SRI RAJAH RAVU VENKATA MAHIPATHI GANGADHARA RAMA RAO BAHADUR, YUVARAJAH OF PITHAPURAM, REPRESENTED BY THE TRUSTEE MAHARAJAH OF PITHAPURAM AND ANR. Vs. THE COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessees are the sons of the Maharajah of Pithapuram, the proprietor of the Zamindari of Pithapur which was permanently settled under the Madras Permanent Settlement Regulation (Madras Regulation XXV of 1802). They are the joint proprietors of an estate settled upon them by their father, The estate which formed part of the Zamindari of Pithapur includes certain forests from which the assessees derive income by the sale of wood, bark, leaves, other usufruct of trees, minor forest produce and license fees. They supplement this income by the sale of trees in non -forest areas of the estate held by them. It is admitted that the trees in the forest and non -forest areas have grown wild and that agricul.

(2.) RURAL operations are not carried on in any of the areas. - For the year of account, 1941 -42, the income from these sourcesamounted to Rs. 7,612 and the assessees were taxed on this sum for the year 1942 -43. They maintained that they were exempt from taxation for two reasons. In the first place they said that the income was derived from the produce of a permanently settled estate which was free from all taxation, other than that imposed by way of peishkush, by reason of the provisions of the Madras Regulation. In the second place they contended that the income was agricultural income within the meaning of Section 2(1) of the Indian Income Tax Act, 1922 and as such is exempt from Income Tax by reason of Section 4(3) (viii). The Income Tax Officer rejected both these pleas. His decision was upheld by the Appellate Assistant Commissioner and by the Income tax Appellate Tribunal. At the request of the assessees, the Tribunal has, under Section 66(1) of the Income Tax Act, referred for the opinion of this Court two questions. The tribunal has worded them as follows: WHETHER the imposition of Income Tax in respect of income derived from a permanently settled estate would be a breach of Regulation XXV of 1802 relating to Permanent Settlement. Whether the income of Rs. 7,612 derived from the sale of wood etc. (as detailed herein above) is exempt under Section 4(3)(viii) read with Section 2(1) of the Indian Income Tax Act, 1922.

(3.) THE words " as detailed herein above " mean of course as detailed in the order of reference.