Case: Shri Chatrasinghji Kesari Singhji Thakore Vs. Commissioner Of Income-Tax, Bombay

the terms of the lease claim reimbursement, must therefore be regarded as income within the meaning of the Indian Income-tax Act, and unless specially exempted, liable to tax. The appellant did not purport to collect local fund cess on behalf of the State Government: nor did the Syndicate pay the amount to him as an agent of the Government. The Syndicate merely sought to discharge what it believed was its contractual obligation under the indenture of lease, and in doing so, it made payments which exceeded the local fund cess payable by the appellant. 8. We are unable to hold that the Syndicate was an inferior holder under the appellant. The appellant was the holder of the land and he had granted a lease in respect of the land to the Syndicate, and our attention has not been invited to any provision of the Bombay Land Revenue Code, 1879, which imposes liability to pay local fund cess upon the lessee who holds land under a lease from the landholder. Liability to pay land revenue and the local fund cess is imposed by the Bombay Land Revenue Code upon the appellant. Under the terms of Part VII Cl. 1 of the indenture of lease, the Syndicate had agreed to pay to the appellant the amount of land revenue and local fund cess which the latter may have to pay to the Government. But by collecting the amount from the Syndicate under the terms of his contract, the appellant was not constituted an agent of the Government for recovering either the land revenue or local fund cess. 9. There is nothing in the Income-tax Act which prevents the Revenue authorities from determining the quantum of the amount which is payable by the appellant as local fund cess, when that question properly arises before them in the course of proceedings for assessment. The Income-tax Officer is within the limits assigned to him under the Act a tribunal of exclusive jurisdiction for the purpose of assessment of income-tax. He has under the Act to decide whether a particular receipt is income, and it is not predicated that he must make some person or body other than the assessee who may be concerned with that receipt as a party to the proceeding before he decides that question. As between the State and the assessee it is his function alone to determine whether receipt is income and is taxable. The determination by the Income-tax Officer may be questioned in proceedings before superior tribunals which are permitted by the Act, but the Income-tax Officer cannot be prevented from determining a question which properly arises before him for the purpose of assessment of tax, merely because his determination may not bind some other body or person qua the assessee. 10. It is maintained by counsel for the appellant that in the "Manual of Revenue Accounts" issued under the authority of the Government of Bombay it is recorded that the local fund in respect of land held under a mining lease is a fraction of the aggregate amount of rent and royalties under the lease. This plea is based upon a complete misconception of what is stated in the Manual of Revenue Accounts, 1951. Under the head "Miscellaneous Land Revenue" at p. 41 certain directions are given about the entries to be made in the Tharavband in respect of miscellaneous fluctuating revenue." The Manual after setting out heads of fixed revenue proceeds to set out the following heads of fluctuating revenue: (i) Carrying Local Fund, and (ii) Free of Local Fund. Under the head fluctuating revenue "Carrying Local Fund" are non-agriculture rent or revenue from agriculturally assessed or unassessed lands for back years, for broken periods, or short periods less than five years and fees for brick kilns and lime kilns erected on Government waste lands; (2) Lump commutation-payments not being commutations in perpetuity of land revenue for building or any other non-agricultural purpose, including assessment for unauthorised occupation, and fine when levied for non-agricultural uses with permission, but not including fines levied as penalties, and "(2-A) Rent and royalties under mining leases (usually collected at T)." But these are mere instructions to the village officers relating to the heads of revenue which are "to pass through the Tharavband". By the instructions it is not sought to be conveyed that local fund cess in respect of non-agricultural incomes subject to local fund such as rent and royalties is to be levied at a rate different from the rate prescribed by the statute. The Bombay Local Boards Act 1923 expressly provides that local fund cess is to be levied on land revenue whether the land is used for purposes agricultural or non-agriculture at the prescribed rate and by executive instruction the Act cannot be modified and has not been modified. 11. It was said that the Syndicate may seek to recover from the appellant the excess amounts paid by it towards local fund cess. We were told at the Bar that after the proceeding for assessment in these appeals reached the High Court, the Syndicate has filed a suit in the Civil Court against the appellant to recover the amounts paid by it. We are not in this case concerned with the merits of that claim. The appellant has received certain amount under a contract with the Syndicate, and if that amount was income, the fact that the person who paid it may claim refund will not deprive it of its character of income in the year in which it was received. 