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TMI Blog1934 (12) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 1,50,000 to the Zamindar of Salur in the Vizagapatam District and obtained a mortgage-deed which is Ex. A dated the 8th November, 1928. The document directs the amount of consideration to be paid to various creditors of the mortgagor. It provides for payment of interest at one per cent, per mensem at the end of the year. If the interest is not fully discharged at the end of the year, overdue interest will be added to the principal and will carry compound interest. The principal amount was to be paid within ten years. At the end of ten years if the amount is not paid the mortgagee may file a suit for sale. Possession of 10 out of 21 jeroyati villages in Schedule A attached to the document was delivered to the mortgagee. The other elev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r requires a copy of any of those documents, it should be given. The mortgagor undertakes to deliver all records such as muchilikas, D.C.B., accounts and other records that are with the Maharajah of Vizianagaram. Whenever the debt is paid off the villages are to be put back in the possession of the mortgagor. Under this document the mortgagee has entered into possession. He has also been recognised as the limited proprietor of the estate under the Limited Proprietor's Act, IV of 1911. In the year of account the assessee received ₹ 17,393 slightly less than one year's interest. 2. On these facts the Commissioner of Income Tax wanted to assess the income on the ground that it is not agricultural income. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several of his villages to a farmer of revenue the farmer collects rent from the various tenants and after deducting some percentage for his profits pays the balance to the Zamindar. In such a case not only the receipts by the farmer from the tenants but also the receipts by the landlord from the farmer would be agricultural income. The contrary cannot be suggested. In some of the districts in this Presidency, especially, Ganjam such farming leases usually called Ijara or Mustagari are very common and in some of the Zamindaris that is the only mode according to which a Zamindar enjoys the income of the Zamindari. So far there is no question of mortgage. But now suppose the owner of the land executes a mortgage of his land to a creditor. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards his interest and therefore though it may be agricultural income of the mortgagor when the mortgagee takes it in payment of his own interest it is not agricultural income but merely income from money lending. Though this argument was accepted in the decision reported in Commissioner of Income Tax, Madras v. Subrahmanya 2 I.T.C. 152 which was overed in Ibrahimsa Rowther v. Commissioner of Income Tax, Madras I.L.R. (1928) Mad. 455 : 54 M.L.J. 524 : 3 I.T.C. 33 (S.B.) it was not accepted in the latter case as well as in In the matter of, Makund Sarup I.L.R. (1927) All. 495 and in Commissioner of Income Tax B. O. v. Kameshwar Singh I.L.R. (1933) Pat. 336 The only reason for this can be that what one has to look to is who receives the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as both these characteristics. But the question is which of these we have to look to. According to the three cases mentioned we have to look more to the fact that the collection is made directly by the mortgagee from the tenants and not to the fact that he afterwards credits it for his interest. Similarly the clause relating to inspection can have no bearing on the matter. I can understand that if there is a clause that at the time of the collection a representative of the mortgagor must always follow the officer of the mortgagee keeping an eye on the collections and preventing any possibility of collusion such a clause makes a good deal of difference. For in such a case the collection is all made under the mortgagor's supervision thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Estates Land Act. If a ryot refuses to exchange muchilika or to pay rent it is the landholder that has to undertake legal proceedings for those purposes, and not the mortgagor. It will certainly be anomalous to say that he is not a landholder and the income he collects is not agricultural income though on the other hand it is also true that he is doing all this because interest is due to him on a debt. 6. In my opinion we ought to follow the decision in Ibrahimsa Rowther v. Commissioner of Income Tax, Madras I.L.R.(1928)Mad. 455 : 54 M.L.J. 524 : 3 I.T.C. 33 and leave the Commissioner of Income Tax to appeal to the Privy Council if he chooses. 7. There is one point in In the matter of, Makund Sarup I.L.R. (1927) A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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