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Issues:
1. Whether income derived from a permanently settled estate is exempt from taxation. 2. Whether income from the sale of wood, etc., is exempt as agricultural income under the Indian Income-tax Act, 1922. Analysis: The judgment concerns the taxation of income derived by the sons of a Maharajah from an estate settled upon them by their father, which includes forests and trees. The assessees argued for exemption from taxation based on the Madras Permanent Settlement Regulation and the definition of agricultural income under the Indian Income-tax Act, 1922. The Income-tax Officer, Appellate Assistant Commissioner, and Income-tax Appellate Tribunal rejected their pleas, leading to a reference to the High Court for opinion on two questions. Regarding the first issue, the Court referred to the Chief Commissioner of Income-tax v. Zamindar of Singampatti case, where a Special Bench held that income from a permanently settled estate was exempt from taxation beyond peishkush. However, a later Privy Council judgment in Probhat Chandra Barua v. King Emperor indicated that a zamindar could be assessed for income from the estate, not limited to agricultural income. The Court concluded that the Privy Council's judgment impliedly overruled the earlier decision, stating that income other than agricultural income from a permanently settled estate could be subject to income-tax. Moving to the second issue, the Court analyzed whether income from forests and wild trees qualifies as agricultural income under the Indian Income-tax Act. Referring to relevant cases, including Province of Bihar v. Maharaja Pratap Udai Nath Sahi Deo and Kaju Mal v. Salig Ram, the Court determined that income from trees grown wild cannot be classified as agricultural income. The judgment emphasized that agriculture involves human agency, and income from naturally grown trees does not align with the definition of agriculture. The Court upheld that such income is not exempt under the Act's agricultural income provision. In conclusion, the High Court held that income derived from a permanently settled estate, other than agricultural income, is taxable under the Madras Regulation. Additionally, income from forests and wild trees is not considered agricultural income under the Indian Income-tax Act, thus not qualifying for exemption. The judgment clarified the taxability of specific types of income derived from estates and forests, setting a precedent for similar cases involving taxation on non-agricultural income from settled estates.
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