LAKSHMI DAIJI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question of law which has to be answered in this reference is as follows :-

(2.) THE assessee concerned in this case was assesses to income-tax for the year 1941-42 upon a total income of Rs. 12,905. This amount included a comparatively small sum of money which represented interest on rent from agricultural land. THE assessee claimed that that sum could not be taxed, as interest on rent was agricultural income in the sense in which that expression is used in Section 2 (1) (a) of the Income-tax Act and was exempt from taxation under Section 4 (3) (viii). THE claim, however, has been negatived and the question as formulated above has been referred to us at her instance by the Income-tax Appellate Tribunal under Section 66(1) of the Indian Income-tax Act.

(3.) RENT is always associated with land, it is a payment for the use of land. Interest, on the other land, is associated with money; it is a payment for the use of money. In this case rent was payable to the landlord by the tenant by virtue of a contract of tenancy of land. The cause of action in respect of rent arises out of contract. On the other hand, the interest which is payable in respect of arrears arises out of a statutory provision of law which imposes a penalty upon the tenant for non-payment of his rent. Although both rent and interest on arrears of rent are payable by the tenant to the landlord, they are payable for different reasons. RENT is payable for the use of the land under a contract. Interest is payable for the use of money withheld by the tenant, and it is payable not by reason of a contract but by reason of a statutory provision.