Case ID: 1010

Judgment:
Appeal No. 405 of 1957. Appeal from the judgment and order dated May 15	 1956	 of the Calcutta High Court in I.T.R. 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. 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. 57	965 8 10. 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 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. 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 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 4(3)(viii) 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 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 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 2(1)(a) of the Indian Income tax Act. That section reads as follows: "2(1) '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: e.g. 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. 7	728 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 2(1)(a) 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. 7	728 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 2(1) 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 2(1) 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.