1. This is an application under Sub-section (3) of Section 29 of the Orissa Agricultural Income-Tax Act, 1947 against an order of the Revenue Commissioner refusing, to state a case for the decision of the High Court in respect of the assessment of the petitioner of agricultural income-tax for the year 1947-48.
2. The petitioner is the proprietor of the impartible estates of Khallikote, Ataganda and Biridhi. On 26-5-49, the Agricultural Income-Tax officer of Ganjam made an assessment on the total agricultural income of the petitioner for the year 1947-48 as estimated by him. Against that order, the petitioner filed an appeal under Section 25 of the Act before the Collector of Agricultural Income-Tax, Orissa, who dismissed the appeal and confirmed the assessment on the 6th March, 1950. The petitioner then filed a revision petition under Section 23of the Act before the Revenue Commissioner who rejected this petition. Then he applied to him under Sub-section (2) of Section 29 of the Act for stating a case on the ground that important questions of law were involved in his order passed under Section 28 of the Act. The learned Revenue Commissioner rejected thispetition solely because he thought that his order under Section 28 neither enhanced the assessment nor was it otherwise prejudicial to the petitioner and that consequently he (Revenue Commissioner) had no jurisdiction to state a case under Sub-section (2) of Section 29 of the Act.
3. Sub-section (2) of Section 29 (omitting the proviso) is as follows :
'Within sixty days of the date on which he is served with notice of an order under Section 25 or 26 or of an order under Section 28 enhancing an assessment or otherwise prejudicial to him, or of a decision by the Revenue Commissioner under Section 27, the assessee in respect of whom the order or decision was passed may, by application accompanied by a fee of one hundred rupees or such lesser sum as may be prescribed, require that Revenue Commissioner shall, within sixty days of the receipt of such application, draw up a statement of the case and refer it with his own opinion thereon to the High Court.'
That sub-section therefore confers on an as-sessee the right to move the Revenue Commissioner for stating a case if the order of the Revenue Commissioner under Section 28 amounts to enhancement of an assessment or is otherwise prejudicial to him. The language of this sub-section is very similar to that of Section 66 (2) of the Indian Income-tax Act prior to the recent amendment and there are several decisions on the question as to whether an order of a revising authority confirming an assessment made by a subordinate authoritywould amount to an order 'prejudicial' to the assessee within the meaning of Sub-section (2) of Section 66 of the Income-tax Act as amended.
The law on the subject is undoubtedly not clear. But there is a decision of five Judges of the Madras High Court in 'SREERAMULU v. I. T. COMMISSIONER', AIR 1939 Mad 709 to the effect that if the original order of the Income-tax Officer was a prejudicial order the order of the revising authority confirming that order was also equally prejudicial to the assessee. The reasons given by their Lordships in that decision apply with full force to the present case. The Petitioner was all along contending that he was not liable to assessment under the Agricultural Income-tax Act in view of the permanent settlement made with his ancestor under Regulation XXV of 1802. In addition, he contended that he was entitled to some deductions from the total income for the purpose of assessment. All his contentions were rejected both by the Agricultural Incorhe-tax Officer and by the Collector of Agricultural Income-tax on appeal. Their orders were therefore prejudicial to him. The same questions were raised by him before the Revenue Commissioner who heard the revision petition under Section 28 of the Act. The Revenue Commissioner also dismissed all the objections and refused to interfere with the assessment made by the subordinate authorities. Therefore, his order also must be held to be prejudicial to the petitioner in view of the aforesaid Madras decision.
I am fully alive to the fact that the correctness of some of the observations in that Madras decision has been doubted in 'I. T. COMMISSIONER v. BISHWAMBHARLAL', AIR 1944 Bom 150, though in 'AMULAKHARAI v. I. T. COMMR., BURMA', AIR 1940 Rang 175 the Madras view was not dissented from but distinguished to be inapplicable to the facts of that case. There is a later Lahore decision reported in 'TRIBUNE TRUST LAHORE v. INCOME-TAX COMMR., PUNJAB N. W. F. and DELHI PROVINCES'. AIR 1944 Lah 445 following the Madras view. I would, with respect, follow the decision of the five Judges of the Madras High Court, and hold that the order of the Revenue Commissioner is prejudicial to the assessee inasmuch as it has the effect of confirming the orders of the subordinate authorities which were themselves prejudicial to the assessee. The Revenue Commissioner has therefore taken a wrong view of law in refusing to state a case in exercise of the powers conferred by subsection (2) of Section 29 of the Agricultural Income-tax Act.
