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TMI Blog1946 (4) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... common ground that such interest was charged and was received and the only question is whether it constituted agricultural income within the meaning of the definition contained in Section 2(1)(a) of the Indian Income-tax Act. Of that definition there are only six material words, as far as we are concerned, and those are the words rent or revenue derived from land, within which in this case the interest in question would have to come if it is to stand any chance of being classified as agricultural income and, therefore, being held to be exempt from income-tax. The Income-tax Officer assessed her to tax on this sum and the Assistant Income-tax Commissioner up held the assessment. In due course she appealed to the Income-tax Tribunal which held that the sum of ₹ 365 in question was agricultural income. Finally a question was framed and submitted to us in this form:― Whether the sum realized by the assessee on account of interest on arrears of rent of agricultural land is 'agricultural income' within the meaning of Section 2(1) of the Income-tax Act and as such exempt from tax under Section 4(3)(vii) of the said Act. It has to be observed that under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the High Court at Patna which take a view favourable to the assessee and hold that interest on arrears of rent can be classified as agricultural income. The first of these case is that of Sri Ramchandra Dev v. Commissioner of Income-tax, Bihar and Orissa [1942] 10 I.T.R. 141. This was decided in 1942 and the learned Chief Justice and Mr. Justice Manohar Lall of the Patna High Court, considering the question in relation to the same section of the Indian Income-tax Act as I am now dealing with, took the view that interest on arrears of mustajiri rent received in default of punctual payment, formed part of the agricultural income of the assessee. The second of the two cases is the still more recent one of Srimati Lakshmi Daiji v. Commissioner of Income-tax [1944] 12 I.T.R. 309 in which again the same question was considered and decided in the same way. In this case, however, the learned Judges took the rather wider view, which with great respect I am inclined to think is the right view, that interest in a case like this falls to be considered not as rent but as revenue derived from the land on the ground that it has its source in the agricultural tenancy itself inasmuch as bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while no doubt, it does serve the purpose of being that statutory recompense which they say it is, it may none the less be derived from the land in the sense that I have endeavoured to explain above. I do not feel that its purpose as statutory recompense is inconsistent with its being derived from the land for the reason that the occasion for the recompense itself arises out of the land. The only other case on which I desire to say one word is the Full Bench Bihar case of Maharaja Bahadur Ram Ran Vijay Prasad Singh v. The province of Bihar [1942] 10 I.T.R. 446, in which three of the learned Judges of that Court expressed an uncompromising dissent to the view I have ventured to express above. I do not desire to say more than that having read that case with some care, I do not think it really constitutes an authority to the detriment of the view that interest on arrears of rent may constitute agricultural income for the purposes of the definition of that term in the Indian Income- tax Act. What was being dealt with in this Full Bench case was the Bihar Agricultural Income-tax Act; and, as I understand it (though the Act has not been produced) the only word there to be construed wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en thousand rupees as the assessee's proceeds from this source for the year in question. And by his assessment of the 30th January, 1941, he treated this sum as income on the ground that the lease money fixed is quit disproportionate to the premium charged and area involved. This was confirmed by the Appellate Assistant Commissioner and ultimately the question was brought before the Income-tax Appellate Tribunal. It is instructive to notice that, as I read the judgment of the 16th October, 1942, of the Tribunal, they were content to treat this question-and I think they were right in doing so―as a question of fact. The argument was whether the receipts were in the nature of capital receipts or of revenue and in speaking of the assessee's objection they say that it was to the effect that on the facts of this case the receipts of this source are not income but constitute capital.... They say that prima facie salami or nazrana is not income and that if the Income-tax authorities wish to have it treated as income in any particular case, the burden lies on them to show that there do exit facts which would make it income. I entirely agree with that statement, and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either that the premium paid on the granting of these leases represented rent in advance or that the assessee was carrying on a business so as to convert her receipts from this source into revenue. For these reasons I should propose to answer the second question put to us by saying that on the facts as found by the Appellate Tribunal and as stated in the case before us, the payments in question are not assessable to income-tax. PATHAK, J.― I agree in the conclusions of my learned brother on both the points. I may, however, add a few words on the second question mentioned by my learned brother. That questions, in short, is whether the receipts which have been described as nazrana are capital or income. Prima facie, this is a question of fact. In the present case, upon the findings arrived at by the Income-tax Appellate Tribunal, there is no question that the matter is entirely one of fact. There is no mention of any salami or nazrana in the leases. The finding is that the moneys in question were received by the assessee, but not by way of rent. No hard and fast rule can be laid down in order to determine what is the character of a particular payment. Normally, the char ..... X X X X Extracts X X X X X X X X Extracts X X X X
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