S M BOSE Vs. SECY BOARD OF REVENUE

JUDGEMENT

(1.) THIS is a reference made by the Board of Revenue, Orissa under the provisions of Section 29, Orissa Agricultural Income -tax Act. The question referred to us is

(2.) WHETHER salami is income within the meaning of the Income -tax Act or Agricultural Income -tax Act has come for determination in several cases before their Lordships of the Patna High Court and it is the consistent view taken by Patna High Court in many decisions that salami paid to the landlord at the time of settlement of agricultural land cannot be regarded as income as a matter of law. Where salami can be regarded as payment of rent in advance it can lightly be regarded as income. Where, however, salami could not be regarded as a payment of rent in advance, it could not 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 would make the salami income. We would only quote the precedent in the case - - 'Province of Bihar v. Pratap Udai Nath Sahi Deo', AIR 1941 Pat 289 (3. B.) (D), which is a case under the Bihar Agricultural Income -tax Act. Harries C. J. after a review of all the decisions laid down the position of law as indicated above. It, therefore, appears to be settled law that it cannot be laid down as a hard and fast rule that salami can in no case be taxable.

(3.) THE petitioner settled by auction the occupancy right in certain Nij -chas, Nij -jote, Anabadi and Nilam -Kharid lands in his estate. The purchase money fetched at the auction was entered in his accounts as salami, and an annual rent was fixed for the different plots of land at varying rates. The salami does not represent the market -value of the land in the area and the finding of fact is that it is in fact much lower than the value of similar lands in the neighbourhood. The Assistant Collector of Agricultural Income -tax inferred from this fact that as the salami is low it must be presumed that it represented a part of the annual rent commuted into cash payment. In his view, therefore, it constitutes agricultural income and is liable to be taxed. The Board of Revenue came to a contrary conclusion, on the facts, and held that as the lands were at the absolute disposal of the landlord and the occupancy right in them was transferred to the bidders at the auction the money realised at the auction was in the nature of a capital receipt and not income from, land. The Board also held that the rent fixed for the land was prima facie a fair rent and that it could not be legitimately inferred whether any part of the rent went into the fixation of the salami. On these findings the following reference has been made to this Court: