CHHATRASINHJI KESARISINHJI THAKORE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is rather an unusual reference, in that the assessee is contending that he is liable to pay a larger amount and the taxing Department equally emphatically insists that the liability of the applicant is a smaller liability. Of course, such a position would be inconceivable if the dispute was restricted to the payment of tax. No assessee ever contends that he is liable to pay more income - tax and no taxing Department even says that the assessee is liable to pay less tax. But this controversy arises because the liability is different in nature. The liability which the assessee wants to take up upon himself is the liability to pay to the State Government and the liability which the Department wishes to impose upon the assessee is a liability to the Central Government in respect of income -tax.

(2.) NOW , the question arises this way. The assessee is the Thakore Saheb of Shivrajpur and the assessment years are 1952 -53 and 1953 -54. The Thakore Saheb had leased out certain of his lands to the Shivrajpur Syndicate Ltd. Under the lease, the syndicate was liable to pay rent and royalty and it was also liable to pay and discharge all taxes, rates, assessments and impositions whatsoever being in the nature of public demands which shall from time to time be charged, assessed or imposed upon or in respect of the mines or works of the lessee or any part thereof by authority of the Government of India, or the Government of Bombay or otherwise. Therefore, the lessee was liable to pay rents, taxes and rates as the lessor was in law liable to discharge. It is clear, in our opinion, that before the lessee can be made liable to pay any amount under this clause of the lease, the condition precedent is the liability of the lessor to pay any tax or rate. To put it in a different language, under this clause the lessor became entitled to collect from the lessee the amount of taxes or rates which he in law was liable to pay.

(3.) NOW , the question that really the Tribunal should have considered and which it has failed to consider is what is the liability of the assessee in law with regard to the payment of the cess and turning to the relevant provisions of the law, which is the Bombay Local Boards Act, 1923, we have first S. 75 which constitutes the local fund of the district local board, and the item with which we are concerned is cl. (c) -the net proceeds (after deducting the expenses of assessment and collection) of the cesses in the district authorised by ss. 93 and 95. When we turn to S. 93, it imposes an obligation upon the State Government to levy a cess at the rate of 3 annas on every rupee of every sum payable to the State Government as ordinary land revenue. We are not concerned with the other part of this sub -section. Therefore, the scheme of this section is that the Government in order to finance the district local board, charges over and above the land revenue a further sum of 3 annas on every rupee from every person liable to pay land revenue and that additional sum is paid to the district local board. Now, we have cases where there is alienation of land revenue; where the Government does not recover the whole of the land revenue but has alienated either the whole or part of it. That case is dealt with in cl. (b) -every sum which would have been assessable on any land as land revenue had there been no alienation of land revenue. So for the purpose of the cess the alienation has to be ignored and Government has a right to levy cess on the original land revenue payable ignoring the alienation. Then we have cl. (c) -every sum which would have been assessable on any land as land revenue had the land not been talukdari land. This deals with talukdari land and again the intention is to charge the cess on the basis of assessment again ignoring the fact of any connection given to the talukdar in respect of his talukdari land. Then S. 94 lays down rules for assessment and it dealt with the case of alienated villages. We are told that the Tribunal will have to find as a fact that the lands are alienated villages and in the cases of alienated lands, we are concerned with villages under cl. (a) -if the village has been surveyed and assessed in the manner laid down in the said Code and rules made thereunder, the cess shall be fixed on the total amount of assessment of the village as fixed under the said Code or rules made thereunder. The villages here are admittedly surveyed villages and the question is what is he total amount of assessment which these villages have to pay.