AGARWALA, C.J. -
(1.) THIS is a reference under Section 25(2) of the Bihar Agricultural Income-tax Act, 1938, at the instance of Maharaja Pratap Singh Bahadur through the Manager of the Gidhour Court of the Wards Estate.
(2.) FOR the year 1942-43 the assessee net agricultural income for the year ending the March 31, 1942, was assessed at Rs. 1,52,634 which included a sum of Rs. 14,359-9-9 received from Government as malikana. In appeal this was reduced and the case was remanded for revision of the assessment after reconsideration of certain items with which were are not concerned at present. The assessees claim that the sum received as malikana was not assessable was rejected.
The question referred to us for decision is :-
Whether income received as malikana and paid by Government under Regulation VII of 1822 is agricultural income assessable to agricultural income-tax ?
On the grounds that malikana is not agricultural income the amount received by the assessee on this amount has been assessed to the tax under the general income-tax Act which exempts agricultural income from taxation, it having been held that it is not agricultural income within the meaning of the Income-tax Act, 1922, which defines agricultural income as - Any rent or revenue derived from land which is used for agricultural purpose...... For the purpose of the Bihar Agricultural Income-tax Act, 1938, however, it has been held that malikana is agricultural income, with the result that the recipient has again been assessed on the amount received. The Bihar Agricultural Income-tax Act, 1938, defines agricultural income as any rent or income derived from land which is used for agricultural purposes......
Although in one Act income is used, and in the other, the word revenue there is no real difference in the two definitions.
In order to bring the sum received as malikana within the definition of agricultural income the Revenue authorities must have either that it is rent or that it is income derived from land used for agricultural purposes. If is, therefore, necessary to consider the nature of malikana. In 1793 the then Government proposed to settle lands with the ten proprietors on terms which included the payment of revenue amounting to nine-tenths of the estimated yield. Regulation VIII of that year provided that the lands of those proprietors who refused to enter into engagements on those terms should either be let in farm or held has by Government and that the dispossessed proprietors should be paid by the Government an allowance in consideration of their proprietary right at such rate as the proper authority might determine. This allowance was called malikana. In the case of lands let in farms the person with whom they were settled was required to pay to Government, in addition to the revenue settled an additional sum which Government, itself would have to pay to the dispossessed proprietor as malikana. It appears, however that even before the enactment of the Regulation of 1793 some zamindars were in receipt of malikana. This is dealt with in Phillips Land Tenures of Lower Bengal, pages 124 to 126. The learned author says, It has been questioned whether a zamindar could be ousted....... It was however probably only in later times, when the zamindars rights were at their highest pitch, that dismissal was so rare for we know that during the vigorous times of Mahomedan rule, the zamindars were often expelled............. The claim of the ancient zamindars and village headmen, when thus displaced, were usually recognized to the extent of giving them an allowance for subsistence; and sometimes they continued to received this allowance in the shape of payments from the new occupants called Russoom zamindari, this practice probably accounts for payment, to a displaced zamindari by his successor, of malikana for the subsistence of his family....... Sometimes, when the zamindar was in competent, Government appointed an officer to take has possession of the zamindary; and in such cases, as also when the revenues were farmed, it was usual in the later Mahomedan and British period to allow the zamindar malikana, at least in Bihar at the rate of ten per cent on the revenue although the zamindar performed none of the functions of an officer.
. It will thus bed seen that the malikana allowance was no regarded as rent paid to the displaced proprietor, but merely as a subsistence or compassionate allowance for himself and his family. In Heeranund Sahoo v. Mussamut Ozeerun it was held that a right to malikana is not the same thing as a right to receive rent, but is a proprietary right constituting an interest in land in Mussamut Ozeerun v. Baboo Heeranund Sahoo, it was held that malikana is a money payment, and neither rent nor maintenance; in other words, it is to be regarded like bond or other debt, the non-payment of which, within a certain legal period, bars an action to recover it. In Bhoalee Singh v. Mussamat Neemaoo Behoo 2 a Bench of three Judges held that the malikana is not rent, nor has it the elements of rent. Later, in Syed Shah Najamuddin Hyder v. Syed Zahid Hussein also it was held that malikana is not a claim for rent. A passage in the judgment of Garth C.J., in Mullick Abdool Gufoor v. Muleka was referred to by the learned Advocate-General : There is nothing in principle, so far as we can see, to distinguish a malikana right from a right to receive rents, or the dividends payable upon Government paper. What the learned Chief Justice was considering there was whether a right to receive malikana could legally be the subject of a gift under the Muhammadan law, and what he decided was that such a right could be the subject of a gift in the same manner as other incorporated property of that nature. The cases to which I have referred above, in which it was held that malikana is not rent, were not dissented from. On the authorities, I think, it is clear that right to receive malikana is not a right to receive rent.
