The main legal point established in the judgment is the distinction between rent and interest on arrears of rent, and the determination that interest on arrears of rent collected from agricultural tenants is not agricultural income for the purpose of income tax assessment.

JUDGMENT

Derbyshire, C.J. - In this assessment the assessee was assessed on a certain sum which was interest derived from securities, house properties and other sources. The assessee also had a considerable agricultural income amounting to Rs. 72,600 which, as it was agricultural income, was not included in the assessment. The income tax Officer, however, included in the assessment a sum of Rs. 2841 as interest on arrear of rents collected from agricultural tenants under the provisions of Section 67, Ben. Ten. Act, 1885, which is as follows:

An arrear of rent shall bear simple interest at the rate of six and a quarter per cent. per annum from the expiration of that quarter of the agricultural year in which the instalment falls due to the date of payment or of the institution of the suit whichever date is earlier.

2. The simple question is - is the sum of Rs. 2841 which is interest on rents in arrear collected from agricultural tenants, agricultural income, and so not assessable under the income tax Act? The learned Commissioner relied upon the case in Sheik Yusuf Vs. Jitendra Nath Roy, AIR 1934 Cal 489 and held that interest on rent derived from agricultural tenants is not rent as defined by the Bengal Tenancy Act. The passage in the report dealing with this is as follows:

The Courts below have agreed in passing a decree in favour of the plaintiff the effect of which is that interest on rent as claimed in the suit has been made recoverable as rent. In our judgment, interest on rent cannot be held to be rent as defined by the Bengal Tenancy Act, and the term 'rent' as defined in the said Act does not include interest: see in this connexion Koylash Chandra De v. Tarak Nath Mandal ('98) 25 Cal 571

3. This latter case was decided in 1897 and the relevant part of it is in the headnote, which reads as follows: "Interest on rent is not rent within the meaning of Section 3, Clause (5), Ben. Ten. Act." Those two decisions were under the Bengal Tenancy Act. We have to consider the matter from the point of view of the income tax Act. Agricultural income as defined in Section 2 (1) (a) is as follows: "Any rent or revenue derived from land which is used for agricultural purposes ..." Then follow other words which are not relevant. The question is whether this interest on arrears of rent is rent or revenue within the meaning of Section 2 (1) (a), income tax Act. The Oxford Dictionary gives a definition of rent as follows:

The return or payment made by a tenant to the owner or landlord, at certain specified or customary times, for the use of lands or houses.

4. Revenue is defined by the same dictionary as "the return, yield or profit of any lands, property or other important source of income." "Revenue" would include, in India, any non-periodic payment to the landlord in respect of the use of his lands such as selami. Rent is always associated with land; it is a payment for the use of land. Interest, on the other hand, is associated with money; it is a payment for the use of money. In this case the rent was payable to the landlord by the tenant by virtue of a contract of tenancy of land. The cause of action in respect of rent arises out of contract. On the other hand, the interest which is payable in respect of arrears arises out of a statutory provision of law which imposes a penalty upon the tenant for non-payment of his rent. Although both rent and interest on arrears of rent are payable by the tenant to the landlord, they are payable for different reasons. Rent is payable for the use of the land under a contract. Interest is payable for the use of money withheld by the tenant, and it is payable not by reason of a contract but by reason of a statutory provision. In my opinion, the interest cannot be said to be rent nor can it be said to be a return, yield, or profit of the lands such as would make it revenue within the meaning of Section 2 (1) (a), income tax Act. For these reasons I am of the opinion that interest on arrears of rent payable u/s