12. The contention that this income was of a "casual and non-recurring nature" was abandoned before the Tribunal. It cannot be said that the receipt was produced by chance or was accidental, fortuitous or from unforeseen sources of income. Assuming that the amounts sought to be included as income were paid as a result of some mistake on the part of the Syndicate, they have not the characteristic of casualness, nor is it suggested that they are non-recurring.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]9. There is nothing in the Income-tax Act which prevents the Revenue authorities from determining the quantum of the amount which is payable by the appellant as local fund cess, when that question properly arises before them in the course of proceedings for assessment. The Income-tax Officer is within the limits assigned to him under the Act a tribunal of exclusive jurisdiction for the purpose of assessment of income-tax. He has under the Act to decide whether a particular receipt is income, and it is not predicated that he must make some person or body other than the assessee who may be concerned with that receipt as a party to the proceeding before he decides that question. As between the State and the assessee it is his function alone to determine whether receipt is income and is taxable. The determination by the Income-tax Officer may be questioned in proceedings before superior tribunals which are permitted by the Act, but the Income-tax Officer cannot be prevented from determining a question which properly arises before him for the purpose of assessment of tax, merely because his determination may not bind some other body or person qua the assessee10. It is maintained by counsel for the appellant that in the "Manual of Revenue Accounts" issued under the authority of the Government of Bombay it is recorded that the local fund in respect of land held under a mining lease is a fraction of the aggregate amount of rent and royalties under the lease. This plea is based upon a complete misconception of what is stated in the Manual of Revenue Accounts, 1951. Under the head "Miscellaneous Land Revenue" at p. 41 certain directions are given about the entries to be made in the Tharavband in respect of miscellaneous fluctuating revenue." The Manual after setting out heads of fixed revenue proceeds to set out the following heads of fluctuating revenue:(i) Carrying Local Fund, and(ii) Free of Local FundUnder the head fluctuating revenue "Carrying Local Fund" are non-agriculture rent or revenue from agriculturally assessed or unassessed lands for back years, for broken periods, or short periods less than five years and fees for brick kilns and lime kilns erected on Government waste lands; (2) Lump commutation-payments not being commutations in perpetuity of land revenue for building or any other non-agricultural purpose, including assessment for unauthorised occupation, and fine when levied for non-agricultural uses with permission, but not including fines levied as penalties, and "(2-A) Rent and royalties under mining leases (usually collected at T)." But these are mere instructions to the village officers relating to the heads of revenue which are "to pass through the Tharavband". By the instructions it is not sought to be conveyed that local fund cess in respect of non-agricultural incomes subject to local fund such as rent and royalties is to be levied at a rate different from the rate prescribed by the statute. The Bombay Local Boards Act 1923 expressly provides that local fund cess is to be levied on land revenue whether the land is used for purposes agricultural or non-agriculture at the prescribed rate and by executive instruction the Act cannot be modified and has not been modified11. It was said that the Syndicate may seek to recover from the appellant the excess amounts paid by it towards local fund cess. We were told at the Bar that after the proceeding for assessment in these appeals reached the High Court, the Syndicate has filed a suit in the Civil Court against the appellant to recover the amounts paid by it. We are not in this case concerned with the merits of that claim. The appellant has received certain amount under a contract with the Syndicate, and if that amount was income, the fact that the person who paid it may claim refund will not deprive it of its character of income in the year in which it was received12. The contention that this income was of a "casual and non-recurring nature" was abandoned before the Tribunal. It cannot be said that the receipt was produced by chance or was accidental, fortuitous or from unforeseen sources of income. Assuming that the amounts sought to be included as income were paid as a result of some mistake on the part of the Syndicate, they have not the characteristic of casualness, nor is it suggested that they are non-recurring.