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TMI Blog1907 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... defendant. This issue raised the question whether the plaintiff's alternative claim for a refund of Income tax could be enquired into, seeing that the plaintiff had never claimed any such relief in any notice given to the defendant under the provisions of Sec. 424, C.P.C. 3. The Subordinate Judge has held, (1) that the plaintiff was liable to pay Road cess; (2) that the plaintiff's suit for a refund of Income tax must be dismissed, as no notice of any such claim was given to the defendant previously to the institution of the suit, and (3), that the plaintiff is under the law liable to pay both Road cess and Income tax on the net profits derived by him from mines. 4. On behalf of the appellant, the correctness of all these findings of the Subordinate Judge is impugned. It is said (1) that the plaintiff is not liable to pay Road-cess at all; (2) that as a notice under Sec. C.P.C. claiming a refund of Road cess was given to the defendant, it was unnecessary to give him a fresh invoice claiming a refund of Income tax, and further, that if the giving of any such notice is required by law, the defendant waived his right to it, and (3) the plaintiff is not liable to pay (sic) Ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms. They cannot, in my opinion, be considered the owners of the mines. 6. Finally, the provisions of Sec. 81 of the Road Cess Act clearly show that both the owner and the occupier of a mine are liable to pay in equal shares the Road cess assessed on its net profits. So that the word "owner" used in Sec. 72, is not necessarily the same person as the "occupier," and is not restricted to the "occupier." The ground on which the suit was brought for a refund, viz., that the plaintiff was not liable to pay Road cess fails. 7. It is however, contended that Sec. 72 contemplates the service of only one notice on the owner or occupier of a mine--the submission of only one return by him, and the levying of only one assessment on the annual net profits enjoyed by him. I am unable to assent to this plea. Under Sec. 14(2) of the Bengal General Clauses Act (I of 1899 B.C.,) words in the singular include the plural, so the terms of Sec. 72 of the Road Cess Act apply as well to two notices and to two returns as to one. The same argument applies to the form of notice in Schedule E of the Act, on which reliance is also placed. Then, the provisions of Sec. 81 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would seem to me that the royalty collected by the plaintiff on the coal raised from his mines comes within the expression "sources of income," used in Sec. 4 of Act II of 1886. None of the exemptions referred to in Sec. 5 of the Act apply to this royalty. So it would appear, that the plaintiff is liable to pay both Income tax, and Road cess tax as well on the same net profits. The explanation seems to be that Road cess is a rate levied to enable roads to be constructed in the district in which the mines are situated; while Income tax is a tax levied for the general purposes of Government. 12. On behalf of the appellant, reference has been made to the case of Umed Rasul Shaha v. Anath Bandhu Chowdhuri (1901) I.L.R. 28 Calc. 637. In that case the question was whether both Road cess and Income tax were leviable on the profits derived from a mela. It was decided that Road cess was not leviable on such profits, as they were derived from land, and land is under Chapter II of the Act only to be assessed with Road cess when used for agricultural purposes. It is however contended that in this case it is laid down generally that when road cess is paid for any property, Income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently on the 10th May, 1902, the plaintiff presented an application for amendment of the plaint. He alleged that in addition to the cesses levied upon the royalties. Income tax had also been assessed thereon, and he had been compelled to pay ₹ 5,669-5 ans. 7 pies as Income tax on the 27th August, 1900. He consequently asked that an alternative prayer might be added to the plaint for the refund of the Income tax levied from him, if the Court should be of opinion that the royalties were liable to be assessed with cesses. After abjection on the part of the defendant, to which detailed reference will be made hereafter, the application for amendment was allowed on the 9th July, 1902. The suit came on for hearing in 1905, and after the case for the plaintiff had been closed, objection was taken for the first time on behalf of the defendant, that the alternative claim for refund of the sum levied as Income tax could not be maintained without service of a fresh and an appropriate notice, under section 424 of the Civil Procedure Code, and an issue was raised on this point. The learned Subordinate Judge held upon the question, whether the royalties were table to be assessed with ces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strar of Probates (1900) A.C. 323 at 337, Partington v. Attorney General (1869) L.R. 4 H.L. 100 and Stockton and Darlington Ry. v. Barrett (1814) 11 Cl. & F. 590 at 602. In the first of these cases. Lord Cairns pointed out that a