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Issues Involved:
1. Whether selami or premium is agricultural income under Section 2(1) of the Indian Income Tax Act, 1918, when charged for the settlement of waste lands or abandoned holdings and for recognition of a transfer of a holding from one tenant to another. 2. Whether illegal abwabs, such as uttarayan, constitute agricultural income under the same section. Detailed Analysis: Issue 1(a): Selami for Settlement of Waste Lands or Abandoned Holdings The court examined whether selami (premium) paid for the settlement of waste lands or abandoned holdings constitutes agricultural income under Section 2(1) of the Indian Income Tax Act, 1918. The court held that when a new tenancy is created for unoccupied waste lands or lands abandoned by previous tenants, the premium represents the capitalized value of a portion of the rent. The court noted, "The capitalized value of the sum periodically payable, taken along with the premium, constitute in the aggregate the consideration for the grant." Consequently, such selami can be regarded as "rent or revenue" derived from land, thus qualifying as agricultural income under Section 2(1)(a). Issue 1(b): Selami for Recognition of Transfer of Holding The court differentiated between selami paid for the settlement of waste lands and selami paid for the recognition of a transfer of a holding from one tenant to another. It held that in the latter case, the original tenancy continues, and no new demise occurs. The court stated, "The money is paid by the transferee to the landlord to purchase peace, so that he may not contest the validity of the transfer." Thus, such selami is neither rent nor revenue and cannot be considered agricultural income. Issue 2: Illegal Abwabs (Uttarayan) The court addressed whether illegal abwabs, such as uttarayan, constitute agricultural income. Uttarayan was described as a voluntary payment made by tenants for specific expenses, including the Bastu Puja and distribution of sweets and oranges. The court ruled, "The item consequently is an illegal exaction and cannot, on the widest interpretation which may be placed on the phrase 'rent or revenue,' be possibly included therein." The court further referenced the decision in Partridge v. Mallandaine, which held that even income from illegal activities is taxable. Hence, income from illegal abwabs like uttarayan is not exempt from assessment. Conclusion: The court concluded: 1. Selami paid for the settlement of waste lands or abandoned holdings is agricultural income and answered Q.1(a) in the affirmative. 2. Selami paid for the recognition of a transfer of a holding from one tenant to another is not agricultural income and answered Q.1(b) in the negative. 3. Illegal abwabs, such as uttarayan, do not constitute agricultural income and answered Q.2 in the negative. Costs and Orders: There was no order for costs under Section 51(1) as the reference was partially decided in favor of the assessee. A copy of the judgment was ordered to be forwarded to the Board of Revenue under Section 51(3). Separate Judgments: Ernest Edward Fletcher, J., and H. Walmsley, J., both agreed with the judgment delivered by Asutosh Mookerjee, Acting C.J.
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