COMMISSIONER OF INCOME TAX Vs. MANAGER OF KATRAS ENCUMBERED ESTATE

JUDGEMENT

(1.) -

(2.) THIS is a case stated under Section 66, sub-section (2), Income-tax Act, for the opinion of the Court. The facts which have given rise to the case are simply stated. The assessee is the proprietor of a certain mine producing coal and fireclay. In the month of June 1920, the late proprietor of the mine owed a sum of four lakhs of rupees to a company. By March 15, 1921, the amount due to the company including the first loan and a subsequent loan amounted to Rs. 12,19,071 and to secure the repayment of this sum the proprietor mortgaged the mine to the company on that date. On the same day the proprietor executed a lease of the mine to the same company at a royalty and it was provided that a minimum sum of Rs. 8,000 a year was to be paid and that that sum of Rs. 8,000 was to be paid to the proprietor himself. The balance of such royalty as might be payable was to be applied by the mortgagees lessees to the liquidation of their debt under the mortgage. The question is as to whether the entire royalty to be paid by the lessees is to be taxed when it comes into the hands of the proprietor as his income.