An allowance received by an assessee as a descendant of the original founder and owner of a state, in lieu of his relinquishing his proprietary rights to certain parganas, is not agricultural income and is therefore liable to tax.

Judgment

SIKRI, J.: This appeal pursuant to a certificate granted by the Allahabad High Court under S. 66A(2) of the Income Tax Act (hereinafter referred to as the Act) is directed against the judgment of the High Court in a reference under the Act, answering the question referred to it in the negative. The question referred by the Appellate Tribunal is:

"Whether on a true interpretation of clause (viii) of sub-section 3 of section 4 of the Indian Income-Tax Act the sum of Rs. 36396 received by the assessee as an allowance during the previous year of the assessment year 1949-50 is revenue income liable to tax under the Indian Income-Tax Act, 1922?"

2. The relevant facts stated in the Statement of, the case are as follows: "The assessee is a Hindu undivided family headed by one Sri Trivikram Narain Singh who is a descendant of one Sri Babu Ausan Singh who was the original founded and owner of what is known as Ausanganj State in the district of Benares The district of Banares was formerly a part of Oudh territory. By a Treaty between the East India Company and Nawab Asafuddaula in or about the year 1775, the province of Benares was ceded to the British Government. The British Government granted a Sanad of Raj to Raja Chet Singh who in turn gave the Jagir of Parganas Seyedpore and Bhittery in perpetuity to Babu Ausan Singh. It appears that in 1796 there were some disputes between Babu Ausan Singh and the Zamindars in the district and the matter was referred by the Collector of Benares to the Board of Revenue in Calcutta. The disputes between the Jagirdars and Zamindars ultimately ended in 1837 by a compromise between the British Government and the then Jagirdar Har Narain Singh whereby the British Government granted a pension of Rs. 36,322/8/- to Babu Har Narain Singh and his heirs in perpetuity. The quantum of this pension was calculated on the basis of 1/4th of the revenue of the Jagir. By this arrangement the revenue or land collections of Jagir became payable by the Zamindars direct to the Government and by the grant of the pension, Babu Har Narain Singh and his successors no longer remained the proprietors of the Parganas or the Jagir and became entitled to merely a pension. The letter by which, the amount of pension was determined at Rs. 36,322/8/. is dated 7th of July, 1837 and was from H. Ellliot Esqr., the Secretary Sadar Board of Revenue N.W.P. Allahabad, to J. Thompson Esqr., Offg. Secretary to Lt. Governor. N.W.P."

3. The pension was paid regularly from year to year by the Government to Babu Har Narain Singh and his heirs. During the previous year of the assessment year 1949-50, the assessee received a sum of Rs. 36,396 on account of the aforesaid pension. The Income Tax Officer, in spite of the objection of the assessee, held that it was a regular annual income of the assessee and did not fall within the category of agricultural income tax. He observed that "in fact this income arose from a statutory obligation of the Government to pay it, and although the Government recouped this from the person with whom the land was settled, land in the genealogical tree of Malikana appears in the second degree, its immediate and effective source is the Government s statutory obligation to pay it, and this obligation is not land within the meaning of Income-tax Act, vide Commer of Income-tax v. Kamakhya Narain Singh, (1948) 16 ITR 325:"

4. The assessee appealed to the Appellate Assistant Commissioner who held that "the alleged cash grant of varying and unspecified amount received by the appellant, in relation to land revenue of Seyedpur now, Tehsil of District Ghazipur, clearly fell within the definition of agricultural income under Section 2(1) of the Income-tax Act."

5. The Income tax Officer appealed to the Income Tax Appellate Tribunal. The Tribunal held that the sum of Rs. 36,396 was chargeable to tax under the Act as the Income was not agricultural income for "although the pension was determined with respect to the quantum of the