JUDGEMENT

Appeal (No. 21 of 1942) from a judgment of the High Court (September 6, 1940) on a reference under s. 66 of the Indian Income-tax Act (XL of 1922) (as amended by Acts

XXI. and XXII. of 1930 and Act XVIII. of 1933), by which the High Court answered in the negative a question of law, submitted by the Commissioner of Income-tax of Bihar and Orissa in respect of an assessment to income-tax of the appellant assessee for the year 1937- 1938. The following facts are taken from the judgment of the Judicial Committee The two questions submitted to the Commissioner by the assessee to be referred to the High Court were " (1.) Whether "royalty on mines being capital revenue should not have been "excluded in computing the total income determined for "income-tax? (2.) What should be the principle on which "cost of management in collection of royalties is to be deter-" mined when there is a combined management covering both "the Zamindari collection of agricultural income and royalties "of mines?” The Commissioner of Income-tax was of the opinion that the second question raised no question of law and should not be answered by the High Court. In fact, no argument was addressed by the assessee to the High Court thereon, and the High Court concurred in the opinion of the Commissioner of Income-tax. No further reference to that question need therefore be made.

The assessee, Kumar Kamakshya Narain Singh Bahadur, was at all material times the proprietor of a revenue paying estate known as the Ramgarh Raj, bearing Tauzi No. 28, in the Collectorate of Hazaribagh, being impartible and governed by the rule of primogeniture. At the time of the assessment which was the subject-matter of this appeal, the estate was under the management of the Court of Wards, the assessee being a minor. On August 10, 1937, the assessee attained his majority and the estate was released from the management of the Court of Wards.

For the income-tax year 1937- 1938 the manager of the estate, on behalf of the assessee, made a return of the income of the assessee to the Income-tax Officer, District Hazaribagh, including a sum of Rs.5,32,368-2-10 being royalties realized from lessees of coal mines under seven leases, each of them for a term of nine hundred and ninety-nine years, in the form of and on similar conditions and covenants as those contained in three leases, that was to say (1.) A lease dated April 5, 1919, between Alexander McNeil Walter, the manager of the Ramgarh Estate under the Court of Wards Act (Act IX. Bengal Code 1879) of the one part and Bokaro and Ramgurh, Ld., of the other part; (2.) a lease dated March 25, 1925, between the said Alexander McNeil Walter and Bokaro and

Ramgurh Ld., of the other part; (3.) a lease dated April 12, 1927, between the said Alexander McNeil Walter of the one part and the Karanpura Development Co., Ld., of the other part. Under the terms of the leases the lessees covenanted to pay to the lessor royalties on all steam coal, rubble

Law. Rep. 70 Ind. App. 180 ( 1942- 1943) Raja Bahadur Kamakshya v. C ommissioner of Income-Tax 85

coal, dust, hard and soft coke gotten manufactured and dispatched, the lessees also covenanting that after certain dates, as provided by the said leases, minimum royalty should be paid on the terms and at the rates provided therein, in the event of the royalties reserved and payable under the said leases not amounting to the figure of the minimum royalty.

It was here only necessary to refer in detail to the material terms and covenants of one of the leases, namely, that dated April 3, 1919. The most material clause was as follows " This "indenture witnesseth that in pursuance of the said agreement "and in consideration of the salami or premium rupees thirty-" seven thousand and forty (being at the rate of rupees forty "per standard bighas on nine hundred and twenty-six bighas) "in respect of the premises at or before the execution of these "presents by the lessees paid to the lessor (the receipt wher