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TMI Blog1957 (4) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... an Chowdhury who died on 25th January, 1953, and on his death his widow, Shrimati Sindhurani Chowdhurani, and others were substituted. The gross agricultural income of the assessee was Rs. 89,633 and income from salami was Rs. 9,331-9-4 which was received from settlement of 414 different holdings out of which 278 were holdings of virgin lands and 136 were those of what are described as auction purchase lands. Out of the gross income from salami 15 per cent. has been allowed as collection charges and the amount in dispute in this appeal therefore is Rs. 7,934. The Agricultural Income-tax Officer held this sum to be "agricultural income" by his order dated 10th November, 1941, which was affirmed on appeal to the Assistant Commissioner of Agricultural Income-tax Act. The revision taken to the Commissioner under section 27 of the Act was dismissed but at the instance of the assessee the following two questions were referred for the opinion of the High Court: " (1) Whether the single non-recurring premia or salamis paid to the landlord assessee once only as consideration for the settlement of agricultural land at the time of granting a lease can be held to be income within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e re-let after eviction. 5. Salami is not in the nature of a present. It is a compulsory payment by the tenant to the landlord at the inception of the tenancy. " In the statement of the case the Board said that the zamindar's business or vocation was letting out holdings against payment. The area of land held by him was a large one "which he lets out piecemeal to various tenants on condition among others that the would-be tenant will first pay a fee which he prefers to call salami and that he will pay an annual rent." It held that this payment was not "a windfall", that the "salami arose from the landlord's business of letting out his lands, and ......... is an income", that because of the "regularity or periodicity" attached to the receipt of salami, " it satisfies the test of 'income' " and therefore the amounts received as salami were "agricultural income" within section 2(a)(1) of the Act. On a consideration of the facts found by the Board in this case and after reference to the reported judgments of the various Courts, the Calcutta High Court held that the amounts received by the assessee as salami were not "agricultural income" and the Board has brought this appeal (C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural income-tax. The basis of the first Calcutta judgment dated May 12, 1945, in C.A. No. 162 of 1955 was that salamis were a normal and regular feature of these estates and there was periodicity. When the matter came up in appeal to the Federal Court the learned Chief Justice was of the opinion that the receipt termed salami if nothing more is stated in respect of it cannot be treated as a capital receipt and therefore exempt from taxation nor could it merely as such be treated as income and therefore assessable to income-tax. Mahajan, J., (as he then was) said: "It may be a recurring or a periodical payment if it is a fee or a fine levied annually on the holder of rent-free tenures as a quit rent ; on the other hand, it may not be a periodical payment or a recurring payment if it is in the form of gratuity or offering on receiving a lease or settling for the revenue or on receiving any favour real or implied. " He was of the opinion that in the former case it would be agricultural income but in the latter case it would be a capital receipt being the price for that small "modicum of ownership which the landlord transfers to the tenant. " In the Assam cases Ram Labhaya, J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re sold, the purchaser in all cases being the landlord himself and thus for recovering the arrears of rent the landlord had to bring to sale the right, title and interest of his tenant and after purchase of this right he re-let the land, on receiving the salami from the new tenant. This process again shows that the landlord did part with some interest in land, which cannot be said to be precarious, when he made the settlement of land on receipt of salami, which was a single non-recurring payment by the lessee for the acquisition of his rights under the lease. "Agricultural income" which, it is claimed by the Board, comprises salami, has been defined in section 2(a)(i) of the Act. The relevant portion of this section is : " Section 2(a)(i). Any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in Assam or subject to a local rate assessed and collected by officers of the Government as such. " Salami is not rent and therefore unless it is revenue it will not fall within this definition. "Income" was described by Sir George Lowndes in Commissioner of Income-tax v. Shaw Wallace & Co. as "a periodical monetary return c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the land but before the land was put into use by the assessee." The same Court in Province of Bihar v. Maharaja Pratap Udai Nath Sahi Deo followed the definition of the word 'salami' as given in Kumar Visheshwar Singh's case. Harries, C.J., there held that where salami cannot be regarded as payment of rent in advance, it will not be income and would, therefore, not be taxable. He said "prima facie, salami is not income, and it is impossible upon the facts as stated to say that salamis received ........... constitute part of his income. " Rankin, C.J., in Re Gooptu Estate Limited held payment of one lakh of rupees as salami not to be income. In that case it was demanded and paid in respect of re-settlement of a lease which had still to run for 48 years but had been forfeited for the non-payment of rent. In certain cases, however, payment by way of salami has been held to be "agricultural income." In Birendra Kishore Manikya v. Secretary of State for India it was held that the consideration for the grant of a lease is the capitalised value of the sum periodically payable along with the premium so that "the larger the one element the smaller the other." On this basis the premiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and for its continuance. In H. H. Maharaja Sir Bir Bikram Kishore Manikya Bahadur v. Province of Assam, a case under the Act, Harries, C. J., referred to Kamakshya Narain Singh's case and held that it had to be decided on the facts of each case whether salami was agricultural income or not because it was not known in respect of what transaction the amount was received. The Orissa High Court in S. M. Bose v. Secretary, Board of Revenue has held that salamai is not a payment of rent in advance nor is it income but is a payment by way of capital receipt. It was contended before us that the Privy Council in Kamakshya Narain Singh's case based its decision on the wasting nature of the assets under the lease. But the definition given by Lord Wright is in general terms and just describes what the characteristics of a payment by way of salami are without any reference as to the nature of assets under a lease. In all these appeals before us the assessees derived considerably large amounts of income from agricultural holdings. It is not shown as to what the number of the holdings were but they must have been considerably large. On the other hand the number of settlements was compar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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