4. The next question for consideration is whether any question of law arises on the decision of the Revenue Commissioner under Section 28 so as to justify our directing him to state a case. The questions of law have been formulated by the petitioner in his application to this Court and they may be dealt with serially.
5. The first contention of the petitioner was that as the holder of an impartible estate governed by the Permanent Settlement Regulation No. XXV of 1808 (1802?) he was not liable to agricultural income-tax. This point has been fully set at rest by the various decisions of the Privy Council. In 'PRABHAT CHANDRA v. EMPEROR', AIR 1930 PC 209 it was pointed out that the Bengal Permanent Regulation No. I of 1793 did not exempt the zamindar from any future general scheme of property taxation. That case undoubtedly arose in respect of anassessment to income-tax. In 'HULAS NARAIN v. PROVINCE OF BIHAR', AIR 1942 FC 8, a similar question arose in respect of liability toassessment to agricultural income-tax of the zamindars of Bihar who were also governed by the Bengal Permanent Regulation No. I of 1793. Their Lordships of the Federal Court relied on the aforesaid decision of the Privy Council andheld that the Bihar Agricultural Income-tax of 1938 did not in any way whittle down or derogate from the assurance given to the zamindars by the Bengal Permanent Regulation No. I of 1793. Mr. Patnaik, however, urged that though the aforesaid decisions may be conclusive in respect of zamindars created by the Bengal Permanent Settlement Regulation No. I of 1793 there were some distinguishing features in respect of the permanently settled zamindaries of the old Madras Presidency which were governed by the Madras Permanent Settlement Regulation No. XXV of 1802. This point also has been set at rest by a decision of the Privy Councilreported in 'GANGADHARA RAMA RAO v. I. T. COMMR. MADRAS', AIR 1949 PC 294, which was a case which went up from Madras. Mr. Patnaik however urged that certain aspects of the question were not fully considered in the Privy Council decision and wanted to agitate them in this case. We, are, however, satisfied that the decisions of the Privy Council and the Federal Court mentioned above are binding on us and this question of law cannot be agitated here.
6. The second contention of the petitioner was that the income derived by him prior to the commencement of the Orissa Agricultural Income-tax Act, 1947 was not liable to assessment inasmuch as no retrospective effect was given to that Act. Section 1 of the Act was brought into force on the 12th July, 1947 and other sections of the Act were brought into force on 1-4-48. The charging section of the Act is Section 3 which says that agricultural income-tax shall be charged on the total agricultural income of the previous year of every person. The expression 'previous year' has been defined in Clause (n) of Section 2 of the Act as meaning
'the twelve months ending on the 31st day of March preceding the year for which the assessment is to be made.'
The year of assessment of the petitioner was 1948-49 which admittedly is after the coming into force of all the provisions of the Act. By virtue of the definition of the expression 'previous year' the agricultural Income-tax authorities took into account the income of the petitioner for the year 1947-48 and made the assessment accordingly. Mr. Patnaik urged that by so taking the income of 1947-48 into consideration for assessment, in effect retrospective effect was being given to the Act in the absence of any express provision. I am however unable to accept this contention. The Agricultural Income-tax Act does not say, either expressly or by implication, that for the first one year after its coming into force no assessment can be made at all. If Mr. Patnaik's contention is to be accepted, for the whole of the year 1948-49 no assessment can be made because by virtue of Section 3 the assessment for a year must be based on the total agricultural income of the previous year. In the absence of an express provision for the year 1948-49 the reasonable construction would be that the income of the year 1947-48 also would be liable to assessment in 1948-49 notwithstanding the absence ofany express words in the Act giving such limited retrospective effect. It can be inferred by necessary implication in view of the definition of the expression 'previous year' contained in Clause (n) of Section 2 read with the charging Section 3.
