1943 (8) TMI 2

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..... on of whether the interest received by the assessee in respect of the preference shares held by him in the Steel Corporation of Bengal is taxable income will stand. The second question regards as follows: Whether the interest on rent payable to the appellants as landholder under the Madras Estates Land Act can be said to be agricultural income within the meaning of Section 2(1)(a) of the Act and so exempt from assessment under section 4(3)(viii) of the Income- tax Act. The assessee is a landholder within the meaning of the Madras Estates Land Act. Section 61 of the Act states that an arrear of rent payable by a ryot to his landholder shall bear simple interest at the rate of onehalf per cent per mensem from the date on which th .....

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..... and Act. The Calcutta High Court held that interest on arrears of rent was not agricultural income. It was pointed out that rent is payable to the landlord by the tenant by virtue of a contract of tenancy of land and the cause of action in respect of rent arises out of contract. Interest on arrears of rent is payable by reason of a statutory provision of law which imposes a penalty upon the tenant for non-payment of his rent. The Patna High Court followed this decision in Maharaja Bahadur Ram Ran Vijay Prasad Singh v. The Province of Bihar [1942] I.L.R. 21 Pat. 488; 10 I.T.R. 446 although in an earlier case, Sri Ramachandra Dev v. The Commissioner of Income-tax, Bihar and Orissa, [1942] I.L.R. 21 Pat. 461; 10 I.T.R. 141 it expressed a con .....

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..... not agricultural income within the meaning of the Income-tax Act, the Court can only have regard to the definition contained in that Act. Our attention has been drawn to the judgment of the Special Bench of this Court which decided Commissioner of Income-tax, Madras v. Zamindar of Kirlampudi I.L.R. 55 Mad. 830. It was there held that interest due to a zamindar under a promissory note taken by him from his ryots for the amount of rent due by them with interest was not agricultural income within the meaning of the Income-tax Act. The basis of the decision was that there was a fresh contract between the zamindar and the ryots whereby the character of the liability was changed. It was no longer rent but a loan. Apparently it was contended in .....

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