HON. NAWAB HABIBULLA Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THEIR Lordships agree with the conclusion of the High Court. The appellant's counsel referred to the recent decision of this Board in Income-tax Commissioner, Bihar and Orissa v. Maharajadhiraj of Darbhanga (1935) L.R. 62 I.A. 215, the judgment being delivered by Lord Macmillan. In that case a moneylender had lent money on a zarpeshgi lease and usufructuary mortgage of agricultural lands under which he was in possession with all the powers of an owner, and upon the terms that, after deducting from a gross estimated rental the estimated costs of management and a sum (thika rent) which was to be credited, he was to take the balance (thika profits). There was no dispute that the rents so drawn by him were agricultural income with the meaning of Section 2, Sub-section 1(a) of the Act, and it was conceded that if the assessee had not been a moneylender and the transaction in course of his moneylending business, the statutory exemption would have applied, but it was maintained that the income was income, profits and gains of the business, and that it thereby lost the benefit of the exemption. The Board held that the result of the exemption is to exclude "agricultural income" altogether from the scope of the Act, howsoever or by whomsoever received, and that the nature of the assessee's business cannot affect the exemption.

(2.) IN the opinion of their Lordships, that case affords a useful contrast to the present case. The position of the assessee in that case had been described by the Chief Justice of Patna- and this Board adopted the description--as follows L.R. 62 I.A. 221: "The mortgagee-lessee was to be in possession of both properties, and, in his relation to the cultivators of the soil he stood in the position of landlord, dealing directly with them and collecting the rents. He had moreover to pay the government revenue, cesses and taxes and his name was registered in the Land Registration Department. He alone was able to sue for rent whether current or arrears, to sue for enhancement or for ejectment and was able to settle lands with raiyats and tenants in all the properties, in fact he was in a position to take all proceedings which the mortgagor would have been able to take in the ordinary course if the lands leased and mortgaged had remained in her khas possession." Accordingly, the assessee collected the rents directly in his own right, and the amount of his income therefrom depended on his exercise of these rights. The position of the appellant is very different: the recovery of the rents depends on the rights of the wakf estate, and on the appellant's performance of his duties of management as Mutawalli, and the amount of his remuneration does not depend either on the nature of the properties or assets which constitute the wakf estate, or on the amount of the income derived therefrom by the wakf estate. If, as might possibly happen, the whole or a portion of the wakf property ceased to be represented by agricultural lands, it is clear that the remuneration fixed by Article 15 of the scheme would not be affected.