7. The third contention of the petitioner was that deduction should have been allowed for the collection charges in respect of arrear of rent from the tenants realised by the assesses in the year 1947-48. For appreciating this point it is necessary to quote the relevant provisions of Section 6 (c) which are as follows :
'Section 6. The agricultural income referred to in Sub-clause (1) of Clause (a) of Section 2 shall be deemed to be agricultural income mentioned in the said Sub-clause (1), after making the following deductions :
* * * * (c) a sum equal to such percentage as may be prescribed of the total amount of the rent which accrued due in the previous year in respect of the charges for collecting the same.'
The Agricultural Income-tax authorities construed Clause (c) of Section 6 to mean that deductions for collection charges should be made not in respect of the total rent (whether arrear or current) actually realised in the previous year but only in respect of that rent which accrued due in that previous year. Therefore, for the year 1947-48, they allowed deductions in respect of the rent that accrued due for that year but refused to allow any deduction for the rent actually realised in that year in respect of the previous arrears. I think the view taken by the Agricultural Income-tax authorities is correct. It is fully supported by a decision of the Patna High Court on the analogous provision of the Bihar Agricultural Income-tax Act 'KAMESHA-WAR SING v. GOVERNMENT OF BIHAR', AIR 1943 Pat 1 and I would, with respect, agree with the observations of the learned Judges of the Patna High Court. When the Legislature in Section 6 used the words 'sum realised in the previous year on account of agricultural income' and in Clause (c) used the words 'rent which accrued due in the previous year' the reasonable inference is that though the liability to assessment arises in respect of the total income actually realised in the previous year the deduction for collection charges would be only in respect of that portion of the rent which accrued due during that year. The case on which rent accrued due in the estate governed by the Madras Estates Land Act is to be gathered from Sections 59 and 60. Past arrears cannot reasonably be said to have accrued due in the year 1947-48. This may undoubtedly work some hardship in the first few years of the coming into force of the Agricultural Income-tax Act inasmuch as the assessee may not be entitled to any deduction in respect of collection charges for past arrears of rent actually realised in on assessment year. But the language of the section is clear and unambiguous and considerations of hardship are out of place.
8. The fourth contention of the petitioner was that a sum of Rs. 7198/- spent by him for charitable purpose ought to have been deducted from the total income. The finding of the Agricultural Income-tax Officer is that the sum was not spent for charitable purpose but towards meeting the deficit of the expenditure on various temples mentioned by the petitioner. It was urged that though that aforesaid sum was given to meet the deficit, in respect of the expenditure incurred in the temples of the estate it was actually expended in feeding the poor in the temples and that consequently it would amount to expenditure for charitable purposes. This is however a question of fact which cannot be taken up at this belated stage. The petitioner did not lead any evidence nor is there any finding of the lower Courts to the effect that the said sum though ostensibly given for expenditure on the temples was in fact for feeding the poor inside temples. I would, therefore, disallow this objection as involving no question of law.
