SESHACHELAPATHI, J. - This is a reference under section 66(1) of the Indian Income-tax Act made to this court by the Income-tax Appellate Tribunal Hyderabad Bench. The question of law formulated by the Tribunal for consideration is as follows :
'Whether on the facts stated the income in question is not agricultural income within the meaning of section 2(1)(a) or (b)(i) of the Indian Income-tax Act ?'
At the outset we may refer to the comment made by the learned counsel for the Revenue as to the language employed in the question formulated. It is stated by him that the real question in this case is whether the income in question is entitled to exemption from income-tax under section 4(3)(viii) of the Act and the question should have been framed accordingly. It is also suggested that the employment of the expression 'not' before the words 'agricultural income' in the question formulated is inappropriate, as it would seem to cast the burden on the revenue to prove that the disputed amount is not agricultural income, while in law the onus of proving the right to exemption from tax is upon the assessee. There is some force in the two submissions made by the learned counsel. But the objections are really as to the form of the question and not to the substance. We are satisfied that the question formulated by the Appellate Tribunal substantially reflects the controversy between the assessee and the Revenue.
The assessee is the owner of certain lands in Ramaniahpeta village, Kakinada taluk. On those lands there are a large number of mango, palmyra, cashew-nut coconut and other fruit-bearing trees which were yielding income. In 1943 the lands were requisitioned for military purposes in accordance with the relevant rules made under the Defence of India Act (XXXV of 1939). In cases of such requisitioned properties certain rules were made in 1943 called Payment of Compensation and Arbitration Rules. By reason of the requisition of these lands for military purposes by the Government under the aforesaid rules the assessee became entitled to payment of compensation. It would appear that there was a dispute between the assessee and the Government with respect to the quantum of compensation and a reference to the district judge as a arbitrator was made under section 19(1) of the Defence of India Act read with rules 7 and 8 of the Defence Act, payment of Compensation and Arbitration Rule 1943, as amended and continued in force by section 6 of the Requisitioned Land (Continuance of Powers) Act, 1947. That original petition (O.P. No. 118 of 1950) was decided by the District Judge, East Godavari on September 23,1953, fixing certain amounts as due to the assessee for the years 1946-1949, which it is unnecessary to refer here.
In respect of the assessment year 1955-56 the assessee submitted a return declaring a net taxable income in a sum of Rs. 3,473. In the assessment order made by the Income-tax Officer Kakinada, the declaration of the net income by the assessee was not accepted. The Income-tax Officer held that the sum of Rs. 11621-5-7 received by the assessee from the Government in respect of the occupation of his lands by the military authorities should be included in his total assessable income. On that footing he determined the total taxable income of the assessee at Rs. 17,237 and deducting the tax paid under section 18(a) of the Act directed the assessee to pay the balance of tax amounting to Rs. 2,200-1-0 on or before January 20 1956.
Aggrieved by that order the assessee filed an appeal before the Appellate Assistant Commissioner of Income-tax Rajahmundry (Income-tax Appeal No. 86455-56). The main contention raised in that appeal was that the amount received by the assessee from the Defence Ministry as compensation for the occupation of his lands by the military authorities should not have been included in his total taxable income by reason of it being agricultural income. The objection was overruled by the Appellate Assistant Commissioner and the appeal was dismissed on September 29,1956.
The assessee filed lan appeal before the Commissioner of Income-tax Hyderabad Bench, again the order of the Appellate Assistant Commissioner Rajahmundry. Before the Tribunal the same objections as were raised before the Appellate Assistant Commissioner were pressed. The Tribunal by order dated August 12, 1958, held that the amount received by the assessee from the Defence Ministry as compensation for the occupation of his lands by the military authorities was not agricultural within the meaning of section 2(1)(a) or section 2(1)(b)(i) of the Indian Income-tax Act and in that view it rejected the appeal. The assessee applied to the Tribunal to refer the question of the liability of the amount in question to income-tax to the High Court under section 66(1) of the Indian Income-tax Act. Hence the reference.
Section 4(3) of the Act provides :
'Any income profits or gains falling within the following classes shall not be included in the total income of the person receiving them.'
Among such classes of income is 'agricultural income' (clause (iii) of section 4(3).
'Agricultural income is defined in section 2(1) of the Indian Income-tax Act and the relevant portions thereof are as follows :
'agricultural income' means -
(a) any 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 :
(b) any income derived from such land by -
(i) agriculture, or
(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market or
(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him in respect of which no process has been performed other than a process of the nature described in sub-clause (ii)'.
Whatever might be the attempts made by the assessee before the Income-tax Appellate Tribunal to sustain his claim for exemption with reference to the language of section 2(1)(b)(i) before us Mr. Chandrasekhara Sastri the learned counsel for the assessee has in the main confined his argument to the language of section 2(1)(a) of the Act as the basis of the claim for exemption.
