Appeal No 405 of 1957
Appeal from the judgment and order dated May 15 1956 of the Calcutta High Court in ITR No 20 of 1953
section Mitra B Das and section N Mukherjee for appellants Nos 2 to 41
A N Kripal and D Gupta for the respondent
November 23
The Judgment of the Court was delivered by HIDAYATULLAH J
The point involved in this appeal is a very short one but it requires a long narration of facts to reach it
The appeal is against the judgment and order of the High Court of Calcutta dated May 15 1956 arising out of an Income tax Reference
By the Calcutta Municipal Act VI of 1863 there was established a Corporation under the name of The Justices of the Peace for the Town of Calcutta
By a notification issued on November 2 1864 one square mile of land forming part of the Panchannagram Estate was acquired by the Government of Bengal at the instance of the Justices
Section CXII of the Municipal Act provided that the Justices might agree with the owners of any land for the absolute purchase thereof  for any other purpose whatever connected with the conservancy of the Town
Under section CXIII it was provided that if there was any hindrance to acquisition by private treaty the Government of Bengal upon the representation of the Justices would compulsorily acquire the land and vest 600 such land in the Justices on their paying compensation awarded to the proprietor
The action which was taken by the notification was under section CXIII of the Municipal Act and the acquisition was under Act VI of 1857 an Act for the acquisition of land for public purposes
The Panchannagram Estate was permanently settled under Regulation 1 of 1793
After the acquisition the proprietor of Panchannagram Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs 386 7 1
This represented the proportionate land revenue on the land acquired
In August 1865 the Justices were required to pay Rs 54685 2 10 as compensation payable to the proprietor and to other persons holding interest in the land
Another piece of land which is described as an open level sewer was also acquired about the same time and separate compensation was paid for it
With the amount of conveyance charges the total compensation thus paid by the Justices was Rs 57965 8 10
On October 271865 the Government called upon the Justices to pay a further sum of Rs 7728 13 8
This order has not been produced in the case but from other correspondence it is easy to see that the amount represented an amount capitalized at 20 years  purchase of land revenue attributed to the area acquired which as has been stated above came to Rs 386 7 1
This payment was made on or about January 12 1866
Similarly another amount was paid in July of the same year for redemption of the land revenue in respect of the strip of land for the open sewer
On December 5 1870 a conveyance was executed by the Secretary of State in favour of the Justices of the Peace
It was there stated inter alia Whereas the Honourable the Lieutenant Governor of Bengal hath thought fit that the said land so acquired as aforesaid would be vested in the said Justices of the Peace for the Town of Calcutta a Corporation created by and authorised to hold land under the said Act No VI of 1863 of the Council of the Lieutenant Governor of Bengal to the end and intent 601 that the said land may be held by the said Justices for a public purpose namely for the conservancy of the Town  and subject in every way to the same  Act but free and discharged from all payment of land revenue land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government in respect thereof NOW THIS IN DENTURE WITNESSETH to hold the saidpieces of land hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose namely for the conservancy of the town upon the trusts and subject to the powers provisions terms and conditions contained in the said Act No VI of 1863 of the Council of the Lieutenant Governor of Bengal and to the rules heretofore passed or hereafter to be passed by the Government of Bengal under the the said last mentioned Act
On January 23 1880 a temporary lease of the land known as the Square Mile  was granted by the Justices of the Peace to the predecessors in title of the appellant assessee Srish Chandra Sen who has since the filing of the appeal died leaving behind 40 legal representatives who have been shown in the cause title of the appeal
The lease was renewed for further periods and the rent was also progressively increased
The conservancy arrangements for which the land was held were carried out but the lessee had the right to carry on cultivation with the aid of sewage
The assessee derived from this land various kinds of income some being purely agricultural and some non agricultural
For the assessment year 1942 43 the total agricultural income was computed at Rs 99987 9 6 and non agricultural income at Rs 12503 8 0
Agricultural income tax was charged by the State of Bengal under the Agricultural Income 602 tax Act on the agricultural income less expenses
For the assessment years 1943 44 1944 45 1945 46 and 1946 47 the assessments were made along similar lines
In 1947 the Income tax Officer reassessed the income for the assessment year 1942 43 after reopening the assessment under section 34 of the Income tax Act on the ground that the so called agricultural income had escaped assessment to income tax under the Indian Income tax Act
Assessments for the other years 1943 44 1944 45 1945 46 and 1946 47 were also reopened and the income in those years wag also similarly reassessed
The assessee appealed to the Appellate Assistant Commissioner against all these orders of the Income tax Officer but his appeals failed
Against the orders of the Appellate Assistant Commissioner appeals were filed before the Income tax Appellate Tribunal Calcutta Bench
The Tribunal dealt with the assessment for 1942 43 separately and allowed the appeal as regards assessment for that year
