1907 (1) TMI 1 - HC - Income Tax

Summary

Issues Involved:
1. Liability to pay Road cess.
2. Requirement of notice under Sec. 424, C.P.C. for refund of Income tax.
3. Liability to pay both Road cess and Income tax on the same profits.

Issue-Wise Detailed Analysis:

1. Liability to Pay Road Cess:
The plaintiff argued that he was not liable to pay Road cess as he did not fall within the definition of "owner" under Sec. 72 of the Road Cess Act (IX of 1880, B.C.). He contended that the term "owner" should only apply to a person in actual occupation of the mine. The court, however, disagreed, stating that the term "owner" was not restricted to the actual worker or lessee of the mine but also included the proprietor of the land who receives royalties from the mines. The court emphasized that Sec. 81 of the Road Cess Act indicated that both the owner and the occupier of a mine are liable to pay Road cess on its net profits. The court concluded that the plaintiff, as the proprietor receiving royalties, was liable to pay Road cess.

2. Requirement of Notice Under Sec. 424, C.P.C. for Refund of Income Tax:
The plaintiff's alternative claim for a refund of Income tax was challenged on the grounds that no notice of such a claim was given to the defendant under Sec. 424, C.P.C. The court noted that the plaintiff had initially given notice for the refund of Road cess but had not included the claim for Income tax in that notice. The court held that a fresh notice was required for the Income tax claim, and since no such notice was given, the claim could not be entertained. The court also rejected the plaintiff's argument that the defendant had waived the requirement for notice, stating that the defendant had not waived this right and had raised the objection at an appropriate stage.

3. Liability to Pay Both Road Cess and Income Tax on the Same Profits:
The plaintiff contended that he should not be liable to pay both Road cess and Income tax on the same profits. The court examined the nature of royalties and concluded that royalties received by the plaintiff from the coal mines constituted "income" under Sec. 4 of Act II of 1886. The court referenced several legal precedents and definitions to support its conclusion that royalties are income and are taxable under the Income Tax Act. The court also noted that the Road cess is a rate levied for the construction of roads in the district where the mines are situated, while the Income tax is levied for the general purposes of the government. The court found no legal basis to exempt the plaintiff from paying both taxes on the same profits.

Conclusion:
The court dismissed the plaintiff's suit, upholding the Subordinate Judge's findings that the plaintiff was liable to pay Road cess, that the claim for a refund of Income tax was not maintainable due to the lack of notice under Sec. 424, C.P.C., and that the plaintiff was liable to pay both Road cess and Income tax on the same profits. The appeal was dismissed with costs.