Section 2(1)(a) of the Act postulates three requirements which should be satisfied : (i) that the rent or revenue must be derived from the land; (ii) the land should be used for agricultural purposes; and (iii) the lands must be assessed to land revenue in the taxable territories or be subject to a local rate assessed and collected by officer of the Government as such. The lands of the assessee are admittedly assessed lands and therefore, the third requirement is satisfied. The question that we have to determine hinges upon whether requirements 1 and 2 aforesaid are satisfied.
Mr. Sastry contends that the income in question falls within the the scope of the words 'rent or revenue' derived from the land used for agricultural purposes. The first part of the contention of the learned counsel is that the amount in dispute represents 'rent'. It is argued that though actually there is no demise by the assessee of the lands to the military authorities, by reason of the requisitioning of the lands a relationship of landlord and tenant had been created and that the Defence Ministry must be regarded to be a statutory tenant. The learned counsel sought to the support this contention by reference by way of analogy to the Madras Buildings (Lease and Rent Control) Act, 1949, under which when buildings are required for the purposes of the State or Central Government, or any local authority, or of any public institution under the control of the Government or for the occupation of any officer of the Government, the landlord is bound to deliver possession of the building to the authorised officer, the terms of the tenancy being such as might be agreed upon between the landlord and the tenancy being such as might be agreed upon between the landlord and the tenant, and in the absence of such agreement the terms may be determined by the courts referred to in section 3(5) of the Act.
Apart from the inappropriateness implicit in trying to construe the terms of one enactment with reference to the terms of another, we find that under the Madras Buildings (Lease and Rent Control) Act, 1949, there is a provision expressly providing for a tenancy. Neither in the rules made under the Defence of India Act, under which the assessees lands have been requisitioned, nor under the provisions of the Requisitioned Land (Continuance of Powers) Act, 1947, is there in terns any reference to the creation of the jural relationship of landlord and tenant between the requisitioning authority and the person form whom the lands have been so requisitioned.
Mr. Sastry has invited our attention to a decision of the Calcutta High Court of Province of Bengal v Board of Trustees 1. In that case a large block of land vested in the Improvement board of Trustees, Calcutta, was requisitioned by the Government of Bengal under section 75(a) of the rules made under the Defence of India Act (XXXV of 1939). There was no agreement between the parties as to the quantum of compensation and, therefore, there was in consequence a reference to the arbitrator under section 19(1)(b) of the Defence of India Act. When the matter eventually came up before the High Court in appeal, the question that fell for determination by the learned judges was principally as regards the amounts of compensation which were to be determined in accordance with the provisions of section 23 of the Land Acquisition Act.
(1) A.I.R. 1946 Cal. 416.
In the course of the judgment, the learned judges observed that the effect of the requisition under the Defence of India Rules was to deprive the owner of possession and that he must, therefore, get the value of his possession. They also observed and it is on this observation that stress was laid by Mr. Sastry :
'Looking at the matter from another aspect, the requisitioning authority gets the possession from the owner and becomes so to say a statutory tenant.'
We do not read this observation as laying down as a proposition from the owner and becomes so to say a statutory tenant.'
We do not read this observation as laying proposition of law that in all cases of requisition there is the creation of the relationship of landlord and tenant between the requisitioning authority and the owner of the premises requisitioned.
Mr. Sastry has referred u to the assessment order in the instant case where the Income-tax Officer has described the sum in the dispute as the lease amount. The Income-tax Officer was computing the compensation on the basis of the possible loss of the income to the owner of the land by reason of the requisition. Any inappropriate terminology employed by the assessing officer cannot alter the legal incidents attached to the nature of the income in question.
It is then contended that, though the amount in question may not be 'rent' in the strict technical sense in which it is used in section 105 of the Transfer of Property Act, it will certainly fall within the wider connotation of the expression 'revenue'. Revenue has been defined in the Oxford Dictionary as : 'return, yield or profit of any lands, property or other important source of income; that which comes to one as a return from property or possessions, specially of an extensive kind; income form any source by specially when large and not directly earned'. It is contended that inasmuch as the income in dispute is referable to the use and occupation of the assessees lands it would be revenue. But. whether it is rent or revenue, the language of section 2(1)(a) requires that it must be derived from the land which is used for agricultural purposes. In other words, the income whether one calls it rent or revenue must be derived as a result of and in consequence of agricultural operation. It is argued by the learned counsel that the words 'is used for agricultural purposes' are merely descriptive of the nature of the land from which the income is derived and that they do not mean or imply that the income must be derived by the actual carrying on of agricultural operations. We are unable to agree. Apart from the language of the section there is a long and decisive current of legal authority pressing against the contention advanced by Mr. Sastry.
In Raja Mustafa Ali Khan v Commissioner of Income-tax 1 their Lordships of the Privy Council observed :
'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; the expression such land in (b) refers back to the land mentioned in (a) and must have the same quality. It is not then necessary to consider any other difficulty which may stand in the way of the assessee. His case fails if he does not prove that the land is used for agricultural purposes.'
