Patna High Court
Commissioner Of Income-Tax, Bihar And ... vs Raja Sri Sri Kalyani Deo, Panchkote. on 14 December, 1944
Equivalent citations: [1945]13ITR17(PATNA), AIR 1945 PATNA 338
JUDGMENT
MANOHAR LALL, J. - This is a reference under section 66 (1) of the Indian Income-tax Act, 1922, by the Appellate Tribunal, Calcutta Bench, asking the opinion of this Court upon the following question : "Whether the proportionate amount of the revenue paid from the estate, to which appertain the coal lands from which the royalties arose, or a reasonable portion of it, ought to have been allowed as a deduction under Section 12 (2)."
The assessee, Raja of Panchkote, is the owner of a zemindary for which he is assessed to pay an annual jama or Government revenue of Rs. 54,527. In the previous year 1940-41, which is the subject of assessment for the year 1941-42, the assessee derived an income from royalties from the coal fields which he had leased out to some lessees. His claim for deduction of the jama was disallowed by the Income-tax authorities on the ground that Section 12 of the Act does not make it a permissible deduction. The Income-tax Officer took the view that at the time when the jama was fixed, long ago at the time of the Permanent Settlement, there was possibly no trace even of the development of these coal fields, and obviously this income from coal fields could not have been one of determining factors in assessing the jama for all times, and as the jama fixed by the Government was dependent on the income was not deductible under Section 12 (2) of the Act. He adds that "this item of expense not having been incurred solely for the purpose of making or earning such income was not deductible under Section 12 (2)." The Appellate Assistant Commissioner substantially came to the same conclusion.
The Appellate Tribunal took the contrary view which may be expressed in their own words : "Most of the income assessed arose out of the revenue paying Estate No. 19 of Manbhum Collectorate. The revenue payable is Rs. 54,527-0-0. The claim to deduct this was disallowed on the ground that Section 12 of the Act does not make it a permissible deduction so that no enquiry was held to apportion it amongst the lands out of which the income assessed arose. It is submitted that if the whole figure cannot be deducted an enquiry should be made as to what is the sum deductible. It is argued on the principle laid down in Probhat Chandra Barua v. Emperor, that the tax is not on the gross income, that the non-agricultural income of an estate is the income after deducting the revenue. We do not see why the apportionment was not made. We therefore, direct that the proportionate amount of the revenue paid may be deducted in computing the income from the non-agricultural sources."
At the instance of the Commissioner of Income-tax, Bihar and Orissa, the question stated above has been referred to us.
In my opinion it is impossible to take any other view than that taken by the Appellate Tribunal. The authoritative pronouncement by Lord Russell of Killowen, who directed the judgment of the Board, in the celebrated case of Probhat Chandra Barua, is conclusive and binding on us.
At page 240 his Lordship observed : "Their Lordships were unable to ascertain upon what footing the appellant had been assessed in respect of the income derived from his zemindary, i.e., whether on the gross income or after some allowance had been made in respect of the jama assessed and paid upon the lands. Their Lordships are of opinion that, in assessing the appellant to income-tax in respect of the income derived from the zemindary, his income, profits and gains from that source should be computed after making proper allowance in respect of the jama assessed and paid."
The assessee is sought to be assessed in respect of the non-agricultural income derived from the coal fields which are situated within his zamindari. The assessee is, therefore, entitled to claim a deduction for the jama which should be ascertained as paid by him for the lands in his zenmindari which produced him the royalties, otherwise the tax would not be upon "income, profits and gains" but on his gross receipts.
It was argued on behalf the Income-tax Department that it is impossible to ascertain what would be the jama payable for the lands under which the coal fields are situated which produced the royalty income, but it is not within the province of this Court to advice the parties at this stage as to what sort of evidence they should lead in order to determine the amount of revenue which should be deducted.
The learned standing counsel also drew attention to Section 9 (1) (v) of the Act where the assessee when he is sought to be taxed under the heading property is allowed a deduction for the sum paid on account of land revenue in respect of the property. He argued that no such reference is to be found in Section 10 or in Section 12. This argument is wholly inadmissible in view of the decision of their Lordships of the Judicial Committee.
I would, therefore, answer the question referred to us in these words : The assessee is entitled to claim a deduction in account of the jama paid which can be attributed to the coal lands from which the royalties included in the assessable income arose in the previous year.
The assessee is entitled to the costs of this Court, hearing fee Rs. 250/-
FAZL ALI, C.J. - I agree. Reference answered accordingly.