taxing Act must be construed strictly; you must find words to impose the tax, and if words are not found which impose the tax, it would not be imposed. In the second case, Lord Halsbury observed, that in construing Acts which profess to impose a charge, we have no governing principle of the Act to look at; we have simply to go on the Act itself to see whether the duty claimed is that which the Legislature has enacted. It is necessary to state, however, that this rule, while valuable as a caution, cannot be taken as substantially varying the ordinary rules for construing all Statutes. As was remarked by Lord Cairns, in Pryce v. Monmouthshire Canal and Ry. Cos. (1879) 4 A.C. 197 at 202, the rule means little more than this, that inasmuch as there was not any a priori liability in a subject to pay any particular tax, nor any antecedent relationship between the tax payer and the taxing authority, no reasoning founded on any supposed relationship of the tax pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the mode of ascertainment of such annual profits. It appears to me to be clear that 'the annual net profits from a mine' is a quantity which is independent of the circumstance, whether the mine is worked by the owner himself or by lessees or adventurers holding the property under him. When a mine has been opened and is being worked, in order to determine the annual net profits from the mine, we have to ascertain first the actual yearly receipts, and then deduct from it the working expenses. In other words, the difference between the gross earnings and the working expenses, which constitutes the net receipts, is the annual net profits from the mine. It may be a question of some nicety to decide, what should or should not be included under working expenses; for instance, it may be a matter for argument whether "working expenses" includes interest on the capital invested, the cost of repairs and insurance, the expenses of sinking a shaft and other similar charges. It is not necessary for our present purposes to determine what may or may not be legitimately included in working expenses; but this much seems to me to be tolerably plain, that the net receipts ascer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72 does nothing of the kind; the interpretation suggested is inconsistent with the language used, and is inconsistent with the principle which underlies Sec. 6 of the Act. Reference, however, was made to Sec. 14 of the Bengal General Clauses Act, I of 1899, which provides that in all Bengal Acts, unless there is anything repugnant in the subject or context, words in the singular shall include the plural and vice versa, I am unable to appreciate how this rule is of any assistance to the respondent; in the first place, the rule in question is nothing more than a statutory recognition of a familiar rule of construction, and in the second place, it leaves open the question whether there is anything in the subject or context repugnant to the application of the rule. As I have already pointed out, Sec. 6 and Sec. 72 both contemplate the ascertainment of the net annual profits of the mine; neither section has any reference to the distribution of such net profits amongst the owner and the occupier, and there is no indication, that different returns are to be called for from different persons in respect of the share of the net profits which may pass into the hands of each individual. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or occupier," the last three of which have undoubtedly the common characteristic of referring to persons who have possession of or control over the mine; this circumstance justifies the inference, that the term 'owner' is to be taken with a similar qualification. No doubt, a different interpretation might have been admissible, if the phrase used had been "owner or occupier or his chief agent or manager." It may be observed that the term 'owner' is often used in the limited sense indicated above; the owner of a property is the person in whom it is for the time-being beneficially vested, and who has the occupation or control or usufruct of it; for instance, a lessee is, during the term, sometimes described as the owner of the property demised. [See the judgment of Bramwell, L.J. in Eglinton v. Norman (1877) 46 L.J. Q.B. 559; see also Lister v. Lobley (1837) 7 A. & E. 124 Chauntler v. Robinson (1849) 4 Exch 163 : 80 R.R. 507, and Russell v. Shenton (1842) 3 Q.B. 449 : 61 R.R. 249]. Similarly, the definitions of the term 'owner' given in Sec. 72 of the Coal Mines Regulation, 1872 [Statute 35 and 36 Vict. Ch. 76] and in Sec. 41 of the Metallifero ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the period of five years. Here again, what is contemplated is the annual net profits of the mine; and, indeed, if different returns by different persons of their respective shares of the profits had been in contemplation, it is inconceivable, how a declaration by one of such persons could possibly be regarded as binding upon the others, and as fixing the amount of annual net profits for a period of five years. Section 80 next provides for service of notice upon "the owner, chief agent, manager, or occupier" of the mine, of the amount of Road Cess and Public Works Cess