V. Bhargava, J. - (1.) THE question referred by the Income-tax Appellate Tribunal, Allahabad Bench, for our opinion under Section 66 (1) of the Income-tax Act is : "Whether on a true interpretation of Clause (viii) of Sub-section (3) of Section 4 of the Indian Income-tax Act the sum of Rs. 36,396/- received by the asses-see as an allowance during the previous year of assessment year 1949-50 is revenue income liable to tax under the Indian Income-tax Act, 1922," THE facts and circumstances under which this question has arisen and has been referred to this Court have been mentioned by the Tribunal in the statement of the case to which were attached as annexure a number of other documents. For the purpose of stating the facts and circumstances, therefore, we are referring to the statement of the case as well as the various documents which form, part of the statement of the case.
(2.) THE assessee in this case is a Hindu undivided family whose karta is Sri Trivikram Narain Singh He is a descendant of one Sri Babu Ausan Singh, who was the original founder and owner of what is known as the Ausanganj Estate in the district off Varanasi. It was some time in the year 1775 that the then Province of Banaras was ceded to the British Government by Nawab Asfuddaula of Audh whereafter the British Government granted a Sanad to Raja Chet Singh conferring on him the rights of a Raja. Raja Chet Singh in turn gave the Jagir of Pargana Seyedpore and Bhittary in perpetuity to Babu Ausan Singh. In the year 1798, there were some disputes between Babu Ausan Singh and the zamindars of this Pargana with the result that the matter was referred by the Collector of Banaras to the Board of Revenue in Calcutta. During the pendency of the disputes, Babu Ausan Singh was succeeded by Babu Sheo Narain Singh who in turn was succeeded by Babu Har Narain Singh. Various proposals were made in intervening stages for settling the disputes but the ultimate settlement came in the year 1837. THE final notification by which the terms of the settlement) were notified does not appear to have been produced before the Income-tax Appellate Tribunal though there is a mention that there was such a notification dated 19-10-1837 in the copies of the orders of the Commissioner of Agricultural Income-tax and the Agricultural Income-tax Board which have been annexed to the statement of the case by the Tribunal. THE Tribunal, however, relied on a report of the Sadar Board of Revenue contained in a letter sent by the Secretary of the Board of Revenue to the officiating Secretary to the Lt. Governor dated 7-7-1837 which is annexure 1 to the statement of the case. THE appellate order of the Tribunal shows that the terms which were suggested in this letter were accepted by the Tribunal as indicating the final terms on the basis of which Babu Har Narain Singh and his successors-in-perpetuity were given the right by virtue of which this amount now in question in the reference was actually received by the present assessee. Paragraph 3 of the letter, which gives the terms of settlement between the Government and Babu Har Narain Singh, is the one paragraph that really needs interpretation by us, and is consequently reproduced below: "3. THE settlement of the Pargana connected with 1241 F from which time the Board proposes that the Muqarraridar should get one-fourth of the net collections after deducting from the whale gross-collections the cost of Tahsil Establishment which will give him an income of Rs. 36-322-8-0 as in the margin, on which principle the immediate accounts should be adjusted. JUDGEMENT_150_ITR41_1961Html1.htm The Tribunal in its order also relied on there contents of paragraph 6 of this letter which is as follows : "The Board also request that a Sanad be issued under the authority of the Lt. Governor conferring the pension of Rs. 36,322-8-0 on Babu Har Narain Singh and his heirs in perpetuity." After reproducing these parts of the letter, the Tribunal in their appellate order proceeded to interpret this settlement and expressed the opinion that this letter left no room for doubt that what was given to Babu Har Narain Singh was a mere pension and the quantum of the pension was calculated an relation to the rent collection. Having given this interpretation the Tribunal then proceeded to examine whether the sum that was being received under this letter by Babu Har Narain Singh and his successors was agricultural income exempt from income-tax or income liable to tax under the Indian Income-tax Act. The Tribunal finally held that this income being received by Babu Har Narain Singh and his successors was not agricultural income and was consequently liable to Income-tax. It is in these circumstances that the question mentioned above has been referred for our opinion at the instance of the assessee.
