1960 (4) TMI 90 - HC - Income Tax

Summary

Issues Involved:
1. Whether the sums received by the assessee from the syndicate constitute "income" under the Indian Income-tax Act, 1922.
2. If the sums are considered income, whether they are exempt under section 4(3)(vii) of the Act as being of a casual and non-recurring nature.

Detailed Analysis:

Issue 1: Whether the sums received by the assessee from the syndicate constitute "income" under the Indian Income-tax Act, 1922.

The assessee, the Thakore Saheb of Shivrajpur, leased lands to the Shivrajpur Syndicate Ltd. The lease agreement stipulated that the lessee was liable to pay rent, royalty, and all taxes, rates, assessments, and impositions of a public nature on the mines or works. The lessee paid sums of Rs. 16,309 and Rs. 39,515 to the assessee for local cess during the assessment years 1952-53 and 1953-54, respectively. The Income-tax Department sought to tax these amounts, while the assessee contended they were not income but payments for local cess, which he was liable to pay to the State Government.

The Tribunal found no demand by the district local board for these amounts nor evidence that the assessee paid the local cess. However, the assessee admitted his legal liability to pay the local cess. The court emphasized that if there is a legal liability for the assessee to pay these amounts to the district local board, then these sums do not represent income. Conversely, any surplus beyond the legal liability would be considered income.

The court examined the relevant provisions of the Bombay Local Boards Act, 1923, particularly sections 75, 93, 94, and 96, to determine the liability for the cess. The court concluded that the Tribunal should ascertain whether the sums paid by the lessee exceeded the actual cess liability of the assessee. If the sums received exceeded the legal liability, the excess would be income.

The Tribunal's supplemental statement revealed that the cess payable was Rs. 270.45 for each year, while the sums received were Rs. 16,309 and Rs. 39,515, respectively. The excess amounts were Rs. 16,038.45 and Rs. 39,244.55, which were considered income.

Issue 2: If the sums are considered income, whether they are exempt under section 4(3)(vii) of the Act as being of a casual and non-recurring nature.

The assessee argued that the sums received were of a casual and non-recurring nature and thus exempt under section 4(3)(vii) of the Indian Income-tax Act, 1922. However, the Tribunal and the court did not accept this contention. The court noted that the sums received were regular payments under the lease agreement and not casual or non-recurring.

The court concluded that the sums received by the assessee, to the extent they exceeded the legal liability for the local cess, constituted income. The amounts legally payable as cess were not liable to income tax. The court directed the Tribunal to submit a supplemental statement of the case to determine the exact liability and excess amounts.

Conclusion:

The court answered the first question affirmatively, stating that the sums received by the assessee, beyond the legal liability for local cess, constituted income. The second question was answered negatively, indicating that the income was not exempt under section 4(3)(vii) as being of a casual and non-recurring nature. The assessee was ordered to pay costs.