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The issue involves the taxation of compensation received by a company for requisitioned lands under the Assam Land (Requisition and Acquisition) Act, 1948, whether it qualifies as agricultural income and is exempt from tax. Summary: The High Court of Calcutta considered a reference under section 66(2) of the Indian Income-tax Act, 1922, regarding compensation received by a company with a tea estate in Assam for lands requisitioned under the Assam Land (Requisition and Acquisition) Act, 1948. The lands were requisitioned to accommodate refugees and landless persons. The company received compensation of Rs. 1,24,638 for the requisitioned lands. The Income-tax Officer included this amount under "Other sources," disputing the company's claim of exemption as agricultural income. The Appellate Assistant Commissioner found the compensation to be agricultural income as the lands were used for agricultural purposes. The Tribunal upheld this decision based on findings that the lands were under cultivation when requisitioned and later given to refugees for cultivation. The Commissioner of Income-tax raised a question under section 66(1) challenging the exemption of the compensation from tax. The Tribunal reframed the question to focus on whether the compensation was exempt from tax. The Division Bench of the High Court upheld the exemption, stating that the compensation was directly associated with the requisitioned lands used for agricultural purposes. The Court cited precedents emphasizing that revenue directly derived from land used for agricultural purposes qualifies as agricultural income. The Court concluded that the compensation, being directly linked to the requisitioned lands, met the criteria for agricultural income exemption. The Court ruled in favor of the assessee, affirming that the compensation was exempt from tax. No appeal was made to the Supreme Court, and the Court's decision was binding on the Commissioner. The Court rejected the argument that the compensation was not agricultural income, as its source was the requisitioned lands themselves. The Court's decision was unanimous, and no costs were awarded. This judgment clarifies the tax treatment of compensation received for requisitioned lands under the Assam Land (Requisition and Acquisition) Act, affirming that such compensation can qualify as agricultural income and be exempt from tax.
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