The main legal point established in the judgment is that for income to qualify as agricultural income under the Indian Income-tax Act, 1922, it must be derived from land used for agricultural purposes and meet the specific criteria outlined in section 4(3)(viii) of the Act.

Lord Simonds.-The consolidated appeals result from the consolidation of four appeals from the Chief Court of Oudh, all of which relate to assessments of income-tax under the Indian Income-tax Act, 1922.

Two appeals relate to the income of Raja Mustafa Ali Khan of Utraula who will be referred to as “the assessee,” for the year of assessment 1939-40 and two appeals to his income for the year of assessments 1940-41. In each case there is one appeal by the assessee and one by the Commissioner of Income-tax, United Provinces, who will be referred to as “The Commissioner”. The same questions are raised in regard to each year and it will be necessary to state and consider the facts in regard to one year only.

By an assessment order dated the 18th September, 1939, the Income-tax Officer, Gonda, made an assessment for the year 1939-40 on the assessee which included as income from “other sources” (as defined in section 12 of the Act) three separate items as follows:

1. Forest Rs.25,144.

2. Malikana Rs.6,967.

3. Annuity and interest Rs.1,07,000.

These items will be explained later, but it is convenient here to state that, the assessee having appealed against this assessment, the first item was reduced to Rs.21,040 by the Assistant Commissioner of Income-tax and was at this figure upheld by the Income-tax Appellate Tribunal and the Chief Court of Oudh, that the second item has throughout been upheld at the figure of Rs.6,967 less 10 per cent. for expenses, i.e. Rs.6,271 and that the third item was in the first place reduced by the Assistant Commissioner to Rs.61,797, that from his decision the assessee appealed, but the Commissioner did not, that the Appellate Tribunal allowed the assessee’s appeal and that its decision was affirmed by the Chief Court. The appeals therefore to their Lordships’ Board are by the assessee against assessments in respect of the first item at Rs.21,040 and the second item at Rs.6,271 and by the Commissioner against an order quashing an assessment in respect of third item in the figure at Rs.61,797.

In the case of each item the question is whether the moneys received by the assessee were exempted from income-tax as being “agricultural income” under section 4(3)(viii) of the Act. With regard to the first item the assessee sought also to raise the question whether the moneys received under that head were not income at all but capital, but it did not appear to their Lordships that this point was open to him upon the present appeal.

The relevant provisions of the Act are as follows:-

“Section 2-In this Act, unless, there is anything repugnant in the subject or context,-

(1)”Agricultural income“means-

(a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in British India or subject to a local rate assessed and collected by officers of the Crown as such;

(b) any income derived from such land by-

(i) agriculture, or

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii).

Section 4-(3) any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them:

(i) to (vii).

* * *

(viii) Agricultural income.”

In regard to the first item the question referred to the Chief Court of Oudh under section 66(1) of the Act was as follows:

“Whether income from the sale of forest trees growing on land naturally and without the intervention of human agency, even if the land is assessed to land revenue, is agricultural income within the meaning of section 3(1)(a) of the Income Tax Act and as such exempt from income-tax under section 4(3)(vii