1960 PLP 840 (PTD)

"Section 6.‑Heads of income chargeable to income‑tax.‑Save as otherwise provided by this Act, the following heads of income, profits, and gains, shall be chargeable to income‑tax in the manner hereinafter appearing, namely :‑ (i) Salaries. (ii) Interest on securities. (iii) Income from property. (iv) Profits and gains of business, profession or vocation. (v) Income from other sources." Section 12.‑Other sources‑(1) The tax shall be payable by an assessee under the head "Income from other sources" in respect of income, profits and gains of every kind which may be included in his total income (if not included under any of the preceding heads). The appellants are the sons of the Maharajah of Pithapuram, the proprietor of the zamindary of Pithapur, which was per manently settled under the Madras Permanent Settlement Regula tion. A part of the permanently settled estate known as Pulivela was settled upon the appellants by their father. This estate includes forest and non‑forest areas of spontaneous growth from which the appellants derive income by the sale of wood, bark, leaves, minor forest produce, usufruct of trees including Jadivala in Jiarayati lands, and levy of licence fees. They also derive income from the sale of proceeds of trees which are also of spontaneous growth, in non‑forest areas. It is admitted that the trees in the forest and non‑forest areas have grown wild, and that agricultural operations are not carried on in any of the areas from which the income in question was derived. For the year of account 1941‑1942 the income derived by the appellants from the sources mentioned above amounted Rs. 7,612, and the appellants were taxed on this sum for the year 1942‑1943. The material part of the assessment Order made by the Income‑tax Officer is as follows :‑ "It is stated that the income from forests as well as miscel laneous income from non‑forest areas referred to above are in the nature of agricultural income and not liable to be taxed. It is however admitted that the entire income from various sources detailed above relates to trees of spontaneous growth in forests as well as in non‑forest areas, that no trees are grown by the assessees and no agricultural operations are carried on in any of these areas. The income from these sources does not then fall under `agricultural income' as defined in section 2 (1) (a) and (b) (l) of the Income‑tax Act and is not exempt from tax. The total income of Rs. 7,612‑1‑5 will therefore be taxed." The above Order was objected to before the Appellate Assis tant Commissioner on two grounds :‑(1) that as the government have fixed the public assessment for ever under the Madras Permanent Settlement Regulation, any further taxation will be illegal ; and (2) that the income sought to be taxed was agricultural income within the meaning of section 2 (I) of the Indian Income tax Act and exempt from the levy of the tax by virtue of section 4 (3) (viii). Both contentions were rejected by the Appellate Assistant Commissioner, and also on appeal from his Order by the Income Tax Appellate Tribunal. At the request of the appellants the Tribunal referred two questions to the High Court. These are: "(1) Whether the imposition of income‑tax in respect of income derived from a permanently settled estate would be a breach of Regulation XXV of 1802 relating to Permanent Settlement. (2) Whether the income of Rs. 7,612 derived from the sale of wood, etc. (as detailed herein above) is exempt under section 4 (3) (viii) read with section 2 (1) of the Indian Income tax Act, 1922." Both these questions were answered against the appellants by the High Court. In a recent decision of the Board, viz. Raja Mustafa Ali Khan, through Special Manager, Court of Wards, Utraula, District Gonda v. Commissioner of Income‑tax, United Provinces, Ajrner and Ajmer Merivara (1948 L R 75 I A 268) it was held that: "Income derived from the sale of forest trees growing on land naturally and without the intervention of human agency, even, if the land is assessed to land revenue, is not 'agricultural income' within the meaning of section 2 subsection (1) (a) or (b) of the Indian Income‑tax Act, 1922, and is not therefore exempt from income‑tax under section 4, subsection (3) (viii), of the Act . . . . . " In view of this decision, Mr. Cyril King, learned counsel for the appellants, stated frankly that he was not prepared to argue that the income in the present case is exempt from taxation on the ground that it is "agricultural income." Therefore, their Lordships have to consider in this appeal only one question, ‑namely whether the income should be held to be exempt from taxation under the Indian Income‑tax Act on the ground that it arose from a permanent settled estate which must be presumed to have been exempted from all taxation, beyond the peishkush (jama) payable to government, fixed under Regulation XXV of 1802. The argument of the learned counsel proceeded on these lines :‑The forest and the non‑forest areas from which the income is derived have all been included