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1959 (5) TMI 13 - SC - Income TaxWhether in view of the circumstances of the case, and particularly the manner in which, after due consideration, the learned Agricultural Income-tax Officer in his first judgment dated the 5th January, 1946, had held that the assessee was not liable to be assessed for the receipt on account of the zarpeshgi lease, the learned Agricultural Income-tax Officer has jurisdiction to revise his own order under section 26 of the Act? Whether if he had the jurisdiction to revise his own order, under section 26 of the Act, the income from the zarpeshgi lease of the assessee was taxable under the Act? Held that - The Agricultural Income-tax Officer was competent under section 26 of the Act to assess an item of income which he had omitted to tax earlier, even though in the return that income was included and the Agricultural Income-tax Officer then thought that it was exempt. The answer given by the High Court was therefore correct. The case of the assessee rests upon the claim that this was a money-lending transaction and the receipts represented a capital return. If, however, the payment to the lessor was premium and not a loan, the income, being agricultural, from these leasehold properties was assessable under the Act. We are of opinion that it was so, and that the Agricultural Income-tax Officer was right when he assessed it to agricultural income-tax. The income was not the income of money-lending, and this does not depend upon the character of the recipient. The Thika profits were clearly agricultural income being actually derived from land. The answer to the question by the High Court was thus correct. Appeal dismissed.
Issues Involved:
1. Jurisdiction of the Agricultural Income-tax Officer to revise his own order under section 26 of the Bihar Agricultural Income-tax Act, 1938. 2. Taxability of income from the zarpeshgi lease under the Bihar Agricultural Income-tax Act, 1938. Detailed Analysis: Issue 1: Jurisdiction of the Agricultural Income-tax Officer to Revise His Own Order Under Section 26 of the Act The first issue revolves around whether the Agricultural Income-tax Officer had the jurisdiction to revise his own order under section 26 of the Bihar Agricultural Income-tax Act, 1938. The High Court of Patna had answered this affirmatively, allowing the Officer to reassess the income that was initially exempted. The Supreme Court examined the scope of section 26, which is similar to section 34 of the Indian Income-tax Act before its amendment in 1948. Key Points: - Section 26 allows the Agricultural Income-tax Officer to reassess income if it has "escaped assessment" for any reason. - The High Court interpreted "escaped assessment" broadly, including cases where income was not taxed due to a mistake or oversight. - The Supreme Court referenced multiple cases, including Kamal Singh v. Commissioner of Income-tax, where it was held that income could be said to have escaped assessment even if it was initially returned but later exempted. - The Court concluded that the Officer could reassess the income under section 26, as the phrase "escaped assessment" was not limited to inadvertent omissions but included deliberate actions. Issue 2: Taxability of Income from the Zarpeshgi Lease The second issue concerns whether the income from the zarpeshgi lease was taxable under the Act. The assessee argued that the income was a capital receipt in repayment of a loan, while the State of Bihar contended that it was agricultural income derived from leasehold properties. Key Points: - The documents in question were indentures of lease, placing the lessee in possession for 28 years in consideration of a payment of Rs. 17,16,000. - There was no term in the documents indicating that the sum paid was a loan or mortgage; it was a premium for the lease. - The Supreme Court examined the clauses of the lease, concluding that the payment was not a loan but a premium, making the income agricultural. - The income derived from the leasehold properties was agricultural income and thus taxable under the Act. - The Court rejected the argument that the income was a capital receipt from a money-lending transaction. Conclusion: The Supreme Court upheld the High Court's decision on both issues. The Agricultural Income-tax Officer had the jurisdiction to revise his order under section 26 of the Act, and the income from the zarpeshgi lease was taxable as agricultural income. The appeal was dismissed with costs.
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