1960 PLP 1050 (PTD)

AKRAM, C. J.‑This is a reference by the Income‑tax Tribunal under section 66 (1) of the Income‑tax Act, at the instance of the Commissioner of Income‑tax (East Pakistan), for our opinion on questions, which by agreement between the parties, came to be formulated as follows:‑ "1. (a) Whether, in the circumstances of the case the sum of Rs. 50,000 paid as salami is in the nature of compensation and as such not assessable to income‑tax ? If the answer to the above question be in the negative‑ (b) Whether in the circumstances of the case, the sum of Rs. 0,000 paid as salami constitutes agricultural income within the meaning of section 4 (3) (viii) of the Act ? and

2. Whether, in the circumstances of the case, the sum of Rs. 5,000, paid as rent, constitutes agricultural income within the meaning of section 2 (1) and as such is exempt from tax under section 4 (3) (viii) of the Act ?" From the statement of the case by the Tribunal it appears that during the last War when Japan occupied portions of Burma, a large number of people from there came to seek shelter in India as refugees, and thereupon the Government of India, for the purpose of housing and accommodating them, created a Refugee Admini stration Department and appointed Mr. S. K. Ghose as Chief Refugee Administrator. With a view to opening a Refugee Camp, Mr. Ghose in 1943 inspected some lands of the Bardhan Kuti Estate in the District of Rangpur, and on approving the site took a temporary lease of about 5,000 bighas of wasteland in the Kanta bari area in the said Estate, agreeing to pay Rs. 50,000 as salami and Rs. 5,000 as yearly rent. No formal document was, however, executed, but the said salami of Rs 50,000 and rent for one year Rs. 5,000 was paid in the year 1943 (1350 B. S.). Accordingly the Income‑tax Officer took the above two sums into account while assessing income‑tax for the period 1944‑45 upon the Manager, Court of Wards, which was administering the aforesaid Estate. Objection to assessment was, however, raised by the Manager, Court of Wards (the assessee) on the ground, inter alia, that the salami of Rs. 50,000 was by way of compensation or in the nature of capital receipt for acquisition by the Refugee Administrator and not income; that the said sum as also the sum of Rs. 5,000 paid as rent (even if treated as income) were both agricultural income, and as such exempt from taxation under section 4 (3) (viii) of the Act. But the above objection was overruled by the Income‑tax Officer and the appeal there from before the Appellate Assistant Commis sioner met with no better fate. The assessee thereupon preferred an appeal before the Income‑tax Tribunal. As the Tribunal agreed with the contentions put forward by the assessee, the Commissioner of Income‑tax obtained the reference as set out above. As to the salami of Rs. 50,000, admittedly it was paid on the basis of a contract between the Manager, Court of Wards, and the Chief Refugee Administrator. The Manager leased out the lands and delivered possession of the same in the course of zamindari business for the purpose of enabling the Refugee Administrator to house and accommodate the refugee temporarily during the period of the War. There was no proceeding by any one for compulsory acquisition, nor was there any forcible possession or unusual use of the land. The transaction was purely contractual and the land continued to remain the property of the assessee although burdened with a lease during the period of the War. In the above circum stances, I am unable to see how a case of compensation arises ; no loss or injury can be said to have been caused to the land and no part of the corpus itself, i.e., the soil in this case, can be said to have been reconverted into money so as to make the salami com pensation or a capital receipt. No hard and fast rule can .be laid down, but each case is to be decided on its own facts. I am of opinion that the salami of Rs. 50,000 which has been received should in the present case be treated as income. As to the salami or the rent paid being agricultural income within the meaning of section 2 (1) and as such exempt from assessment under section 4 (3) (viii) of the Act, the matter seems to be set at rest by the admission of the parties stated in the Letter of Reference as. follows : "In this case, it is admitted by both parties that during the accounting period the land was not used for agricu ltural purpose". Under section 2 (1) of the Act it is the actual use of the land which is to be looked to as the decisive factor and not the purpose of the lease, vide Mustafa Ali Khan v. Commissioner of Income‑tax (A I R 1949 P C 13 = 1960 P T D 940). In re Maharajadhiraj Sir Bejoy Chand Mahtab ((1940) 8 I T R Cal. 378). For the reasons given above I would answer the questions referred to us, viz., 1 (a) and (b) and 2 in the negative, with the result that both items are to be treated as assessable. The Commissioner of Income‑tax will get the costs of this reference. We assess the hearing fee at 10 g. ms. AMIR‑UD‑DIN, J.‑I agree. Reference answered in the negative.