1953 (1) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Whether selami received for settlement of agricultural holdings is agricultural income under Section 2(a)(1) of the Assam Agricultural Income-tax Act.
2. Whether the sum of Rs. 7,994 received by the assessee as selami for settlement of agricultural holdings is agricultural income under the same provision.

Detailed Analysis:

Issue 1: Selami as Agricultural Income
The primary question was whether selami received for the settlement of agricultural holdings, where the rate of annual rent is uniform and the selami is taken once during the tenant's occupation (with no ascertainable period due to the absence of written leases), qualifies as agricultural income under Section 2(a)(1) of the Assam Agricultural Income-tax Act.

The court noted that the term "agricultural income" is defined in Section 2(a) of the Act, which includes "any rent or revenue derived from land used for agricultural purposes and assessed to land revenue in Assam or subject to a local rate assessed and collected by officers of Government."

To determine if selami is agricultural income, the court considered:
1. Whether the receipts can be regarded as rent or revenue.
2. Whether the rent or revenue was derived from land.
3. Whether the land was used for agricultural purposes.
4. Whether the land was assessed to land revenue or local rates.

It was undisputed that conditions 2 and 4 were satisfied. The contention revolved around conditions 1 and 3, specifically whether the amount received is rent or revenue and whether it was derived from land used for agricultural purposes.

Issue 2: Sum of Rs. 7,994 as Agricultural Income
The court had to decide if the sum of Rs. 7,994 received as selami was agricultural income. The taxing authorities and the court previously opined that the receipt was revenue, not rent. The court examined judicial precedents, including the cases of *Province of Bihar v. Maharaja Pratap Udai Nath Sahi Deo* and *Commissioner of Income-tax, Bengal v. Shaw Wallace & Co.*, to understand the nature of "income" and "revenue."

The court referred to the Federal Court's remand, which required further factual findings to ascertain the true nature of selami. The Board provided the following findings:
1. Total number of settlements: 414; Amount of selami: Rs. 9,332.
2. Maximum extent: 59 Bighas 2 cottahs and 10 Dhurs; Selami: Rs. 161-8-6. Minimum extent: 15 cottas; Selami: Rs. 2-11-9.
3. Rate of selami varied with the quality of lands, with fixed rates of Rs. 7 per bigha for jungle lands and Rs. 10 per bigha for non-jungle lands.
4. No tenant was ejected under Section 69 of the Goalpara Tenancy Act; action was taken under Section 68.
5. Lands were sold in execution of rent decrees, purchased by the landlord, and then settled on receipt of selami.
6. Selami was not a present but a compulsory payment at the inception of the letting.

Based on these findings, the court concluded that the selami received was a capital receipt rather than income. The court reasoned that selami was a single payment made at the inception of the settlement, not a recurring income. The nature of the receipt was akin to a capital asset acquisition rather than periodic income.

Conclusion:
The court held that the sum of Rs. 7,994 received by the assessee as selami for the settlement of agricultural holdings is not agricultural income within the meaning of the Assam Agricultural Income-tax Act. Consequently, the assessee was not liable to be assessed for agricultural income-tax on this amount. The court also noted that the land from which the income was derived was not used for agricultural purposes during the accounting year, further supporting the conclusion that the selami was not agricultural income.

The reference was answered accordingly, with the Board ordered to pay the costs of the hearing, including the costs before the Federal Court.