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1930 Supreme(SC) 45
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD BLANESBURGH, LORD MERRIVALE, AND LORD RUSSELL OF KILLOWEN.
PROBHAT CHANDRA BARUA - Appellant
Versus
THE KING-EMPEROR - Respondents
On appeal from the High Court at Calcutta.
Decided On : May. 26. 1930.
Solicitors for appellant:W. W. Box & Co. Solicitor for respondent: Solicitor, India Office.
Important Points
Subject
Tax Law - Income Tax
Act Referred
Headnote
(B) Agricultural Income - Section 4, sub-section 3(viii) - Whether various rents, fees, and payments from an estate constitute agricultural income - Income from fisheries, ground rents for potteries or brick fields, boat tying fees, and stall fees are not agricultural income.
Facts of the case:
An assessee, being the holder of a permanently settled estate, was assessed to income-tax under the relevant Act. The assessee challenged the assessment on the grounds that the permanent settlement regulations guaranteed that the fixed assessment would not be increased and that no further tax would be imposed on the income of the estate. The assessee also claimed that certain items of income, including fisheries and various fees, were agricultural income and thus exempt.
Findings of Court:
The court found that the income from the estate is taxable under the head "other sources" of the Act. The regulations regarding permanent settlement only guaranteed that the specific public assessment would remain fixed and not be increased due to improvements in the estate; they did not provide an immunity from general taxation laws applicable to all inhabitants. Furthermore, the specific items of income claimed as agricultural were not found to meet the definition of agricultural income.
Issues: (i) Whether specific sources of income from an estate are agricultural and exempt from tax; (ii) Whether income from sources not considered during the original permanent settlement is assessable; (iii) Whether income from land in permanently settled estates is liable to income-tax despite the guarantees in the permanent settlement regulations.
Ratio Decidendi: The court reasoned that the "property" head in the tax statute is restricted to house property, making estate income fall under "other sources." Regarding the regulations, the court held that the promise of a fixed assessment was a guarantee against the government increasing its share of the produce based on estate improvements, not a surrender of the sovereign's right to levy general taxes on the income of all persons.
Result: Appeal dismissed.
Legal Category Hierarchy
-
taxation
-
income tax
- agricultural income
- zamindari income
-
income tax
-
land law
-
permanent settlement
- bengal regulations
-
permanent settlement
-
statutory interpretation
- residuary clauses
Judgement
Appeal (No. 90 of 1928) from two judgments or orders of the High Court (March 14, 1927, and May 11, 1927) upon a reference under s. 66, sub-s. 2, of the Indian Income-tax Act, 1922.
The three questions referred are set out in the judgment of the Judicial Committee. The ten items mentioned in question I. were (1.) Jalkar or rents received from fisheries ; (2.) Ground rent from land used for potteries; (3.) Ground rent from land used as brick fields ; (4.) Fees received from the tying up of boats against the assessees land; (5.) Fees received from lands used for storing purchases of crops (paiali); (6.) Fees received from cart stands ; (7.) Punyaha nazar or nazar paid by tenants of agricultural holdings at the beginning of the zamindari year; (8.) Nazar for petitions presented to the zamindar dealing with questions of succession, settlement, and partition; (9.) Ground rent for permanent shops at hats and bazars ; (10.) Stall fees paid by temporary (daily) sellers at hats and bazars.
On May 21, 1926, Sanderson C.J. and Rankin J. referred questions II. and III. to the Full Bench, as there were conflicting decisions of two Division Courts with regard to the point in question III. In Emperor v. Probhat Chandra Barua (( 1924) I. L. R. 51 C. 504.) it was held by Rankin J. (Page J. dissenting) that income derived from a permanently settled estate was liable to income-tax notwithstanding the permanent settlement regulations, the view of Rankin J. prevailing under clause 36 of the letters patent; while in King-Emperor v. Indu Bhusan Sarkar (( 1926) 1. L. R. 53 C. 524.) Cuming and Page JJ. held that where income from fisheries within an estate was included in assets upon which the jama had been assessed at the permanent settlement, that source of income was not liable to assessment to income-tax.
The learned judges of the Full Bench delivered judgment on March 14, 1927. The majority of the Court (Ghose, Buckland and Panton JJ.), in a judgment delivered by Ghose J., answered both questions II. and III. in the affirmative. The judgment of the minority (Mukerji and Suhrawardy JJ.) was delivered by Mukerji J.; they held that question III. should be answered in the negative, and that therefore question II. did not arise. The proceedings are reported at I. L. R. 54 C. 863.
The reference then went back to the Division Bench (Rankin C.J. and Majumdar J.) for decision upon question I. The learned judges delivered judgment on May 11, 1927, holding that none of the items of income set out were " agricultural income5? so as to be exempt under s. 4, sub-s. 3 (viii.).
1930. March 21, 25, 27, 28; April 1, 3, 4, 7, 9, 10. E. B. Raikes K.C., G. D. McNair and Graham Dixon for the appellant. The third question is fundamental and should be considered first. It is submitted that the imposition of income-tax upon income arising from a permanently settled estate is contrary to guarantees and assurances given at the permanent settlement and contained in the Bengal regulations. By Ben. Reg. I. of 1793, s. 3, the zamindars were notified that the jama on their lands was " fixed for ever," and s. 7 declared that no demand should ever be made by the Government for an augmentation of the assessment in consequence of the improvement of the estate ; by Ben. Reg. II. the " public demand " upon each estate was no longer to be liable to variation. [Reference was made also to Reg. VIII. of 1793, s. 49, and Reg. II. of 1819, ss. 1, 2.] The question, or the same question as to the corresponding Madras regulation, has recently been considered in the following cases, in addition to that now under appeal Commissioner of Income-tax v. Zamindar of Singampatti (( 1922) I. L. R. 45 M. 518.) ; Emperor v. Probhat Chandra Barua (( 1924)
I. L. R. 51 C. 504.) ; Maharajadiraj of Darbhanga v. Commissioner of Income-tax (( 1924) I. L. R. 3
P. 470.) ; Emperor v. Indu Bhusan Sarkar. (( 1926) I. L. R. 53 C. 524.) There was a substantial balance of judicial opinion in favour of
