Jagdish Sahai, J. - (1.) The petitioner Raja Jagadambika Pratap Narain Singh was the proprietor of what was known as the Ayodhya Raj before the abolition of Zamindari in this State. He held large properties in the districts of Faizabad, Gonda, Sultanpur and Barabanki. As a consequence of the abolition of zamindari in this State his properties vested in the State of U. P., and the petitioner received by way of compensation for the acquisition of his rights in those properties compensation bonds during the period 1954 to 1958. The bonds are of a self-liquidating nature and the payment under them is spread over a period of forty years. They carry interest at 2 1/2 Per cent per annum on the principal amount, and are Payable in forty equal instalments. The scheme of payment is that the interest for the whole year plus a part of the principal is paid every year. As the interest goes on decreasing due to the part payment of the principal every year, the amount of principal included in the instalment goes on increasing. The petitioner, as required by the rules, presented his bonds for realization of instalments before the Treasury Officer, Faizabad. The latter under the directions of the income-tax authorities deducted large sums by way of Income-tax from the amount of interest which was included in the instalment due to be paid to the petitioner. The petitioner objected to the realization of this amount, and made an application to the Income-tax Officer stating therein that the deduction made was illegal". The Income-tax Officer on 23rd of July, 1958, passed the following order on that application : "Treasury Officers have general instructions on the subject direct front the Central Government and I regret I cannot issue a certificate as desired." Sd/- M. P. Srivastava. I. T. O. Faizabad." According to the petitioner the Income-tax Officer, Faizabad had made an assessment order on the petitioner on 30th October. 1957. The Petitioner filed a revision application under Section 33-A (2) of the Income-tax Act before the Commissioner of Income-tax, U. P., against the order of assessment interalia on the ground that the income from interest on the zamindari bonds could not be assessed under the provisions of the Indian Income-tax Act. That application is admittedly still pending. The petitioner moved this Court under Article 226 of the Constitution of India on 18th of August, 1958. By that time a sum of Rs. 36,916/-had already been deducted and paid over to the Income-tax authorities out of the equated instalments which had been Paid to the petitioner under the compensation bonds issued to him. The Petitioner has alleged that he apprehends that another sum of Rs. 36,916/- will be deducted from the next instalment of compensation which was due for payment on the 1st of July, 1958. He has consequently prayed for the issue of a writ, order or direction in the nature of mandamus commanding the Commissioner of Income-tax, U. P. Lucknow, the Income-tax Officer, Faizabad, and the Treasury Officer, Faizabad (respondents No. 1, 2 and 3 respectively) not to levy or realise any Income-tax on or from any amount payable to the petitioner in respect of the compensation bonds issued to him. It is also prayed that a writ, order or direction in the nature of mandamus be issued commanding the respondents to refund the sum of Rs. 36,916/- already deducted as Income-tax from the petitioner's compensation. There is also a prayer for the issue of a writ of certiorari quashing the assessment order dated 30th October, 1957. In the end there is the usual prayer for the issue of any other writ, order or direction as this Court may in the circumstances of the case deem fit and proper to issue.
(2.) On behalf of the respondents a counter-affidavit has been filed which is sworn by Sri Mukta Prasad Srivastava, Income-tax Officer, Faizabad, and a rejoinder affidavit has been filed on behalf of the petitioner sworn by Sri Lal Narayan Singh the Mulchtaram of the petitioner. It is really not necessary to narrate all the allegations made in the petition, the affidavit, the counter-affidavit and the rejoinder affidavit because the question requiring decision is a short one and is primarily a question of law.
(3.) The petitioner's case is that, though called by the name of interest, the additional amount that is being paid to him over the compensation amount is really not interest or income but is additional compensation. The case of the respondents. On the other hand, is that it is income from securities or from "other sources' and as such a revenue receipt which is liable to be taxed. In order to understand the exact nature of the payment over which there is controversy between the parties, it is necessary to consider some of the provisions of the U. P. Zamindari Abolition and Land Reforms Act (hereinafter referred to as the Act). Section 27 of the Act reads as follows: "Every intermediary whose rights, title or interest in any estate are acquired under the provisions of this Act shall be entitled to receive and be paid compensation as hereinafter Provided.";