respectively, payable in respect of such property. The section further provides, that the amount notified shall be payable by such "owner, chief agent, manager or occupier" to the Collector in two equal instalments on specified dates. There is not the remotest suggestion in the section that two notices are to be served, one upon the owner in respect of the amount of royalty received by him, and the other upon the occupier, in respect of the profits which remain in his hands. To my mind, any such interpretation of section 80 is entirely inconsistent with the language of the section, and is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le apparently to all mining leases, whether granted before or after the Cess Act of 1880, whereas the latter is restricted in application to cases of mines which were not liable to Poor Rate before the Rating Act of 1874. 17. Upon a review, then, of the provisions of the Cess Act of 1880, the position appears to be as follows. The annual net profits of a mine are subject to assessment of the Road Cess and the Public Works Cess. What has to be assessed, is the annual net profits from the mine, irrespective of the mode in which such net profits may be distributed amongst the various persons who may have different degrees of interest in the mine. Such net profits may be taken to be the difference between the gross earnings of the occupier and his working expenses. The royalty which may be payable by the occupier to the owner forms a part of the net annual profits from the mine, and is consequently subject to assessment for cesses. In order to ascertain the annual net profits from a mine, the Collector has to serve a notice upon the person who is in possession of the mine or has control over it, whether such person happens to be the owner himself, or an occupier under him, or the chie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inction without a difference, as the best and only fair method of arriving at the net annual value may be that of ascertaining the net annual profits. It is worthy of note, however, that under the English law, in ascertaining the net annual value, the royalties payable cannot be deducted and must be taken into account. One of the earliest cases in which this principle was laid down, is that of Reg. v. Parrot (1794) 5 T.R. 593 : 2 R.R. 672, in which Lord Kenyan, C.J. laid down that the lessee of a coal mine is liable to be rated, though he derived no profit from the mine, and that the Court could not entertain the objection that he had made an unprofitable bargain with his lessor. In other words, if the mining adventurers in occupation make a profit, they are liable to be rated, even though the whole of the profit is swallowed up by the rent which they pay to their lessor; if profit be made, it is immaterial whether that profit goes into the pocket of the actual occupier or not. This is manifest from the case of Rex v. Attwood (1827) 6 B/& C. 277 : 30 R.R. 322, in which Sir Charles Abbott, C.J. laid down that the lessee of coal mines is rateable for the amount of royalty or rent whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole from the lessees in the first instance, he has levied the amount partly from the plaintiff and partly from his lessees. It is not suggested, that the plaintiff has been prejudiced in any manner by this irregular mode of recovery on the part of the Collector. The ground upon which he seeks relief is--not that the Collector has irregularly levied from him cesses payable, but--that the Collector has assessed cesses upon the royalty which is not assessable at all with cesses under the Act, whether it be money in his hands or in the hands of his lessees. This latter contention is, as I have explained above, wholly untenable. The first ground taken on behalf of the appellant cannot consequently be supported and must be overruled. 20. The second ground taken on behalf of the appellant raises the question, whether the amount of royalty received by the plaintiff is liable to be assessed with Income tax. This question has not been determined by the learned Subordinate Judge, because in his opinion, the claim in respect of this matter could not be put forward without the service of a fresh notice upon the defendant under Sec. 424 of the Civil Procedure Code. It is, therefore, necessary t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the refund of the Income tax was not maintainable without a fresh and an appropriate notice under Sec. 424. C.P.C., and a new issue was framed on the point, inspite of the objection of the plaintiff. The learned Subordinate Judge subsequently held upon this issue, that the refund of the Income tax was not maintainable and accordingly declined to entertain it. Upon these facts, it was contended by the learned vakil for the appellant, that no notice was necessary under Sec. 424. C.P.C. It was argued that Sec. 424, C.P.C. had no application to a case like the one before us, and that it ought to be limited in its application to cases of what might be called torts or wrongs. This contention is contrary to the decision of this Court in The Secretary of State v. Rajlucki (1897) I.L.R. 25 Calc. 289 which, it was suggested, goes too far and may be open to criticism. It is unnecessary, however, to