TMI Blog1960 (10) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... -1960 - Judge(s) : S. K. DAS., J. C. SHAH JUDGMENT The judgment of the court was delivered by SHAH, J.--The appellant executed a deed of trust settling certain lands described in schedule " A " and the rents of lands described in schedule " C " for the maintenance of certain temples and thakoorbaries. The material terms of the deed of trust are : Clause 6 : " And whereas the declarant feels that a declaration of trust should be made whereby the income of a part of the Raj properties may be earmarked and specially devoted to the maintenance of the aforesaid institutions as also the declarant may as hitherto treat himself and be treated by others as a legal trustee of the said institutions and the properties out of the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the view of the Income-tax Officer, the trust was not a public religious trust and the income derived from properties not used for agriculture was not exempt from liability to pay tax in the hands of the appellant. In appeal against the order of assessment, the Appellate Assistant Commissioner held that the income coming to the hands of the appellant from the trust properties was not taxable as private income of the appellant, but in his view, the remuneration amounting to Rs. 21,274 computed at the rate of 5% on the net income of the trust properties in the year in question not being agricultural income in the appellant's hands was liable to be taxed. In appeal to the Income-tax Appellate Tribunal, Patna Bench, Patna, the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd revenue in the taxable territories or subject to a local rate assessed and collected by officers of the Government as such...." Agricultural income falling under clause (a) ought manifestly to be received as rent or revenue derived from land used for agricultural purposes. The income received from agricultural properties of the trust by the appellant as trustee was indisputably agricultural income in his hands and it was by virtue of section 4(3)(viii) exempt from liability to pay tax. The appellant claims that the remuneration which by the covenant contained in the deed of trust he has received is also exempt under section 4(3)(viii) because, when he appropriated a fraction of the rent or revenue of agricultural lands towards his rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorities which illustrate the meaning of "agricultural income" in section 2(1) of the Income-tax Act. In Nawab Habibulla v. Commissioner of Income-tax the Privy Council held that the remuneration received by a mutwalli of a wakf estate, not depending on the nature of the properties or assets which constitute the wakf nor on the amount of income derived from the wakf estate, is not agricultural income within the meaning of section 2(1) of the Indian Income-tax Act even though the income derived by the wakf estate is from properties used for agricultural purposes. In Premier Construction Co. Ltd. v. Commissioner of Income-tax it was held by the Privy Council that income received by an assessee not itself of a character to fall with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the rents. The mortgagee had to pay Government revenue, cesses and taxes and his name was registered in the Land Registration Department. He alone was able to sue for rent whether current or arrears, to sue for enhancement or for ejectment and was able to settle lands with raiyats and tenants in all the properties; in fact, he was in a position to take all proceedings which the mortgagor would have been able to take in the ordinary course if the lands leased and mortgaged had remained in the mortgagor's possession. The mortgagee received the income, because of the legal ownership vested in him and even though under the covenant of the mortgage deed, he was required to appropriate the income towards his dues, the income in his hands did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the trust deed itself upon the income of the property. The mutwalli was the channel through which the beneficiary received the money and the beneficiary was to all intents and purposes the direct recipient of the income, and there was no change of source and no alteration in the character of the income. It remained agricultural income after it had passed into the hands of the beneficiary. In the present case, the appellant has no beneficial interest in the trust property. The appellant so far as his remuneration is concerned is again not the direct recipient of the income of the trust : the source and the character of the income are both altered when agricultural income is appropriated under the covenant in the deed of trust as remuner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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