The expression 'agriculture' which is derived form the two Latin words ager and cultura in its literary sense means the cultivation of a field. It has been defined in the Oxford Dictionary as 'the science and art of cultivating the soil including the preparation of the soil, the planting of seeds, the raising and harvesting of crops, and the rearing, feeding and management of livestock, village husbandry and farming in the widest sense.' In its normal sense, therefore, agriculture implies decision of human skill and energy upon the land. In a recent decision of the Supreme Court in Commissioner of Income-tax v. Raja Benoy Kumar sahas Roy 2 after a most comprehensive examination of a large mass of judicial opinion, Bhagwati, J., speaking for the court has laid down that agriculture involves essentially two categories of operations : basic and subsequent. The basic operations are : tilling of the land, sowing of the seeds, planting, and similar operations accompanied by the expenditure of human skill and labour on the land itself. The subsequent operation are after the germination of the produce, such as weeding, digging the soil around the growth, removal of undesirable undergrowth and all operations which foster the growth and preserve the same not only form insects and pests but also from depredation from outside, tending, pruning, cutting, harvesting and rendering the produce fit for the market. The learned judge further held that though the subsequent operations viewed in conjunction with the basic operations form part of an integrated activity, the subsequent operations by basic operations. The learned judge observed :
'One cannot dissociate the basic operations from the subsequent operation and say that the subsequent operations, even though they are divorced from the basic operations can constitute agricultural operations by themselves. If this integrated activity which constitutes agriculture is undertaking and performed in regard to any land that land can be said to have been used for agricultural purposes and the income derived therefrom can be said to be agricultural income derived from the land by agriculture.'
(1)  16 I. T. R. 330, 335.
(2)  32 I. T. R. 466,509; A. I. R. 1957 S. C. 768,788.
From the aforesaid decision it will be clear that an income derived from the land will be agricultural income within the meaning of the Act, only if the income is derived from the land by agriculture, in other words, as a direct consequence of the carrying on of actual agricultural operations. In view of this high authority it is unnecessary to refer to operations. In view of this high authority it is unnecessary to refer to other decisions. The fact that the income is indirectly referable to the land will not invest it with the character of agricultural income.
In Gopal Saran v Commissioner of Income-tax 1 it was held by the Privy Council that an annuity payable under a convenant but charged on land is not agricultural income within the meaning of section 2(1)(a) of the Act and would not partake of the character of rent or revenue derived form the land.
In Raja Mustafa Ali Khan v Commissioner of Income-tax, referred to already, their Lordships of the Privy Council had to consider whether the amounts received as Malikana constituted rent or revenue within the meaning of section 2 a of the Act. The facts of that case were that a proprietor of certain villages alienated several of them for monetary consideration reserving, however, the right to receive a small annual cash payments by virtue of his being the lord of the parganas. The amounts of Malikana were fixed by settlement and were not variable. It was contended before their Lordships that the receipt of Malikana is referable to land and, therefore, would be agricultural income. That contention was repelled by the judicial Committee and it was held that the land was in no real sense the source of income, even though it may be regarded as secured by a charge. If an income is derived form a land which is not used for agricultural purposes it cannot be said that it is agricultural income.
In Emperor v Probhat Chandra Barua 3 it was held that fees received from land used for storing of crops do not come within the definition of agricultural income.
The principle is obvious Where the agricultural land is let out for purposes other than agriculture, such as, for the use of potteries or as brickfields, or as stone quarries or for erecting shops, the income derived therefrom may be indirectly referable to land, but would not be agricultural income, because it is not derived from the carrying on of agricultural operations.
In Vishweshwara Singh v Commissioner of Income-tax a Bench of the Patna High Court has held that where the tenants of the home-stead lands of a zamindar constructed shops and were paying rents therefor, such rents could not be regarded a agricultural income entitled to exemption under section 4(3)(vii) of the Act.
In this case it not suggested that the military authorities had carried on agricultural operations in the lands that they had requisitioned. The amount has been paid to the assessee as compensation under the statutory rules for the deprivation of the income of the owner and in lieu of what otherwise he would have got from the lands. It does not represent the income derived by the owner of land by reason of his own cultivation or the receipt of rent from a tenant who carries on agricultural operations.
In this connection the learned counsel for the Revenue has invited our attention to a decision of the Assam High Court in Senairam Dongarmall v Commissioner of Income-tax 1. In that case certain buildings on a tea estate were requisitioned premises was entitled to compensation. By reason of the acquisition the assessee could not carry on his tea compensation, and it was held that it cannot be agricultural income because the compensation was paid by virtue of the legal liability for the payment of such compensation arising from the requisition of property. The principle of this decision directly applies to the facts of this case.
We hold, therefore, that the amount of Rs. 11,621-5-7 received by the assessee in the circumstances of this case is not 'agricultural income' within the meaning of section 2(1)(a) or section 2(1)(b)(i) of the Act.
The question is answered accordingly. The income-tax Department will have its costs. Advocates fee Rs. 250.
Question answered accordingly.