The main legal point established in the judgment is that income derived from trees which have grown wild cannot be classified as agricultural income and is taxable under the Indian Income Tax Act.

1. The assessees are the sons of the Maharajah of Pithapuram, the proprietor of the Zemindari of Pithapur which was permanently settled under the Madras Permanent Settlement Regulation (Madras Regulation XXV of 1802). They are the joint proprietors of an estate settled upon them by their father, The estate which formed part of the Zamindari of Pithapur includes certain forests from which the assessees derive income by the sale of wood, bark, leaves, other usufruct of trees, minor forest produce and license fees. They supplement this income by the sale of trees in non-forest areas of the estate held by them. It is admitted that the trees in the forest and non-forest areas have grown wild and that agricul.

2. Rural operations are not carried on in any of the areas.- For the year of account, 1941-42, the income from these sourcesamounted to Rs. 7,612 and the assessees were taxed on this sum for the year 1942-43. They maintained that they were exempt from taxation for two reasons. In the first place they said that the income was derived from the produce of a permanently settled estate which was free from all taxation, other than that imposed by way of peishkush, by reason of the provisions of the Madras Regulation. In the second place they contended that the income was agricultural income within the meaning of Section 2(1) of the Indian Income Tax Act, 1922 and as such is exempt from Income Tax by reason of Section 4(3) (viii). The Income Tax Officer rejected both these pleas. His decision was upheld by the Appellate Assistant Commissioner and by the Income tax Appellate Tribunal. At the request of the assessees, the Tribunal has, under Section 66(1) of the Income Tax Act, referred for the opinion of this Court two questions. The tribunal has worded them as follows:

(1) Whether the imposition of Income Tax in respect of income derived from a permanently settled estate would be a breach of Regulation XXV of 1802 relating to Permanent Settlement.

(2) Whether the income of Rs. 7,612 derived from the sale of wood etc. (as detailed herein above) is exempt under Section 4(3)(viii) read with Section 2(1) of the Indian Income Tax Act, 1922.

3. The words " as detailed herein above " mean of course as detailed in the order of reference.

4. In Chief Commissioner of Income Tax v. gamindar of Singampatti I.L.R. (1922) Mad. 518 a Special Bench of three Judges of this Court held that income from a permanently settled estate was exempt from all taxation beyond the peishkush payable to Government. The precise question in that case was whether the income from forests and fisheries was agricultural income and therefore not chargeable to Income Tax. The Court did not decide whether such income came within the definition of agricultural income, although it would appear that the learned Judges were inclined to the view that it was. They based their decision on the broad ground that the Madras Regulation and the sanad issued to the Zamindar precluded further taxation by the Government. The sanad followed the provisions of the Regulation. In the present case, the sanad has not been produced, but it may be taken that it was also in accordance with the Regulation.

5. If the decision in Chief Commissioner of Income Tax v. Zamindar of Singampatti I.L.R. (1922)Mad. 518 stood alone we should be bound to answer the first question referred in favour of the assessee; but it does not stand alone. There is a judgment of the Privy Council of later date which has direct bearing. It was delivered in Prabhatchandra Barua v. King-Emperor (1930) 59 M.L.J. 814 : L.R. 57 IndAp 228. I.L.R. 58 Cal. 430 where the same question arose with reference to the Bengal Permanent Settlement Regulation (Bengal Regulation I of 1793). Their Lordships pointed out that while that Regulation contains assurances against any claim to an increase of the jama, based on an increase of the zamindari income, no promise is given in it that a zamindar shall in respect of the income which he derive