examine this point in detail, as I think, that the other contention of the plaintiff upon this matter is well founded. It may be assumed, therefore, that a notice under section 424, Civil Procedure Code, is requisite in cases of this description; and it may further be assumed, that, as pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Under the circumstances disclosed in the case before us, it appears to me that the right to a notice of action was waived. It has further to be observed, that if the objection had been taken, as it ought to have been taken, when the application for amendment of the plaint was made, it would have been open to the plaintiff to bring a separate action in respect of the claim for the refund of the Income tax after due service of notice under section 424, Civil Procedure Code. But not only was objection not taken on the ground of want of notice, when leave was granted to amend the plaint, it was actually taken at a time when, if the objection was allowed to prevail and the plaintiff was driven to institute a separate suit for the recovery of the Income tax, he would be successfully met with the plea of limitation. It is well settled, that if provisions of law are waived in the course of a trial, they cannot afterwards be set up by way of objection to any step taken or about to be taken upon the footing of the waiver; when a litigant has, without mistake induced by the opposite party, taken a particular position in the course of a litigation, he must act consistently with it, specially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instalment may, in substance, partially consist of interest, the periodical instalments are not liable to be assessed with Income tax. This principle was adopted by the House of Lords in the case of Secretary of State v. Scoble (1903) A.C. 299. There the Secretary of State had power by contract to purchase a Railway, paying for the purchase, the full value of all the shares of the Company, with the option of paying instead of a gross sum, an annuity for a term of years, each instalment of the annuity representing in substance an instalment of the purchase money, and interest on the amount of the purchase money unpaid. The House of Lords affirmed the decision of the Court of Appeal [Scoble v. Secretary of State (1903) 1 K.B. 494, On Appeal (1903) A.C. 299] that as capital could not be taxed as income. Income tax was not payable upon that part of the annuity which essentially represented capital. In this very case, Lord Halsbury, L.C. pointed out, that where we are dealing with Income tax upon a rent derived from coal, we are in truth taxing that which is capital in this sense, that it is a purchase of the coal; and not a mere rent. The Lord Chancellor further observed that the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, that no Income tax should be imposed on the rent reserved on a mineral lease. The distinction between a price paid down in one sum for the out and out purchase of the minerals forming part of the land, and the rent and royalty which constitute, in reality, a payment by instalments of the price of these minerals, is intelligible, though it may be quite logical, thus affording an illustration of Lord Halsbury's reservation in Quinn v. Leathern (1901) A.C. 495 at 506, that law is not necessarily a logical Code, and is not always logical at all. The view I take, receives some support from the definition of the word 'income' as given in the Oxford Dictionary, Vol. V. p. 162. 'Income' is defined to be "that which comes in as the periodical produce of one's work, business, lands, or investments, considered in reference to its amount, and commonly expressed in terms of money; annual or periodical receipts accruing to a person or corporation." The same view of the matter appears to have been adopted in the American Courts, in which it has been held, that the term 'income' includes a sum accruing as royalty under an oil lease of land, granted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inference from what may be a superfluous provision [Mollow March Co. v. Court of Wards (1872) L.R. 4 P.C. 419 at 437, and London Joint Stock Bank v. Mayor of London (1875) 1 C.P.D. 1 at 17]. I, therefore, prefer to rest my decision on the ground that the term ' income' as used in section 4 of the Income Tax Act is comprehensive enough to include a royalty, and that if royalty is really of the nature of rent, it is not excluded from the operation of section 4 by reason of the exceptions specified in cl. (a) of section 5. 22. It was strenuously contended by the learned vakil for the appellant, upon the authority of Umed Rasul v. Anath Bandhu (1901) I.L.R. 28 Calc. 637, that the plaintiff ought not to be assessed with Income tax in respect of the identical sum upon which cesses have been levied; reliance was particularly placed upon the passage in which it is stated that "the defendants would seem to be liable to pay Income tax and consequently not Road cess." The case relied upon, however, is clearly distinguishable, and as has been already explained by my learned brother who was a party to that decision, it was not intended to lay down in it a general proposition ..... 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