It held that the reassessment was improper under section 34 of the Income tax Act because the Income tax Officer had not proceeded on any definite information but in the course of a roving enquiry
The Tribunal also held that the income was exempt from taxation to income tax under section 43viii of the Act inasmuch as this income was derived from land used for agricultural purposes which continued to be assessed to land revenue
In the appeals arising out of assessments for the subsequent years a common order was passed by the Tribunal remanding the appeals to the Appellate Assistant Commissioner for a rehearing
The Tribunal stated that the appellants had filed a number of documents to establish that land revenue was assessed on the land which the Department contended proved the contrary
The Tribunal felt that the matter should be reconsidered by the Appellate Assistant Commissioner and hence remanded the cases
The Appellate Assistant Commissioner in the rehearing held that the land in question continued subject to land revenue and that the lump sum payment was merely payment of revenue in advance
He accordingly allowed the appeals and ordered exclusion of the income 603 from the assessments for the four years in question
On appeal by the Department the Tribunal changed its opinion and came to the conclusion that the  payment of a lump sum was not a payment in advance of the land revenue due from year to year but was land revenue capitalised
It referred to the deed by which the proprietorship in the land was ves ted in the Corporation by the Secretary of State and stated that by the document and the capitalisation of land revenue the demand for land revenue was extinguished for ever
It accordingly allowed the appeals and restored the orders of assessment made by the Income tax Officer
The assessee next moved the Tribunal for a reference setting out a number of questions which he contended arose out of the Tribunal s order
The Tribunal referred the following question of law for the opinion of the High Court Whether on the facts and in the circumstances of this case the Tribunal s conclusion that the land was not assessed to land revenue within the meaning of section 21a of the Indian Income tax Act is justified The reference was heard by Chakravarti C J and Sarkar J as he then was
In an elaborate judgment the learned Chief Justice upheld the conclusions of the Tribunal and answered the question in the affirmative
Sarkar J in an equally elaborate order expressed his doubts about the correctness of the Chief Justice s reasons but declined to disagree with him
The question that arises in this case as we have stated in the opening of this judgment is a very short one
It is an admitted fact that by payment of  a lump sum the liability to pay land revenue was redeemed and no land revenue was de manded or was ever demandable from the Justices or their assigns in perpetuity
The contention of the assessee is that this redemption saved the Justices from the liability for payment but did not affect the assessability of the land to revenue under Regulation I of 1793
Unless it is contended
there was a cancellation of the assessment a is to be found in the 604 Land Tax and Tithe Redemption Acts in England the liability must be deemed to continue and land would still be assessed to land revenue for purposes of section 21a of the Indian Income tax Act
That section reads as follows 21 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 the taxable territories or subject to a local rate assessed and collected by Officers of the Government as such
It is not denied that both the conditions namely used for agricultural purposes and is either assessed to land revenue or subject to a local rate   have to co exist
It is admitted by the Department that there is no question of subjection to a local rate assessed and collected in this case
The income derived from the land was from its use for agricultural purposes and the first condition is thus satisfied
The dispute centres round the point whether the land can be said to be assessed to land revenue in spite of the lump sum payment in 1865
In the High Court the matter was examined from three different points of view
The first was the effect of acquisition of the land by Government upon the continued assessability of the land to land revenue
The learned Chief Justice held that by the acquisition the assessment ceased to subsist
The second was the effect of the redemption of land revenue by the Justices by a lump sum payment
The learned Chief Justice was of opinion that it had the effect of cancelling the assessment
The last was the effect of the grant free from land revenue about which the learned Chief Justice was of opinion that it freed the land from assessment to land revenue
Sarkar J agreed as to the first but expressed doubts about the second and third propositions
According to the learned Judge the acceptance of a lump sum payment in lieu of recurring annual payments was more a matter of agreement than a cancellation of assessment to land revenue
The matter has been argued before us from the 605 argument about the interpretation to be placed on the conveyance by the Secretary of State which according to him only freed the Justices from payment  of the assessed land revenue but did not cancel the assessment
No Act of Legislature bearing upon the power of Government to accept a Iump sum payment in lieu of the annual demands for land revenue has been brought to our notice
Counsel admitted that they were unable to find any such legislative provision
We have thus to proceed as did the High Court without having before us the authority of a legislative enactment
