Judgment

HIDAYATULLAH, J. : This appeal which has been filed with a certificate under S. 66-A (2) granted by the High Court of Assam against its judgment and order dated March 29, 1955, concerns the assessment of the appellants, a Hindu undivided family, for the assessment years, 1945-1946 and 1946-47.

2. The appellants owned a tea garden called the Sewpur Tea Estate in Assam. They had on the Estate, factories, labour quarters, staff quarters, etc. On February 27, 1942, the Military authorities requisitioned all the factory buildings, etc., under R. 79 of the Defence of India Rules. Possession was taken sometime between March 1 and March 8, 1942. The tea garden was, however, left in the possession of the appellants. The possession of the military continued till the year 1945, and though the appellants looked after their tea garden, the manufacture of tea was completely stopped. Under the Defence of India Rules, the Military authorities paid compensation. For the year 1944, corresponding to the assessment year, 1945-1946, they paid a total sum of Rs. 2,22,080/- as compensation including a sum of Rs. 10,000/- for repairs to quarters for labourers and Rs. 144/-which represented the assessor s fee. For the year 1945, corresponding to the assessment year, 1946-1947, the Military authorities paid a sum of Rs. 2,46,794/- which included a sum of Rs. 15,231/ for other repairs. The sums paid for repairs appear to have been admitted as paid on capital account, and rightly so. The question was whether the two sums paid in the two years minus these admitted sums, or any portion thereof, were received on revenue or capital account.

3. The assessments for the two years were made by different Income-tax Officers. For the assessment year, 1945-1946, the Income-tax Officer deducted from Rs. 2,22,080/-, a sum of Rs. 1,05,000/- on account of admissible expenses. He then applied to the balance, Rs. 1,17,080/-, R. 24 of the Indian Income-tax Rules, 1922, and brought to tax 40 per cent. of that sum amounting to Rs. 46,832/-. The assessment was made under S. 23(4). For the assessment year, 1946-47, the assessment was made under S. 23(3) of the Income-tax Act. The Income-tax Officer excluded the sum paid on account of repairs and treated the whole of the amount as income taxable under the provisions of the Income-tax Act, after deduction of admissible expenditure. The appeals filed by the appellants to the Appellate Assistant Commissioner against both the assessments were unsuccessful. On further appeal, the Income-tax Appellate Tribunal (Calcutta Bench) was divided in its opinion. The Judicial Member held that the receipts represented revenue but on account of "use and occupation" of the premises requisitioned. He, therefore, computed the net compensation attributable to such use and occupation at 20 per cent. of the total receipts in both the years. He, however, observed that if the receipts included income from the tea estate he would have been inclined to apply R. 24 in the same way as the first Income-tax Officer. The Accountant Member was of the opinion that the appellants were liable to pay tax on 40 per cent, of their receipts in both the years after deduction of the sums paid for repairs of buildings and the admissible expenditure. He accepted the estimate of expenditure for the account year 1944, at Rs. 1,05,000/-, and directed that the admissible expenditure for the succeeding year be determined and deducted before the application of R. 24.

4. It appears that through some in-advertence these two orders, which were not unanimous, were sent to the appellants and the Department. The Commissioner of Income-tax filed an application under S. 66(1) for a reference, while the appellants filed an application under S. 35 for rectification of the orders, since many other matters in appeal were not considered at all. When these two applications came before the Tribunal, it was realised that the matter had to go to a third Member for settling the difference