Case: Srish Chandra Sen (Deceased) And Others Vs. The Commissioner Of Income-Tax, West Bengal

2. 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 Sec. 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 such land in the Justices on their paying compensation awarded to the proprietor. The action which was taken by the notification was under Sec. CXIII of the Municipal Act, and the acquisition was under Act, VI of 1857, an Act for the acquisition of land for public purposes.3. The Panchannagram Estate was permanently settled under Regulation I 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.4. In August, 1865, the Justices were required to pay Rs. 54,685-2-10 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.On October 27, 1865, the Government called upon the Justices to pay a further sum of Rs. 7,728-13-8. This order has not been produced in the case; but from other correspondence, it is easy to see that the amount represented an amount capitalised 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,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.5. 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, interthe 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 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 INDENTURE WITNESSETH............................. 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 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 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. 99,987-9-6, and non-agricultural income, at Rs. 12,503-8-0. Agricultural income-tax was charged by the State of Bengal under the Agricultural Income-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 Sec. 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 was 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 Sec. 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 Sec. 4(3)(viii) of the Act, inasmuch as this income was derived for land used for agricultural purposes which continued to be assessed to land revenue.8. 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 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 vested 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 forever. 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 Tribunals order. The Tribunal referred the following question of law for the opinion of the Highon the facts and in the circumstances of this case the Tribunals conclusion that the land was not assessed to land revenue within the meaning of S.2(1)(a) 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 Justices reasons, but declined to disagree with him.

Court's reasoning:
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 demanded 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, as is to be found in the 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 2(1)(a) of the Indian Income-tax Act.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.12. The matter has been argued before us from the same points of view; but Mr. Mitra has added an 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.13. No Act of Legislature bearing upon the power of Government to accept a lump 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 cancelis 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 Sec. 2(1)(a) of the Income-tax Act. The answer given by the High Court was thus correct.