GENTLE, J. - (1.) THIS is a case stated by the Tribunal under s. 66 of the Indian IT Act at the instance of the assessee, who is the manager of the Cossimbazar Raj Estate appointed by the Court of Wards. The question which this Court is required to consider is : "Whether in the facts and circumstances of the case the sum of Rs. 1 lakh received by the Cossimbazar Raj Wards Estate from the Bengal Coal Co., Ltd., was, in law, assessable to income- tax?".
(2.) THE estate of the Maharaja of Cossimbazar has been in the management of the Court of Wards since about the year 1920 or 1921. A portion of the estate comprises some colliery lands in Moujas Gangutia and Chhotadhamua on the 25th Sept., 1916, prior to the Court of Wards taking charge, the Maharaja granted, by a Bengali pattah, a mining lease of that property to the Bengal Nagpur Coal Co., Ltd., upon, inter alia, these terms : (1) THE lease to be for period of 20 years from date; (2) THE lessees would have the right of raising coal from the lands for which they should pay the royalty specified in the lease; (3) THE lessees should be at liberty to abandon the lands at any time before the period of the lease expired, provided they paid up in full the rents and royalty of every description due to the lessor at the time of abandonment; (4) THE lessees to keep coal pillars of specified dimensions and at stated intervals in the mines; and (5) THE lessees had an option to renew the lease at its expiration on the same terms, if coal still was unfinished. On the 12th Feb., 1919, the lessees assigned the lease to the Bengal Coal Co., Ltd., with the sanction and approval of the lessor. Thereafter, that Company raised coal from the lands and paid the stipulated royalty to the lessor and, later to the manager of the Court of Wards when the estate came under its jurisdiction. During the currency of the lease of 1916, an agreement, dated the 24th April, 1933, was made between the estate manager appointed by the Court of Wards and the Bengal Coal Co., Ltd., by which it was inter alia, agreed that : Clause (3). The Company would apply for and would be granted pillarcutting rights in such areas as required upon payment of specified salami; Clause (6). The Company undertook, notwithstanding anything to the contrary contained in the lease of 1916, to continue to hold the lease and the areas thereby demised and to be bound by the terms and conditions of the lease which should be deemed, if and as necessary, to have been renewed so long as any coal remained workable; Clause (7). In the event of any coal remaining unworked for any reason whatsoever (otherwise than as provided in cl. 6 and to which reference is not material), royalty thereof should be payable to the lessor in the same manner as if the coal had been worked, as soon as the said coal should have been abandoned; Clause (8). Save and except cls. (4), (30) and (31) of the lease of 1916 (to which reference is unnecessary) all other terms and conditions laid down therein should remain in force as if no agreement (of the 25th April, 1933) had been executed.
(3.) THE colliery comprised three seams : Dishergarh the upper seam; Hathnol the middle seam; and Sanctoria the lower seam. Dishergarh had been worked out by 1933, when the agreement in that year was made, Hathnol contained inferior coal and no working took place in that seam after the 1933 agreement. THEreafter working was confined to Sanctoria, which is below Hathnol. About 1939 the coal in the Sanctoria was running out and, substantially, there remained only the coal pillars which had been left pursuant to the terms of the 1916 lease. In that year the Company applied for pillar-cutting rights of those pillars and paid the required salami which was accepted by the manager. No formal permission to cut was given. THE Company thereupon commenced raising the remaining coal in Sanctoria, which was confined to the pillars which and been erected, and with respect to which they had applied for pillar-cutting rights. On the 16th June, 1939, Mr. J. N. Sirkar, the estate manager appointed by the Court of Wards, wrote to his superior, the CIT of the Presidency Division, Calcutta. The letter states as follows : "The Company had applied for pillar-cutting rights; they had paid the required salami; formal permission had not been given but the Company contended that permission should be considered as having been granted immediately the salami was paid and they had commenced pillar-cutting; this was being done in a manner which had not been approved by Mr. Carver, (apparently the Court of Wards' Consulting Engineer) as the method was unsound and dangerous as it would render Hathnol unworkable; the Company was depillaring the area in spite of protests and the only way to stop this being done was by means of costly litigation; after consulting the Maharaja, Mr. M. M. Mukherjee had been appointed to take up the matter for a settlement, favourable to the estate, out of Court. Elsewhere in the letter the manager wrote that the Company undertook to continue to hold the leases and the areas demised and to be bound by the terms and conditions of the original pattah so long as coal remained workable and the agreement provided that in the event of relinquishment whilst coal still remained unworked for any reason whatsoever, royalty would be payable to the estate for the coal left unworked. The letter adds that, with a view to escaping liability to pay for the loss caused to the estate, the Company proposed to pay one lakh of rupees for the estate's right to receive royalty on the coal of Sanctoria and Hathnol seams; the proposal had been examined; Mr. Carver had reported that, in respect of the remaining coal in Sanctoria and Hathnol seams, royalties on these two seams approximated to Rs. 2,28,000 and the Company had been asked to pay Rs. 1,50,000 but they had refused to do so". ;