O) it is quite apparent that land revenue is not assessed in respect of any land used for agricultural purposes until it is fixed in the manner provided therein. Admittedly, for the accounting period ending July 31, 1956, for the land in question belonging to the assessee it was not fixed. If land revenue is not fixed as contemplated and in the manner provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of fixing the local rate or the local fund cess does not arise, because this cess is only a particular part of the land revenue payable in respect of any particular piece of land. As admittedly land revenue was not assessed in respect of the land of the assessee for the relevant accounting period ending on July 31, 1956, it cannot be said that his land was assessed to land revenue or in respect of the land local rate was assessed and collected. If this ingredient is not fulfilled, then the rent or revenue derived by the assessee from the land in question cannot be regarded as agricultural income within the meaning of the Act. In our opinion, if land revenue is not legally assessed or local rate is not legally assessed or collected, the question of illegal de facto assessment or collection thereof is really irrelevant. It is undoubtedly true that for the relevant accounting period such land revenue and local rate were assessed and collected from the assessee. However, it is quite clear from the letter of the Collector of Dhulia dated November 13, 1961, that the Government realised that such assessment and collection was illegal and in fact ordered refund of both of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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