9. Lastly it was contended that the maintenance allowance paid by the petitioner to his son who was studying in Madras at all relevant times ought to have been deducted from the total income. The Revenue Commissioner in his order of revision observed that the pocket money paid by the petitioner to his son and the other expenses for his education cannot be called maintenance allowance inasmuch as it was fluctuating and payable at the sweet will of the payer and not restricted by any special agreement between payer and the payee as acquittance against any claims for the time being on the estate as a maintenance allowance. Mr. Patnaik however disputed the correctness of the statement of law. Our attention has been invited to Sub-rule (2) of Rule 3 of the Orissa Agricultural Income-tax Rules, 1948 which describes in detail the allowances payable to the relations of the proprietor of an impartible estate which are lawful deductions under the Act. That sub-rule is as follows :
'(2) In addition to the deductions specificallyallowed under Section 6, the following deductionsprovided under Clause (k) of that section shallbe allowed :--
Maintenance allowance actually paid to the following members of the proprietor's family owning an impartible estate, provided that the aggregate of the allowances so paid shall not exceed one-fifth of the net income of the estate, namely :--
(a) the son, grandson, or great grandson in the male line, born in lawful wedlock or an adopted son of any previous proprietor of the impartible estate :--
(b) the widow of a previous proprietor so long as she does not remarry :
(c) the widow of the son, grandson or great grandson of the proprietor so long as she does not remarry, or the widow of the son, grandson or great grandson of any previous proprietor so long as she does not remarry, provided that in all cases the widow has no son or grand-son :
(d) the unmarried daughter born in lawful wedlock of any previous proprietor :
(e) the unmarried daughter born in lawful wedlock of a son or grandson of the proprietor or of any previous proprietor, provided that she has neither father, nor mother nor a brother living.'
Mr. Mohapatra on behalf of the Department urged that Clause (a) of that sub-rule expressly refers to the previous proprietors of the estate and that consequently the maintenance allowance contemplated in that clause must refer to the allowance payable to a person who though a member of the present proprietor's family, is entitled to maintenance by virtue of his relationship with the previous proprietor. There seems to be much force in this contention because any expenditure incurred for the maintenance of the wife or the daughters of the pre-sent proprietor is not referred to at all in the various clauses of that sub-rule. Mr. Patnaik however urged that the son of the petitioner is the grandson of the previous proprietor and as such may come within Clause (a) of that sub- rule. But the allowance paid to the son of the proprietor is paid to him qua his son and not qua the grandson of the previous proprietor. In any case, I do not wish to finally decide this point now because I feel that this is an arguable point of law which would justify statement of a case for the final decision of this Court.
10. I should now refer to an important question of law raised by Mr. B. Mohapatra regarding the true effect of the first proviso to Sub-section (2) of Section 29 of the Act. That proviso is as follows :
'Provided that a reference shall lie from an order under Section 28 only on a question of law arising out of that order itself, and not on a question of law arising out of a previous order under Section 25 or 26 revised by the order under Section 28.'
Mr. Mohapatra urged that if the Revenue Commissioner while passing an order in revision under Section 28 had discussed any new question of law not taken up either before the Collector of Agricultural Income-tax or before the Agricultural Income-tax Officer then a case may be stated for the consideration of the High Court under Sub-section (2) of Section 29 on that question of law. If, however, the Revenue Commissioner agreed with the view the latter part of the said proviso comes into play and no case can be stated in respect of those questions of law on which the Revenue Commissioner and the Collector had both agreed. In such a case, if the party really felt aggrieved by the view taken by the Collector of Agricultural Income-Tax they ought to have applied to the Revenue Commissioner within sixty days from the date of the order of the Collector for stating a case to the High Court under Sub-section (2) of Section 29. Instead of doing so, they preferred a regular revision petition before the Revenue Commissioner under Section 28 and thereby disentitled themselves from raising the same questions of law in an application under Sub-section (2) of Section 29. This argument is undoubtedly attractive and I think it is supported by some authorities based on the analogous provisions of Section 66 (2) of the Indian Income-tax Act prior to the amendment made in 1939. In that Act also, there was a proviso to Sub-section (2) of Section 66 very similar to the first proviso to Sub-section (2) of Section 29 of the Orissa Agricultural Income-tax Act. The appellate order passed by the Collector of Agricultural Income-tax under Section 25 corresponds to the appellate order passed by the Assistant Commissioner under the Income-tax Act under Section 31 of that Act. The power of the Revenue Commissioner in revision under Section 23 of the Agricultural Income-tax Act corresponds to the power of revision conferred on the Commissioner of Income-tax under Section 23 of that Act. In 'I. T. COMMR. v. BISH-WAMBHARLAL', AIR 1944 Bom 150 Beaumont C. J. relying on 'EAST KHAS JHERIA COLLIERY CO., LTD. v. COMMR. OF INCOME-TAX B. & O.', AIR 1943 Pat 41 and 'EMPRESS MILLS v. COMMR. OF INCOME TAX C. P. and U. P.', AIR 1937 Nag 154 held
'if the Commissioner in a case under Section 33, and in which he has revised an order made under Section 31 or Section 32, agrees with the view taken by the officer under oneof those sections, then the proviso precludes him from making a reference; the assessee has got to ask for the reference direct from an order under Section 31 or Section 32 within the time limited. But if in reviewing an order under Section 33, the Commissioner differs from the order on a point of law, or upholds it on a different point of law to 'that which influenced the lower tribunal', then a reference can be made against the order under Section 33 because it raises a point of law arising only under that order.'
