COMMISSIONER OF INCOME-TAX Vs. ARJAN SINGH

JUDGEMENT

(1.) THIS order will dispose of Income-tax References Nos. 16 and 18 of 1971. The assessee in one is Arjart Singh, an individual, and in the other Gandhara Singh, again an individual.

(2.) THE assessments relate to the year 1960-61. The Income-tax Officer included a sum of Rs. 21,000 in the total income of each of the assessees on the ground that the income was not agricultural income. The assessees had taken 332 acres of land on lease jointly from the Military Estate Officer, Ferozepore, and the land admittedly was used for agricultural purposes. The working of the lease resulted in a net profit of Rs. 42,000 and hence the profit of each of the assessees came to Rs. 21,000. Each of the assessees claimed before the Income-tax Officer that the amount of Rs. 21,000 was exempt from tax under Section 4 (3) (viii) of the 1922 Act equal to Section 10 (1), read with Section 2 (1) (a) of the Income-tax Act, 1961. This contention was negatived by the Income-tax Officer on the short ground that the land was not assessed to laad revenue or a local rate as required by Section 2 (1) (a ). Appeals against this decision to the Appellate Assistant Commissioner by the assessees also failed. The assessees then preferred further appeals to the Income-tax Appellate Tribunal (hereinafter referred to as " the Tribunal " ). The Tribunal accepted the contention of the assessees and ordered the deletion of the amount of Rs. 21,000 from each of the assessees' total income. The department being dissatisfied moved an application under Section 256 (1) of the Income-tax Act, 1961, to the Tribunal and the Tribunal has stated the following question of law for our opinion in the case of both the assessees:

(3.) IT appears to us that the Tribunal has completely gone off the mark. There is no warrant for the proposition that rent paid to army authorities for land leased out by them is land revenue. There is no basic difference bat ween the lease of land not assessed to land revenue and assessed to land revenue belonging to the Central Government and leased out by it on rent. The rent so received would not be land revenue. It is immaterial if the land belonging to the Central Government is exempt from land revenue. If the Central Government leases out such land, the rent received cannot be termed as land revenue. The Tribunal seems to have forgotten that land is a State subject and the right to recover land revenue only accrues to the State Government and not to the Central Government. The Union of India cannot levy land revenue or local rate. In this connection, reference may be made to entries Nos. 45, 46 and 49 in List II of the Seventh Schedule to the Constitution of India.