KALI PRASAD SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case the assessment relates to the income of Sri Shiva Prasad Singh who was the holder of an impartible estate called Jharia Raj. The assessment relates to the year 1947-48 and the accounting year is 1953, Bengali Samvat which is the year ending on the 13th April, 1947. As the assessee Shiva Prasad Singh died on the 1st January, 1947, the assessment has been made on his eldest son Sri Kali Prasad Singh under the provisions of section 24B of the INdian INcome-tax Act. The income of the assessee consisted mainly of royalties and surface rents from coal-bearing lands which were not of agricultural character. The assessee had made settlement of these lands with various persons and one of the important clauses in the agreements was that the lessee should pay to the assessee the entire road-cess payable under the Cess Act (Bengal Act IX of 1880). The relevant clause in the agreement is in the following terms : "That the 2nd party shall be bound to pay separately in the Sherista of the first party, road cess at the rate of 0-1-0 (one anna) per rupee on the amount the said minimum royalty or commission and the cess payable to the Mines Board Of Health or any other cess, rent or tax that may be imposed on the first party. Besides that the second party shall deposit separately in the respective offices or court, any other cess, rent or tax that are in vogue or may be imposed on the second party in future in respect of coal mines and coal business." Under the Cess Act assessee was liable to pay cess to the authorities at the rate of one anna per rupee. During the accounting year the assessee realised from his lessees a sum of Rs. 4,609 on account of road cess in addition to the rents and royalties stipulated in the various agreements. The INcome-tax Officer held that the entire amount of Rs. 4,609 should be included in calculating the total income of the assessee. On appeal the Appellate Assistant Commissioner held that the assessee had not derived any advantage or benefit from the realisation of cess from the lessees in accordance with the agreements. He therefore excluded the sum of Rs. 4,609, from the total income of the assessee. The INcome-tax authorities took the matter in appeal to the INcome-tax Appellate Tribunal and it was contended on their behalf that the Appellate Assistant Commissioner had no warrant or justification for excluding the sum of Rs. 4,609, from the assessees total income. The Tribunal considered the provisions of the Cess Act and reached the conclusion that the tenant and the landlord were each liable to pay half the road cess levied under the Cess Act. The assessee therefore derived an advantage to the extent of half the amount of cess realised from the tenants and the Tribunal held that the assessee was liable to be taxed on this advantage which was equivalent to the amount of Rs. 2,304, that is half of the amount received by the assessee from the various lessees of the coal bearing lands.

(2.) IN this state of facts the Appellate Tribunal has referred the following question of law for the opinion of the High Court :

(3.) FOR the reasons assigned we hold that the amount of Rs. 2,304, which is half the amount of cess received by the assessee from the lessees of the coal bearing lands is liable to inclusion in his total income for the assessment year 1947-48. The question referred to the High Court must accordingly be answered in favour of the Income-tax department and against the assessee. The assessee must pay the costs of the reference. We assess hearing fee at Rs. 250.