8. The next question, therefore, is whether a sum received as malikana is income derived from and within the meaning of the Act. In support of his contention that malikana is income derived from land used for agricultural purposes, The Advocate-General has referred to cases in which there are observations that malikana is a proprietary right or an interest in immovable property. See Heeranund Sahoo v. Mussamut Ozeerun and Bhoalee Singh v. Mussamat Neemo Behoo. In these and similar cases, such as Budhrul Huq v. Court of Wards and Mussamut Ozeerun v. Baboo Heeranund Sahoo, what was being considered was the period of limitations governing a suit to recover malikana and that matter being considered in relation to the Limitation Act of 1859. In Jaggo Bai v. Utsava Lal, the Privy Council let open the question whether a right to receive malikana is immovable property but held that a suit for its recovery is not governed by Article 141 but by Article 120 of the limitations Act of 1908. The Explanation to Article 132 of that Act declares that malikana is deemed to be money on immovable property which implies that it is not really so. If the right to receive malikana be regarded as a proprietary right, it is difficult to resist the conclusion that the person with whom land and of dispossessed proprietor was settled under the Regulation of 1793 was a tenure holder of tenant of some kind under the person entitled to receive the malikana i.e., the dispossessed proprietor, and that it was rent, but they very cases referred to in this connection held that it is not rent. Furthermore if the person entitled to receive malikana be regarded as the proprietor of the land, certain other consequence would seem to follow e.g., that he is entitled to the underground right in the land, unless he has expressly parted with them and to accretions. There is no authority for the proposition that he is entitled to the underground rights and has right to accretions has been negatived in Saudamini Dassya v. Secretary of State for India. In that case Rankin J., as he then was, held that although the right to received malikana may be described as a quasi rent charge it is not a tenure or dominium and that when a proprietor was disposed in consequence of his refusal to enter into an engagements for the payment of the revenue demanded in 1793 his interest in the land was extinguished. The question may also be looked at from another point of view. malikana is payable whether the land in respect of which it was originally granted exists or not. That is not disputed. How can it be said to be derived from land used for agricultural purposes in case where the land no longer exists or no longer exists as agricultural land ?
9. The question whether malikana is income derived from land must I think, be determined in accordance with the principle laid down by the Privy Council in Commissioner of Income-tax v. Raja Bahadur Kamakhaya Narayan Singh (Privy Council Appeal No. 23 if 1944, decided on the July 6, 1948). What their Lordships were considering in that case was whether interest on arrears of rent is derived from lands used for agricultural purposes within the meaning of Section 2 of the Income-tax Act, 1922. They observed as follows :-
10. The word derived is not a term of art. Its use in the definition indeed demands an enquiry into the generalogy of the product. But the enquiry should stop as soon as the effective source is discovered. In the generalogical tree of the interest land indeed appears in the second degree, but the immediate and effecitive source is rent, which has suffered the accident of non-payment. And rent is not land within the meaning of the definition. Similarly, in the case of malikana the person entitled to its receipt derives it from the statutory obligations of Government to pay it, and although, so far as malikana under the Regulations is concerned, Government recouped itself form the person with whom the lands was settled, land in the genealogical tree of malikana appears in the second degree, its immediate and effective source is the Government statutory obligation to pay it, and this obligation is not land within the meaning of the definition. In Raja Mustafa Ali Khan v. Commissioner of Income-tax (Privy Council Appeal No. 33 of 1947 decided on the July 12, 1948), the Privy Council considered the question whether the malikana received by the Utraula Estate in the United Provinces was entitled to exemption from assessment under the Income-tax Act, 1922. The facts with regards to it were thus stated in the order of the Appellate Assistant Commissioner :-
11. During the days of the Nawabs of Oudh the Raja of Utraula was recognized as the pargana lord and as such retained the right to a small eudal tribute and to manorial dues. From the beginning of the 19th century till the annexation, the Rajas of Utraula could not manage their estate properly on account of the continued walfare between the neighbouring estates. During this periods they transferred, made grants or sold a large number of villages to certain persons for monetary consideration. In doing so they surrendered all their zamindari and proprietary rights and lost all their title to real property in respect of those villages, They, however, retained the rights of a small annual cash payment by virtue of their position as the old pargana lord. This cash allowance came to be called the malikana. The village otherwise became quite independent and the exclusive property of the purchasers, grantees or transferees.
12. The amount of the malikana was fixed by a settlement decree and is not variable. It is payable whether the land on which it is supposed to be charge is used for agricultural purposes or not or whether it yields any profits or not. It is admitted that suits for the recovery of this due are cognizable by the Civil courts and not by the revenue Courts. This being so it is impossible to describe this due as rent or as agricultural income. There is no relation of landlord and tenant between the appellant and the proprietors who are liable to pay this amount...... Their Lordships observed : It may be conceded that it would never have become payable to the ancestors of the assessee had they not been feudal proprietors of land. But that does not mean the it is now rent or revenue derived from the land. On the contrary it is paid just because the original proprietors relinquished their claims to the land and it is represents the consideration for that requirements. The and is in no real sense its source; and even if it is to be regarded as secured by a charge on the land that is no more decisive of the question in the present case than it was in Maharaja Kumar Gopal Saran Narain Singh v. Commissioner of Income-tax, Bihar and Orissa.
13. Nor has the revenue department proved that the land in respect of which the malikana was originally fixed is land used for agricultural purposes. Whether it is such land has been held to be a question is being put : see In re Maharajadhiraj Sir Bijay Chand Mahtab Bahadur of Burdwan. The finding of fact in the present case is : There is n trace at present of the lands or villages to which the allowance might be said to relate and nothing is, therefore, known as to the present use to which they have been put. In Raja Mustafa Ali Khan v. Commissioner of Income-tax (Privy Council Appeal No. 33 of 1947, decided on the July 12, 1948), with regard to the assessee claim that he was entitled to exemption from taxation under the Income-tax Act, 1922, in respect of the sale proceeds of forest trees on the grounds that such proceeds constituted agricultural income their Lordships observed : It appears to their Lordships that, whether exemption is sought under Section 2(1)(a) or section 2(1)(b), the primary condition must be satisfied that the land in question is used for agricultural purposes......... His case fails if he does not prove that the land is used for agricultural purposes.
14. In my opinion, therefore, it has not been established in the present case that malikana is rent or that it is income derived from land, or that that the land in respect of which the obligation to pay was originally undertaken is being used for agricultural purposes. I would, therefore, answer the question referred to us for decisions in the negative. The assessee is entitled to the costs of this reference which we assessee at Rs. 250 including the Rs. 100 deposited for the reference.
15. MEREDITH, J., - I agree.
16. Reference answered accordingly.