in the zamin lands on which the zamindar has to pay peishkush, and as such peishkush has been fixed for ever no increase in the peishkush can ever be made under any circumstances, as the tax levied on the income from the produce of the forests will in effect amount to an addition to the peishkush and will thus be contrary to the terms of the sannad. It is admitted that the forest and non‑forest areas were all included in the zamindary at the time of the settlement. In support of the above argument reliance was placed on The Chief Commissioner of Income‑tax, Madras v. Zamindar of Singampatti (I L R 45 Mad. 518) and Maharajadhiraj of Darbhanga v. Commis sioner of‑Income‑tax (I L R 3 Pat, 470) both of which support the appellants. It is not necessary to discuss these decisions, or to consider further the arguments of the learned counsel, for it was decided by the Board in Probhat Chandra Barua v. The King‑Emperor (1930 L R 57 I A 228)‑a case under the Bengal Permanent Settlement Regulation‑that: "While the Bengal Regulations contain assurances against any claim to an increase of the jama, based on an increase of the zamindari income, they contain no promise that a zamindar shall in respect of the income which he derives from his zamindari be exempt from liability to any future general scheme of property taxation, or that the income of a zamindari shall not be sub jected with other incomes to any future general taxation of incomes. Under the Indian Income‑tax Act, 1922, section 6 (vi) (`other sources'), and section 12 subsection (1), the zamindar of a per manently settled estate is assessable to tax under the Act in respect of income, profits and gains derived from his zamindari, subject to the exemptions in section 4 subsection (3) ; the assess ment should be computed after making proper allowance, under section 12, subsection (2) in respect of the jama assessed and paid." Ten items were mentioned in that case, those being: "(i) Jalkar or rents received from fisheries. (ii) Ground rent from land used for potteries. (iii) Ground rent from land used as brick fields. (iv) Fees received from the tying up of boats against the assessee's land. (v) Fees received from land used for storing purchases of crops (paliali). (vi) Fees received from cart‑stands. (vii) Punyaha nazar or nazar paid by tenants of agricultural holdings at the beginning of the zamindari year. (viii) Nazar for petitions presented to the zamindar, dealing with questions of succession, settlement and partition. (ix) Ground rent for permanent shops at huts and bazaars. (x) Stall fees paid by temporary (daily) sellers at huts and bazaars." The Bengal Permanent Settlement Regulation is Bengal Regula tion I of 1793. Though the two Regulations are differently worded it was conceded by the learned counsel, and their Lordships think rightly, that the language of both the Regulations is to the same effect. The decision of the Board was sought to be distin guished by the learned counsel on the ground that the items mentioned in the case before the Board had been excluded from the assessment of the jama at the time of the permanent settle ment. If that was so, no doubt the decision would be inapplicable to the present case. As pointed out by Mr. Tucker, the learned counsel for the respondent, from the "case" stated by the Com missioner of Income‑tax, Bengal, for the opinion of the High Court (see Vol. II I. T. C. 392 at p. 394), it clearly appears that some of the items were admittedly taken into account in assessing the jama. It appears from it that some of the items "such as `Jalkar' were admittedly taken into account in assessing the jama at the time, of the Permanent Settlement ; some were not, such as the abwabs. The cases of some of the remaining items are not free from doubt . . . . ." In the circumstances, the learned counsel for the appellants stated that it was not possible for him to press his contention based upon the Permanent Settlement Regulation any further, but he pointed out that the decision in The Chief Commissioner of Income‑tax, Madras v. Zamindar of Singam patti (supra) on which he relied strongly has not been referred to in the judgment of the Board, though as will appear from the arguments reference had been made to it. Their Lordships have no doubt that though the case is not mentioned by name it must have been considered by the Board. In view of the decision in Probhat Chandra Barua v. The King‑Emperor (supra) it must now be held that the decisions in The Chief Commissioner of Income‑tax, Madras v. Zamindar of Singampani (supra) and Maharajadhiraj of Darbhanga v. Commissioner of Income‑tax (supra) are no longer good law. Following the decision in Probhat Chandra Barua v. The King‑Emperor (supra) their Lordships hold that the decision of the High Court on the questions referred to it is right ; and that the tax was rightly levied on the amount of Rs. 7,612 in the present case. For the above reasons, their Lordships will humbly advise His Majesty that this appeal should be dismissed with costs. Appeal dismissed.