1959 (7) TMI 58 - HC - Income Tax

Summary

Issues Involved:
1. Interpretation of clause (viii) of sub-section (3) of section 4 of the Indian Income-tax Act.
2. Determination of whether the sum of Rs. 36,396 received by the assessee is revenue income liable to tax under the Indian Income-tax Act, 1922.
3. Examination of whether the income received is agricultural income exempt from income-tax.

Issue-wise Detailed Analysis:

1. Interpretation of clause (viii) of sub-section (3) of section 4 of the Indian Income-tax Act:
The court was tasked with interpreting the clause to determine whether the income in question qualifies as agricultural income. The Tribunal had relied on a letter dated 7th July 1837, which outlined the terms of a settlement granting one-fourth of the net collections of land revenue to Babu Har Narain Singh and his successors. The court noted that the right granted was a share of the land revenue itself, not merely a fixed sum or a pension. This distinction was crucial in determining the nature of the income under the Act.

2. Determination of whether the sum of Rs. 36,396 received by the assessee is revenue income liable to tax under the Indian Income-tax Act, 1922:
The court examined the historical context and the terms of the settlement. The Tribunal had concluded that the income was not agricultural and thus liable to tax. However, the court disagreed, emphasizing that the income was derived from a share in the land revenue, making it agricultural income. The court highlighted that the income varied each year based on the net collections, reinforcing that it was a share of the revenue rather than a fixed pension or allowance.

3. Examination of whether the income received is agricultural income exempt from income-tax:
The court explored whether the income met the criteria under sub-clause (a) of section 2(1) of the Income-tax Act, which defines agricultural income as rent or revenue derived from land used for agricultural purposes. The court concluded that the income was agricultural because it was a share of the land revenue collected by the government. The court referenced several cases to support its interpretation, distinguishing the present case from those where the income was a fixed allowance or pension not directly tied to land revenue.

Conclusion:
The court concluded that the income received by the assessee was agricultural income and thus exempt from income-tax. The question referred by the Tribunal was answered in the negative, indicating that the sum of Rs. 36,396 was not liable to tax under the Indian Income-tax Act, 1922. The assessee was awarded Rs. 400 as costs of the reference from the Department.