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TMI Blog1965 (4) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... Singh who was the original founder and owner of what is known as Ausanganj State in the district of Benares. The district of Benares was formerly a part of Oudh territory. By a treaty between the East India Company and Nawab Asafuddaula in or about the year 1775, the province of Benares was ceded to the British Government. The British Government granted a Sanad of the Raj to Raja Chet Singh who in turn gave the Jagir of Parganas Seyedpore and Bhittery in perpetuity to Babu Ausan Singh. It appears that in 1796, there were some disputes between Babu Ausan Singh and the Zamindars in the district and the matter was referred by the Collector of Benares to the Board of Revenue in Calcutta. The disputes between the Jagirdars and Zamindars ultimately ended in 1837 by a compromise between the British Government and the then Jagirdar, Har Narain Singh, whereby the British Government granted. a pension of Rs. 36,322-8-0 to Babu Har Narain Singh and his heirs in perpetuity. The quantum of this pension was calculated on the basis of 1/4th of the revenue of the Jagir. By this arrangement the revenue or land collections of Jagir became payable by the Zamindars direct to the Government and by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 4(3)(viii) of the Income-tax Act." The High Court held that from the language of the letter of July 7, 1837, it was manifest that the right which was conferred was a right to a share of one-fourth in the net land revenue collections after deducting costs of tehsil establishment. It relied on the fact that the amount which bad been received by the successors of Babu Har Narain Singh varied from year to year. It observed that "the language of the letter and this conduct of the parties can only lead to the inference that, by this settlement contained in the letter Of 7th July, 1837, Babu Har Narain Singh and his successors were granted in perpetuity a right to one-fourth of the land revenue collections themselves and not merely a right to receive a sum of money calculated on that basis." The High Court accordingly answered the question in the negative. The learned Additional Solicitor-General, on behalf of the appellant, contends that according to the true interpretation of the letter dated July 7, 1837, no right in the land revenue was granted to the assessee. He relies on the decision of this court in State of Uttar Pradesh v. Kunwar Sri Trivikram Narain Singh. That case arose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llected by officers of the Crown as such : . . . " In Maharajkumar Gopal Sayan Narain Singh v. Commissioner of Income-tax, the facts were that the assessee had conveyed the greater portion of his estate. The consideration for the transfer was, inter alia, an annual payment of Rs. 2,40,000 to the assessee for life. The Privy Council held that this " annual payment was not agricultural income as it was not rent or revenue derived from land but money payable under a contract imposing a personal liability on the covenanter the discharge of which was secured by a charge on land. " The Privy Council in Commissioner of Income-tax V. Raja Bahadur Kamakhaya Narayan Singh construed the word " derived " as follows: "The word 'derived' is not a term of art. Its use in the definition indeed demands an enquiry into the genealogy of the product. But the enquiry should stop as soon as the effective source is discovered. In the genealogical tree of the interest land indeed appears in the second degree, but the immediate and effective source is rent, which has suffered the accident of non-payment. And rent is not land within the meaning of the definition." This court observed in Mrs. Bacha F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case the source of income is clearly the arrangement arrived at in 1837, and, therefore, it is not agricultural income as defined in the Act. Mr. Sastri sought to distinguish those cases on the ground that the allowance here varied from year to year. Assuming that the allowance varied from year to year, the source of the income still remains the arrange. ment and not land. The next point that arises in this case is whether the allowance is taxable income at all. Mr. Sastri contends that it is capital receipt. He says that if the assessee's predecessor had received compensation for relinquishing his title to the lands in dispute, that would have been a capital receipt and not taxable. He further says that the allowance was in fact a payment of the compensation for relinquishing the title to those lands. He says that we must consider the quality of the income and not its periodicity. He refers to the following passage from the speech of Viscount Simon in Commissioners of Inland Revenue v. Wesleyan and General Assurance Society : "It may be well to repeat two propositions which are well established in the application of the law relating to income tax. First, the name given t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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