1948 (9) TMI 14 - HC - Income Tax

Summary

Issues Involved:
1. Whether income received as malikana and paid by Government under Regulation VII of 1822 is agricultural income assessable to agricultural income-tax.

Issue-wise Detailed Analysis:

1. Nature of Malikana:
The primary issue is whether malikana received by the assessee qualifies as agricultural income under the Bihar Agricultural Income-tax Act, 1938. The Act defines agricultural income as "any rent or income derived from land which is used for agricultural purposes." The judgment explores the historical context and legal interpretations of malikana to determine its nature.

Historically, malikana was introduced in 1793 when the government proposed to settle lands with proprietors who would pay a revenue amounting to nine-tenths of the estimated yield. Those who refused were dispossessed, and the government paid them an allowance called malikana. This allowance was not considered rent but a subsistence or compassionate allowance for the displaced proprietors and their families.

Several legal precedents, including Heeranund Sahoo v. Mussamut Ozeerun and Bhoalee Singh v. Mussamat Neemaoo Behoo, consistently held that malikana is not rent. Instead, it is a proprietary right or an interest in land, but not rent or income derived directly from land.

2. Malikana as Income Derived from Land:
The next question is whether malikana can be considered income derived from land used for agricultural purposes. The judgment refers to the Privy Council's ruling in Commissioner of Income-tax v. Raja Bahadur Kamakhaya Narayan Singh, which clarified that the term "derived" necessitates an inquiry into the effective source of the income. In this case, the effective source of malikana is the government's statutory obligation to pay it, not the land itself.

The judgment further references Raja Mustafa Ali Khan v. Commissioner of Income-tax, where the Privy Council held that malikana paid to the Utraula Estate was not agricultural income. The malikana was a fixed cash allowance, not variable with the land's agricultural use or yield, and was recognized as a consideration for relinquishing proprietary claims to the land.

3. Agricultural Use of Land:
For income to be considered agricultural, the land must be used for agricultural purposes. The judgment cites the Privy Council's observation that the primary condition for exemption under agricultural income is that the land in question must be used for agricultural purposes. In the present case, there is no evidence that the land related to the malikana is currently used for agricultural purposes. The finding of fact states, "There is no trace at present of the lands or villages to which the allowance might be said to relate and nothing is, therefore, known as to the present use to which they have been put."

Conclusion:
The judgment concludes that malikana is not rent, nor is it income derived from land used for agricultural purposes. The effective source of malikana is the government's statutory obligation to pay it, not the land itself. Consequently, malikana does not qualify as agricultural income under the Bihar Agricultural Income-tax Act, 1938.

Final Decision:
The question referred to the court was answered in the negative. The assessee is entitled to the costs of the reference, assessed at Rs. 250, including the Rs. 100 deposited for the reference.