The income from a mortgaged property in possession of the mortgagee is the income of the mortgagee and not that of the mortgagor.

Sarjoo Prasad, J.

1. This is a reference made by the Bihar Board of Agricultural Income-tax under Sec.25 (2), Bihar Agricultural Income-tax Act (VII [7] of 1938). There are the following two questions of law which have been referred to us :

"Whether the realisation of rent and cess from the patnidars of the mortgaged property made by the mortgagee under a power-of-attorney from the mortgagor is the income of the mortgagor or mortgagee within the meaning of Sections 6 (c) and 6 (k), Agricultural Income-tax Act, and whether the assessee is entitled to get deduction under those sections in respect of the same income ? Whether under the circumstances of the case the assessee is entitled to get appropriate deductions under Sec. 6 (c) for collection charges and also under Sec. 6 (k) for payment of interest made on the mortgage?" The answer to the two questions formulated above will affect the assessment in respect of various years, namely, 1943-44, 1944-45 and 1945-46."

2. The relevant facts are that a portion of the assessees property has been given in usufructuary mortgage to one Babu Raghubar Narayan Singh of Monghyr under a registered mortgage bond dated 10-8-1935 for a sum of rupees 4 lakhs. Under the terms of the bond the mortgagee was entitled to remain in possession of the mortgaged property and to utilise the usufruct of the same, and until the payment of the mortgage debt the mortgagor or his successors were not entitled to dispossess him of the mortgaged property. The mortgagees were entitled to realise rents from the patnidars and had also the right to enforce payment thereof in case of default by institution of rent suits. Contemporaneous with the mortgage, the executant of the bond also executed a mukhtarnama in favour of the mortgagee. It appears that by virtue of the mortgage in question the mortgagee had been appropriating a sum of Rs. 34,270 out of the usufruct by way of interest for the loan advanced and also paying Government revenue and cesses amounting to RS. 1,11,797. The assessee claims that these two amounts were really a part of his agricultural income, and, therefore, he is entitled to deduction on account of those payments. The assessee contends that those appropriations are really in the discharge of his obligations in favour of Government, on the one hand, and the creditor, on the other; and, therefore, they should be included within his income and the deductions allowed as claimed by him. The Revenue authorities did not agree with this contention of the assessee. They held that, in accordance with the terms of the mortgage deed, the mortgagee was in possession of the patni mahal, and the assessee had no right to collect rents from the patnidars, and, as such, the income from the patni mahal was not the income of the assessee, and, consequently, he was not entitled to any deductions under Sec. 6 (c) or under Sec. 6 (k) of the Act.

3. In my opinion, the view of the Revenue authorities on the point is absolutely correct. The term "agricultural income" as defined in Sec.2 of the Act means any rent or income derived from land which is used for agricultural purposes, etc. On the plain terms of the mortgage bond it is perfectly clear that since sewan, 1342 Fs., that is, long before the periods of assessment the mortgagee has been in possession of the mortgaged property, and the assessee is neither in possession, nor is he entitled to collect any rent, nor has he derived any agricultural income from the said property during the years of assessment. Therefore, in no sense can it be said that he had any agricultural income in respect of the mortgaged property. A mortgage is a transfer of interest in an immovable property, and where the mortgagee comes into possession of the property and is entitled to appropriate the usufruct thereof, he gets the income of the land in question. He gets the income of the land in question subject to the payment, as the terms may be, of the Government demands in respect of