Raja Kali Prasad Singh vs Commissioner of Income Tax

Sarjoo Prasad, J.—In this Income Tax reference made by the Income Tax Appellate Tribunal the dispute relates to two items, viz., a sum of Rs. 4,000 which was paid to the assessee by way of salami by one Dwarka Prasad Agarwala for obtaining a lease and also another sum of Rs. 351 paid by another person, viz., one Amin Ahmad Khan, for obtaining settlement of fireclay land from the assessee.

The assessee is a zamindar and within the ambit of his zamindari there are tracts of various mineral and mica lands. During the year of accounting, i.e., 1943-44, the applicant leased out an area of 3071 acres of land to one Dwarka Prasad Agarwala for the purpose of enabling him to extract mica therefrom. The lease was for a term of 9 years on an annual rental of Rs. 153. It was in connection with this lease that a salami of Rs. 4,000 was paid by the said Dwarka Prasad Agarwala for obtaining the lease. The assessee contended that this Rs. 4,000 was a capital receipt in connection with the transfer of the prospective mineral rights in the land. The claim of the assessee was not entertained by the revenue authorities and the salami of Rs. 4,000 was taxed as a revenue receipt and not as capital receipt. In regard to the other sum it has been found that this sum was received by the assessee as salami or premium for settlement of fireclay land measuring about 51.6 acres for a period of 9 years.

The two leases, one in favour of Dwarka Prasad Agarwala, and the other in favour of Amin Ahmad Khan, are both annexures to the reference made by the Tribunal and the two points which have been formulated for decision by this Court are: "(1) Whether on the facts and in the circumstances of this case the Tribunal was right in holding that the sum of Rs. 4,000 received from Dwarka Prasad Agarwala was a revenue receipt and, therefore, taxable under the Income Tax Act?" and "(2) Whether on the facts and circumstances of this case the Tribunal was right in holding that the sum of Rs. 351 received by the applicant for settlement of fireclay land from one Amin Ahmad Khan was a revenue receipt and therefore taxable under the Income Tax Act ?" I These two points, in my opinion, have to be answered in favour of the assessee in view of a number of judicial decisions upon the point which conclude the matter, the latest of those being the decision of this Court in COMMISSIONER OF INCOME TAX, BIHAR AND ORISSA Vs. RAJA BAHADUR KAMAKSHYA NARAIN SINGH., . In the case in question the point was whether a sum of Rs. 5,25,000 received as salami by the assessee was taxable as income. In dealing with this point their Lordships relied upon a Special Bench decision of this Court reported in HUKAM CHAND DUNI CHAND Vs. COMMISSIONER OF INCOME TAX, LAHORE. where it was held that "salami could not be regarded as income as a matter of law. It may in certain cases be regarded as payment of rent in advance and in such cases it could rightly be regarded as income where, however, salami could not be regarded as a payment of rent in advance , it could be regarded as income and would , therefore , not be taxable. Prima facie, salami is not income and it is for the Income Tax authorities to show that there do exist facts which make the salami in-come". In answering the reference their Lordships pointed out that the question whether salami was or was not assessable as income was largely a question of fact which had to depend upon the investigation of the circumstances of the case ; but where the facts found indicate that it could not be regarded as income the inference would be one of law. As already observed above, prima facie , salami was not income unless the Income Tax authorities show that there were circumstance has been indicated by the revenue authorities. On the contrary the indentures which are on the record indicate that the salami was not in payment of advance rent In my opinion, therefore, the two items of salami in the present case could not be assessed as revenue and therefore had to be excluded from the assessment. For these reasons the question formulated have to be answered in favour of the assessee and answered accordingly. The assessee is entitled to his cost of this reference. Hearing fee, in the circumstances of this case, is assessed at Rs. 100 only.

Ramaswami, J.

I agree.