Case: State Of Madhya Pradesh And Ors Vs. Sirajuddin Khan

2. The facts are as follows: The respondent was the zamindar of Bhadra Estate in Balaghat District of Madhya Pradesh. His estate was known as Bahela Zamindari consisting of 78 villages. The Act came into force on January 26, 1951. Under the Act the proprietary rights of the zamindari vested in the State and he became entitled to compensation in respect of the said rights in the said villages under S. 8 of the Act. The compensation was to be determined in accordance with the rules contained in Schedule 1 to the Act. Under R. 8 of Schedule 1 the zamindar would be entitled to compensation at 10 times the net income. The net income would be calculated by deducting from the gross income, inter alia, the average of the income-tax paid in respect of the income from big forest during 30 agricultural years preceding March 31, 1951. On November 30, 1951, the Compensation Officer determined the compensation payable to the respondent at Rs. 2,21,330-12-6. In arriving at that figure he deducted not only the income-tax payable by the respondent but also the super-tax and sur-charge payable by him. The average of the income-tax paid by him during the material 30 years was only Rs. 3,7602-9, but if the average of the super-tax and surcharge was included, the average came to Rs. 7,070-8-0. The result was was that the net yearly income of the estate was reduced by Rs. 3,310-5-3 and compensation was paid to him on the basis of the amount so reduced. The respondent moved the Settlement Commissioner under S. 15 of the Act for enhancement of the compensation, but the Commissioner confirmed the order of the Compensation Officer. Thereafter, the respondent filed an application in the High Court under Arts, 226 and 227 of the Constitution for quashing the order of the Compensation Officer. The High Court held, on a construction of the relevant provisions of the Act, that super-tax should not be takes into account while calculating the compensation payable to the respondent. The State of Madhya Pradesh has filed the present appeal against the order of the High Court.

Court's reasoning:
8. The qualification that income-tax paid should have been in respect of the income received from the big forest necessarily excludes super-tax, for under the Income-tax Act no super-tax is payable in respect of the income received from big forest, but only in respect of the total income. As we have pointed out earlier, it is not legally possible to disintegrate and allocate a portion of the super-tax to the income attributable to the big forest. It is not paid in, respect of the income from the big forest, but is paid only in respect of the total income. If the contention of the appellant prevails, though the income from big forest falls below the taxable income, it will be deducted if, in combination with the income from other sources, the income goes up to the taxable level. In that event super-tax not payable in respect of the income from big forest will have to be deducted. That apart, the rules made under the Act do not provide for any machinery for allocating the super-tax payable on the total income among the different sources. It, is said that the same difficulties are present even in the case of income-tax. Though income-tax is also a tax on the total income of an assessee, the Act, as we have indicated earlier, provides for computing the income under different heads and, therefofe, it is not inappropriate to describe a particular tax as attributable to an income from a particular head, but it would wholly be inappropriate to describe that a part of the super-tax is payable in respect of an income from a particular source.9. The argument of Mr. Rajagopal Sastri, learned counsel for the respondent, that the 30 years mentioned in the rule takes us back to a period when there was no super-tax appears to be not sound, for as we have stated earlier, super-tax was payable in one form or other from the year 1917. That apart, if the income-tax takes in super-tax, the non-existence of super-tax in a particular year does not make any difference in ascertaining the average, for the income-tax for that year will be the income-tax without the addition of super-tax. This circumstance is not, therefore, of much relevance and we exclude it from our consideration.10. The argument that if the Legislature intended not to exclude super-tax from the gross income, it would have expressly stated so in the rule is an attempt to put the shoe in the wrong foot. The proper approach, particularly in the case of an exproprietary statute is to ask the question why the Legislature did not expressly mention, super-tax, if it intended to do so. The use of one of the two well understood expressions is, on the other hand, an indication that the legislature provided for the deduction of the one used and not of the other omitted. The reason for the rule, if it is legitimate to speculate, appears to be that as it is concerned with the calculation of the net, income from the estate after making certain deductions, only those deductions which have a direct relation to that income are allowed. If the other construction prevails, speculation would take the place of certainty and super-tax not paid factually in respect of the income from big forest would have to be deducted. Such a construction defeats the purpose of thealso the rule empowers the prescribed authority to deduct from the gross income-tax paid in respect of the income received from big forest. The earlier decision is more in point to the present case than the later. Be that as it may, the English decisions on the construction of will are not of much help in construing the express provisions of R. 2(2)(c) of Schedule I to the Act; they shall be construed on their own terms. Having regard to the terms of the rule, we have come to the conclusion that income-tax does not take inax is now levied on income over certainpresent Rs. 25,000 /If As total income is Rs. 35,000/made up of Rs. 20,000/from big forest and Rs.15,000/from other sources, what is theattributable to the income from the big forest? The answer is, it is not possible to do so.