The only materials to which reference was made are an extract from the explanatory notes in the Revenue Roll of the Touzi which shows that an abatement of land revenue pro tanto was granted to the proprietor of Panchannagram Estate and a despatch from the Secretary of State for India Lord Stanley No 2 Revenue dated December 31 1858 recommending redemption of land revenue by an immediate payment of a sum of equivalent value together with a Resolution of Government Home Department No 3264 Rev dated October 17 1861 on permission to redeem the existing land revenue by the immediate payment of one sum equal in value to the revenue redeemed
By the resolution it was provided that such redemption would be limited to 10 per cent of the total revenue in the Collectorate and the price to be paid was to be fixed at 20 years  purchase of the existing assessment
It may be mentioned that in Despatch No 14 dated July 9 1862 the Secretary of State for India Sir Charles Wood did not agree with the earlier policy but did not cancel it
It may thus be assumed that what was done was under the authority of the Crown which was then paramount which paramountcy included the prerogative to free land from the demand of land revenue with or without conditions
We have therefore to examine three things the effect of acquisition on the continuance of the assessment to land revenue the effect of redemption by a down payment on the same 77 606 and the effect of the grant free from land revenue to the Justices
The acquistion was under Act VI of 1857
That Act provided in B XXVI as follows When any land taken under this Act forms part of an estate paying revenue to Government the award shall specify the net rent of the land including the Government Revenue and the computed value of such rent and it shall be at the discretion of the Revenue authorities either to pay over the whole of such value to the owner of the estate on the condition of his continuing to pay the jumma thereof without abatement or to determine what proportion of the net rent shall be allowed as a remission of revenue in which case a deduction shall be made from the said value proportionate to the value of such remission
 This provision only saved the Estate assessed to land revenue from liability to pay land revenue proportionately falling upon the land acquired compulsorily subject to a like proportionate reduction in the amount of compensation payable to the proprietor of the estate but the provision cannot be stretched to mean that the liability of the land actually acquired to land revenue in the hands of grantees from the Government also ceased
Be that as it may it is hardly necessary to view the present case from this angle at all because whether the land acquired continued to be subject to an assessment or must be deemed to be reassessed as a separate estate the result would be the same if Government demand still subsisted on it as in fact it did
There could have been no redemption of the liability by a down payment if no land revenue could have been demanded
The fact that the recurring liability was redeemed by a lump sum payment itself shows that in the view of Government as well as of the Justices the Square Mile  was still subject to the recurring demand and was thus still assessed to land revenue
It is therefore not profitable to investigate the effect of acquisition on the continued liability of the land to land revenue between the time there was acquisition and the vesting of the land in the Justices
For the above reason we need not examine at 607 length the case in Lord Colchester vs Kewnoy where the acquisition by the Crown was held not to make the area acquired immune from land tax because the burden of the tax would then have fallen upon the remaining land situated in the unit from which it was acquired and on which unit a quota of the land tax was chargeable
Such a position does not arise here because the Panchannagram Estate was given abatement and a lump sum was paid to free the land acquired from the liability to land revenue
Similarly the decision of this Court in The Collector of Bombay vs Nusserwanji Rattanji Mistri and Others 2 where on the acquisition of some Foras lands held under Foras Land Act Bombay Act VI of 1851 the Foras tenure was declared to have come to an end and on the same lands being resold by Government as freehold they were declared not to be subject to assessment to which they were previously subject is not very helpful
There do not appear to be any rules prior to 1875 which were framed under the Land Acquisition Act of 1870 Act X of 1870 and which are to be found in the Calcutta Gazette of July 7 1875 p 818
If there were they have not been brought to our notice
But a practice similar to the rules seems to have obtained under section XXVI of the Act of 1857
That Act also did not contain any provision for making rules as are to be found in the subsequent Acts for compulsory acquisition of land
In the absence of any statutory law or rules we must take the facts to be that after acquisition the Panchannagram Estate was given abatement of land revenue and the demand for land revenue was transferred to the land acquired and granted to the Justices
At that stage the liability to assessment remained and it was that liability which was redeemed by a down payment
We next consider the effect of redemption
Learned counsel for the appellant contends that redemption in this connection means that by a single payment the liability for periodical payments is saved but the assessment on the land remains uncancelled
He has cited Wharton s Law Lexicon to show the meaning of 1 2  608 the word redemption which is commutation or the substitution of one lump payment for a succession of annual ones eg See the Land Tax and the Tithe Redemption Acts and many other statutes
Redemption is the act of redeeming which in its ordinary meaning is equal to bringing off a charge or obligation by payment
To what extent this redemption freed the land or its holder from the obligation depends not so much upon what the obligation was before redemption as what remained of that obligation after it