(3.) IN this reference before us no further material has been provided on the basis of which it can be held that the Tribunal acted incorrectly or against law in basing their decision on the terms of the settlement contained in the letter dated 7-7-1837. IN fact, the assessee as well as the INcome-tax department have proceeded on the basis that the terms contained in that letter are the final terms which have been enforced between the parties, exactly as they had done before the Tribunal. We have also mentioned earlier that the Agricultural INcome-tax authorities took notice of a subsequent notification dated 19-10-1837 which from the description given in their orders appears to have merely given effect to the terms of settlement contained in the letter of 7-7-1837. IN this view also, the terms of settlement between the Government and the assessee have to foe gathered from the language of the letter of 7-7-1837. Paragraph 6 of the letter reproduced above mentions that the Board had made a request that a Sanad may be issued under the authority of the Lt. Governor conferring a pension of Rs. 36,322-8-0 on Babu Har Narain Singh and his heirs in perpetuity. There is, however no material on the record of this reference to show that any such Sanad was in fact, subsequently, issued. Whether this part of the recommendation for issue of a Sanad made by the Board of Revenue to the Lt. Governor was accept-ed and acted upon or not, is not known. The terms of the settlement have, therefore, to be gathered from the language of paragraph 3 rather than from the language of paragraph 6. We have mentioned this as, during the course of arguments before us, learned counsel for the department relied on the use of the word "pension" in paragraph 6 in order to urge that what Babu Har Narain Singh and his successors in perpetuity were granted was a mere pension and not any grant of money or land revenue. There is no doubt that, after this settlement, Babu Har Narain Singh and his successors ceased to have any further right or interest in the land in Pargana Seyedpore and Bhittary in respect of which this settlement was arrived at. At one stage, they were Jagirdars of that land. Subsequent correspondence shows that their right was sought to be converted by the State into the right of a Tahsildar but at the final settlement in July 1837 no such right in the land in the Pargana remained vested in Babu Har Narain Singh and his successors. This fact was also noticed by this Court when deciding a writ petition filed by the present assessee claiming payment from the Government under the settlement for one year. For convenience, we may refer to that judgment of this Court by citing the decision as reported in Tri Vikram Narain Singh v. Govt. of State of U. P., AIR 1956 All 564. In that case it was held that, as a result of the settlement in the year 1837, Babu Har Narain Singh and his successors were divested of all interest in the land in Pargana Seyedpore and Bhittary, and that is also our interpretation in the present case. The right in land having ceased, a new right was created in favour of Babu Har Narain Singh and his successors which was described in the letter of 7-7-1837 in para 3 as cited above. The consequence is that it is no longer open to the assessee to contend that the income that he is receiving should be held to be agricultural income on the basis of the definition contained in Sub-clause (b) of Section 2 (1) of the Income-tax Act, Sub-clause (b) of Section 2 (1) of the Income-tax Act can only be relied upon by an assessee who has a right or interest in the land itself from which the income is derived. This is, however, immaterial as in the present case the assessee has relied on Sub-clause (a) of Section 2 (1) of the Income-tax Act under which all that is required is that the income must be rent or revenue derived from land, which is used for agricultural purposes and is either assessed to land revenue in the taxable territories or subject to a local rate assessed and collected by officers of the Government as such. This Sub-clause (a) nowhere lays down the requirement that the land from which the rent or revenue is derived should be owned by the person who derives the income or that the person should have any existing right or interest in land. All that is required is that there should be some rent or revenue derived from land, which is used for agricultural purposes and is assessed to land revenue or is subject to a local rate, and the person - claiming that his income is agricultural income should be receiving that rent or revenue. It would thus appear that under Sub-clause (a) of Section 2 (1) of the Income-tax Act a person can claim his income to be agricultural income if it is comprised of rent or revenue derived from land, which is used for agricultural purposes and is either assessed to land revenue or to local rate, irrespective of the fact whether he himself has any right or interest in the land or not. It is this provision of law that has to be applied to the right under which the present assessee has received the sum of Rs. 36,396/- in question. ;