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1946 Supreme(Nagpur) 68
HIGH COURT OF NAGPUR
BEOHAR SINGH RAGHUBIR SINGH – Appellant
Versus
COMMISSIONER OF INCOME TAX, U P , C P AND BERAR – Respondent
Decided on : 04-09-1946
The central legal point established in the judgment is the strict interpretation of the definition of 'agricultural income' under Section 4(3)(viii), Income Tax Act, and the reliance on legal principles and precedents to determine the taxability of various sources of income.
Headnote:
Income Tax - Agricultural Income - Section 4(3)(viii) - Section 2(1)(a) - Section 6 - Section 9 - Section 10 - Section 66(1), Income Tax Act - Meghraj v. Allah Rakhia, 1947 AIR(PC) 72 - Pratapmal Laxmichand Firm v. Commissioner of Income Tax U.P., C.P. & Berar Misc. Civil Case No. 34 of 1935 - Kamakshya Narain Singh v. Commissioner of Income Tax B. & O.
Fact of the Case:
The cases involved Income Tax references made under Section 66(1), Income Tax Act, as amended in 1939, concerning the exemption of income derived from the sale of forest produce as 'agricultural income' under Section 4(3)(viii), Income Tax Act.
Finding of the Court:
The court analyzed the definition of 'agricultural income' and concluded that income derived from forest produce was not exempt from taxation as it did not meet the criteria of being derived from land used for agricultural purposes or by agriculture. The court also addressed the exemption of interest received on arrears of agricultural rents, ruling it as agricultural income. Additionally, the court determined that income from the sale of forest produce was not of a capital nature and was taxable. The court also dismissed claims of 'bazar dues' and 'nazrana receipts' as agricultural income.
Issues: The main issue was whether income derived from the sale of forest produce qualified as 'agricultural income' under Section 4(3)(viii), Income Tax Act. Additionally, the court addressed the exemption of interest received on arrears of agricultural rents and the nature of receipts from 'bazar dues' and 'nazrana receipts'.
Ratio Decidendi: The court applied a strict interpretation of the definition of 'agricultural income' and emphasized the requirement for income to be derived from land used for agricultural purposes or by agriculture to qualify for exemption. The court also relied on precedents and legal provisions to determine the taxability of various sources of income.
Final Decision: The court held that income derived from the sale of forest produce was not 'agricultural income' and was taxable. However, interest received on arrears of agricultural rents was exempt from taxation. The court also ruled that income from the sale of forest produce was not of a capital nature and dismissed claims of 'bazar dues' and 'nazrana receipts' as agricultural income.
1. This judgment will govern miscellaneous civil case No. 63 of 1944 and miscellaneous civil cases Nos. 7, 8, 85, 91, 92 and 98 of 1945. The questions they raise are not common to all, except as regards one question, but as the others are interlinked between them it will be convenient to group the cases according to the questions referred and. deal with all in one judgment.
2. These cases are all Income Tax references made under Section 66(1), Income Tax Act, as amended in 1939. In view of the contentions made before us, we think it desirable to set out the limits of our authority at the outset. It is important to emphasise that we are not a Court of appeal and accordingly are not free to debate such questions as might seem to us to arise in the case, however important they may appear to be. We are only an advisory body which is not free to tender unsolicited advice. We can only advise on the questions referred and accordingly will have to confine our answers to the questions asked. We have certain other powers, and indeed it will be necessary to exercise them in one of the cases heard along with these (we shall deal separately with that), but these powers only enable us to send the matter back and compel a reference. Until that is done, we have no power to debate questions which have not been referred. This is clear from the Act, but the matter has been placed beyond controversy by their Lord, ships of the Privy Council in Commissioner of Income Tax B. & O. v. Kameshwar Singh of Darbhanga. Rajendra Narayan v. Commissioner of Income Tax B. & O. Trustees Corporation (India) Ltd. v. Commissioner of Income Tax Bombay and National Life Association of Australasia Ltd. v. Commissioner of Income Tax Bombay Presidency & Aden. It has also been so decided by this Court in Income Tax Appellate Tribunal Bombay v. Managing Trustee Shei Radha Madho Trust Saugor, 1946 AIR(Nag) 397.
3. The question which concerns all the cases has been referred in these terms in Misc. Civil case No. 63/44:
Whether, in the circumstances of this case, the income of Rs. 10,835 derived from the sale of forest pro-duce is ''agricultural income'' exempt from taxation under Section 4(3)(viii), Income Tax Act.
The point is the same in the other cases though in some of them the language is a little different, and, naturally the figure differs in each case.
4. The question is one of mixed fact and law. So far as the facts are concerned they will be found separately in each case. So far as the law goes it will be necessary to search for some general and clear cut principle, because opinions have differed, and in the absence of principle, opinion tends to be arbitrary.
5. The definition given in the Act is that ''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.
6. Clause (b) throws us back to Clause (a) because of words ''such land'' which refer to the land described there. It is land which is (1) used for agricultural purposes and (2) either assessed to land revenue in British India or subject to a local rate assessed and collected by officers of the Crown as such.
7. It is admitted that the land in all these cases is either assessed to land revenue or is subject to a local rate assessed and collected by officers of the Crown as such, and that, therefore to that extent, the income complies with the definition. But that is not enough, for, it must also either be used for agricultural purpose's or for agriculture. The question, therefore, is how far does agriculture covers forests? Opinions differ regarding this, and because of that the learned acting Advocate-General suggested that it will be pertinent to go back to first principles and analyze the root of the word.
8. The dictionaries tell us that agriculture comes
