B RAJA RAJESWARA SETHUPATHI AVERGAL ALIAS B MUTHU RAMALINGA SETHUPATHI AVERGAL, RAJAH OF RAMNAD Vs. RIGHT HONOURABLE THESECRETARY OF STATE FOR INDIA IN COUNCIL THROUGH THE DISTRICT COLLECTOR OF RAMNAD

JUDGEMENT

(1.) This appeal is by the Rajah of Ramnad against the decree of the Additional Subordinate Judge of Ramnad at Madura dismissing his suit for the recovery of certain amounts paid by him as income-tax for three years. The Rajah of Ramnad was asked by the Income-tax Officer to make a return of his income taxable under the Income-tax Act (VII of 1918) under Section 17(2) read with Section 2, Clause (13). He submitted a return for the years 1919-1920, 1920- 1921 and 1921-1922, in which he showed the income derived by him from forests and fisheries. The Income-tax Officer, on the basis of the return, proceeded to assess the income from forests and fisheries under Section 18 of the Act. The Rajah paid the tax on 5 July, 1920, 25 April, 1921, and 21 April, 1922. He brought the suit on 22 June, 1925 for the recovery of the three sums paid on the dates abovementioned on the ground that the income from forests and fisheries derived from his permanently settled zamindari was not taxable under the Income-tax Act.

(2.) The first point urged by Mr. Krishnaswami Aiyar for the appellant is that the income derived from a permanently settled estate is outside the scope of the Income-tax Act by reason of the Permanent Settlement Regulation XXV of 1802 and the sanad issued under the Act, and, the act of the Income-tax Officer being ultra vires, he is entitled to a refund of the amount paid by him. In the view we take of the next point, it is unnecessary to discuss all the authorities bearing on this point in deail. In The Chief Commissioner of Income-tax v. Zamindar of Singampatti (1922) I.L.R. 45 Mad. 518 (F.B.), a Full Bench of this Court held that, where the peishcush of a permanently settled estate was fixed in commutation, not only of the rentals of the cultivated lands but also of all income which might be derived from forests or fisheries, both under the terms of the sanad and of Section 1 of Regulation XXV of 1802, these incomes were exempt from further taxation by the Government, and Section 3 of the Income-tax Act did not abrogate this exemption. The learned Judges considered the effect of the Permanent Settlement Regulation of 1802 and the terms of the grant to which the grant in the present case is similar and came to the conclusion that the income derived from forests and fisheries in the permanently settled estate was not liable to be taxed under the Income- tax Act. The learned Government Pleader attacks the correctness of this decision and contends that income from forests and fisheries is taxable unless it comes within the exceptions provided in the Income-tax Act. He urges that there must be specific legislation exempting such income and that it cannot be exempted by implication. Sitting as a Division Bench, we are bound by the decision of the Full Bench. We may observe that we entirely concur with the reasoning and conclusion of the learned Judges who were members of the Full Bench. Reliance is placed by the learned Government Pleader on Emperor V/s. Probhat Chandra Barua (1924) I.L.R. 51 Cal. 504, Emperor V/s. Indu Bhusan Sarkar (1926) I.L.R. 53 Cal. 524, Emperor v. Probhat Chandra Barua (1927) I.L.R. 54 Cal. 863 (F.B.), and Maharajadhiraj of Dharbanga v. The Commissioner of Income-tax (1924) I.L.R. 3 Pat. 470, as supporting his contention that The Chief Commissioner of Income-tax V/s. Zamindar of Singampatti (1922) I.L.R. 45 Mad. 518 (F.B.) was not correctly decided. In Emperor V/s. Probhat Chandra Barua (1924) I.L.R. 51 Cal. 504 there was a difference of opinion between Rankin J. and Page J., Page J., approving of the decision in The Chief Commissioner of Income-tax V/s. Zamindar of Singampaiti (1922) I.L.R. 45 Mad. 518 (F.B.). In Emperor V/s. Indu Bhusan Sarkar (1926) I.L.R. 53 Cal. 524, The Chief Commissioner of Income-tax V/s. Zamindar of Singampatti (1922) I.L.R. 45 Mad. 518 (F.B.) and Maharajadhiraj of Dharbanga V/s. The Commissioner of Income-tax (1924) I.L.R. 3 Pat. 470 were followed by a Bench of the Calcutta High Court. In Emperor V/s. Probhat Chandra Barua (1927) I.L.R. 54 Cal. 863 (F.B.) there was a difference of opinion, two Judges approving the Madras view and three Judges following the view of Rankin, J., in Emperor V/s. Probhat Chandra Barua (1924) I.L.R. 51 Cal. 504. In Maharajadhiraj of Dharbanga V/s. The Commissioner of Income-tax (1924) I.L.R. 3 Pat. 470 Dawson Miller, C. J., after an exhaustive examination of the Permanent Settlement Regulation and its effect observed : "I see no reason to take a different view from that held by the Madras High Court," while Mullick, J., took a different view. We find this point in favour of the appellant.

(3.) It is contended by the learned Government Pleader that no civil suit would lie to recover an amount paid as income-tax. A civil suit is barred under Section 52 of the Income-tax Act of 1918. If the tax was levied under the Act, no doubt a suit would be barred, but if the assessment was made in respect of an item of income which is not assessable under the Act, a civil suit would lie to recover it, inasmuch as the officer making the assessment had no jurisdiction to make it. In cases in which the Income-tax Officer has to decide whether a certain item of income is assessable or not, his decision cannot be said to be ultra vires even if it is illegal. But, where a certain income is outside the scope of the Act, such as agricultural income or income not earned in or brought into British India, any assessment in respect of such income would be outside the scope of the Act and a civil suit to recover it would not be barred by reason of Section 52. We do not discuss this point at length as we find the next point against the appellant.