Here the payment itself was meant to be an immediate payment of one sum equal in value to the revenue redeemed vide the Resolution of Government dated October 17 1861
By the down payment the entire land revenue to be recovered from that land was redeemed
The payment was equal to the capitalised value of the land revenue
When such a payment took place it cannot be said that the assessment for land revenue remained
The land was freed from that assessment as completely as if there was no assessment
Thenceforward the land would be classed as revenue free in fact and in law
In The Land Law of Bengal Tagore Law Lectures 1895 p 81 section C Mitra described these revenue free lands as follows There is another class of revenue free lands which comes within these rules laid down in the Registration and Tenancy Acts namely lands of which Government has in consideration of the payment of a capitalised sum granted proprietary title free in perpetuity from any demand of land revenue
 That this is what had happened here is quite apparent from the conveyance by the Secretary of State vesting the land in the Justices
It is significant that there is no mention of the payment of Rs 7728 13 8 nor of the assessability of the lands to land revenue
On the other hand the deed of conveyance merely reaffirmed the position which existed before by stating  to hold the said pieces of land hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged 609 from all Government land revenue whatever or any payment or charge in the nature thereof
 There can be no doubt that the land revenue was for ever extinguished and the land became free from land revenue assessment in perpetuity
It cannot thereafter be said that the land was still assessed to land revenue
Mr Mitra made a great effort to construe the operative part quoted above with the aid of the recital in the deed where it was stated  but free and discharged from all payment of land revenue land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government
He drew attention to the word payment  and contended that what was saved was payment of land revenue
He argued that in case of ambiguity it was permissible to construe the operative portion of a deed in the light of the recitals and cited Halsbury s Laws of England 3rd Edn Vol
XI p 421 para
680 Gwyn vs Neath Canal Co 1 and Orr vs Mitchell 2
If there was any ambiguity in the operative portion of the deed we may have taken the aid of the recitals
But there is no ambiguity in the deed
The history of redemption is a matter of record and it is plain that Government was accepting a down payment and freeing land from land revenue
This is precisely what was done and the result of the down payment is set out with great clarity in the deed itself and it is that there was no land revenue assessed on or demandable from that land
In fact no demand or payment or charge in the nature of land revenue could ever be made on it
In view of this it is in our judgment quite satisfactorily established that this land was not assessed to land revenue and the income from it did not fall within section 21a of the Income tax Act
The answer given by the High Court was thus correct
In the result the appeal fails and will be dismissed with costs
1868 L R Appeal dismissed 2  254


Summary:
By a notification dated November 2 1864 a piece of land forming part of the Panchannagram Estate which was permanently settled under Regulation 1 of 1793 was acquired by the Government of Bengal at the instance of the justices of the Peace for the Town of Calcutta which was a corporation established under the provisions of the Calcutta Municipal Act 1863 and the justices were required to pay the compensation payable to the proprietor of the Estate
After the acquisition the proprietor of the Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs 386 7 1 being the proportionate land revenue on the land acquired
On October 27 i865 the Government called upon the justices to pay a sum of Rs 7728 13 8 which represented the amount capitalised at 20 years  purchase of land revenue attributed to the area acquired
On December 5 i870 the Secretary of State executed in favour of the justices of the Peace a conveyance of the land acquired which stated inter alia that it was ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose namely for the conservancy of the town On January 23 1880 a lease of the land was granted by the Justices to the predecessors in title of the appellant under which the lessee had the right to carry on cultivation with the aid of sewage
Before the income tax authorities the appellant claimed that the agricultural income derived by him from the land was not liable to income tax but the claim was rejected on the ground that on the payment of a lump sum in 1865 the liability to pay land revenue was redeemed and no land revenue was demanded thereafter consequently the income derived from the land was not agricultural income within the meaning of section 21 of the Indian Income tax Act 1922 and was not therefore exempt from tax
The appellant s contention was that the redemption only saved the justices from liability for payment but did not affect the assessability of the land to revenue under Regulation 1 of 1793
599 Held that by the down payment of a lump sum in 1865 the entire land revenue to be recovered from the land was redeemed and the land became free from land revenue assessment in perpetuity as completely as if there was no assessment
Thereafter the land could not be said to be assessed to land revenue within the meaning of section 21 of the Indian Income tax Act 1922 and consequently the income derived therefrom could not be considered to be agricultural income under that section
The Collector of Bombay vs Nusserwanji Rattanji Mistri and others   distinguished