1928 (7) TMI 4 - HC - Income Tax

Summary

Issues Involved:
1. Taxability of income derived from a permanently-settled estate under the Income-tax Act.
2. Jurisdiction of civil suits to recover amounts paid as income-tax.
3. Recovery of payments made under a mistake of law.

Detailed Analysis:

1. Taxability of Income Derived from a Permanently-Settled Estate:
The appellant contended that income from a permanently-settled estate is exempt from the Income-tax Act due to the Permanent Settlement Regulation XXV of 1802 and the sanad issued under it. The court referenced the Full Bench decision in *The Chief Commissioner of Income-tax v. Zamindar of Singampatti* I.L.R. (1922) Mad. 518 (F.B.), which held that incomes from forests and fisheries in permanently-settled estates were exempt from further taxation by the Government. The court concurred with this reasoning, finding the income in question not liable to be taxed under the Income-tax Act. Despite the Government Pleader's argument for specific legislation to exempt such income, the court, bound by the Full Bench decision, ruled in favor of the appellant on this point.

2. Jurisdiction of Civil Suits to Recover Amounts Paid as Income-Tax:
The Government Pleader argued that a civil suit could not be brought to recover income-tax payments, citing Section 52 of the Income-tax Act of 1918. The court clarified that while a suit is barred if the tax is levied under the Act, it is permissible if the assessment pertains to income outside the Act's scope. Since the income from forests and fisheries was not assessable under the Act, the court found that a civil suit to recover it was not barred by Section 52. However, this point was not discussed in detail as the court found the subsequent point against the appellant.

3. Recovery of Payments Made Under a Mistake of Law:
The appellant sought to recover payments made on 5th July 1920, 25th April 1921, and 21st April 1922, arguing they were made under a mistake of law or duress. The court noted that the suit for the first two payments was time-barred, but the payment on 21st April 1922 was within the limitation period. The court reiterated the principle that payments made under a mistake of law cannot be recovered. The appellant's inclusion of non-taxable income in his return was deemed voluntary, not under duress or coercion. The court referenced *William Whiteley, Ltd. v. The King* (1909) 101 L.T. 741, where payments made under a mistake of law were not recoverable, and emphasized that the appellant had the opportunity to object to the assessment but chose to pay instead. Consequently, the court held that the payment made on 21st April 1922 was under a mistake of law and could not be recovered.

Conclusion:
The appeal was dismissed with costs, as the court found the appellant's payment on 21st April 1922 to be non-recoverable. The respondent's memorandum of objections regarding the disallowance of costs by the Subordinate Judge was also dismissed, affirming that the plaintiff was not liable for the costs of the suit.