For the purpose of this case, it is unnecessary to decide finally whether we should follow the aforesaid view by the Bombay High Court. Even if we assume the said view to be correct, we have jurisdiction to direct the Revenue Commissioner to state a case in respect of the eligibility for deduction of the maintenance allowance given to the assessee's son because this question of law was decided by the Revenue Commissioner under Section 28 on a consideration different from that which weighed with the Collector of Agricultural Income-tax.
The Collector in para 12 of his judgment has not given reasons as to why he disallowed that maintenance allowance but merely stated 'Such an allowance is not contemplated under the Rules and has been rightly disallowed'. It was the Revenue Commissioner who in his order under Section 28 for the first time purported to lay down a proposition of law to the effect that
'any amount paid, which (was?) fluctuating and payable at the sweet (will of the?) payer and (not ?) restricted by any special agreement between payer and the payee as acquittance against any claims for the time being on the Estate.'
would not amount to maintenance allowance as contemplated by the rules. Thus though the Revenue Commissioner upheld the order of the Collector of Agricultural Income-tax the reasons given by him in respect of this item deal with a new question of law which does not appear to have been taken up either before the Collector of Agricultural Income-tax or before the Agricultural Income-tax officer. It is true that before both the said authorities the assessee claimed the deductions to be permissible under the rules. But they did not disallow his claim on the ground that the allowance is 'fluctuating or payable' at the sweet will of the payer and not restricted by a special agreement between the payer and the payee'. I would therefore hold that the passage underlined (here in inverted commas) in the said observations of Beaumont C. J. in the Bombay case quoted above would apply with full force even if we accept the Bombay decision as correct regarding the construction of the proviso. The assessee is therefore entitled to the statement of a case on this limited question of law.
11. I would therefore allow the petition to a limited extent and direct the Revenue Commissioner (now Member, Board of Revenue) to state the following case and refer it to this Court :--
Whether on the facts and circumstances of this case, the expenses incurred by the petitioner on behalf of his son (Jubaraj) would amount to maintenance allowance as contemplated in Sub-rule (2) of Rule 3 of the Orissa Agricultural Income-tax Rules, 1948.
12. Both parties will bear their costs of this application.
13. I agree with the order proposed by my learned brother. Theonly question about which, I had some hesitation was whether an order of the Revenue Commissioner under Section 28 of the Act declining to interfere with the order of the appellate authority can be said to be an order prejudicial to the assessee. With reference to the correspond-ing provisions of the main Income-tax Act as it was before the amendment of 1939, there have been conflicting decisions as noticed by my learned brother. But that conflict was set at rest, so far as that Act is concerned, by the new Clause 33-A which contains a proviso to Sub-section 2 thereof as follows :
'Provided further that an order by the Commissioner declining to interfere shall be deemed to be prejudicial to the assessee.'
The use of the word 'deemed' in this proviso indicates that but for the proviso, an order declining to interfere is an order prejudicial to the assessee. The Orissa Legislature, while enacting the Agricultural Income-tax Act of 1947 and having this proviso to the parent Income Tax Act before it, did not choose to enact any such proviso to Sub-section 28 thereof. On the other hand, the proviso to subjection 2 of Section 28 of the Act is as follows :
'Provided that he shall not pass any order prejudicial to an assessee other then an order declining to interfere, without hearing him or giving him a reasonable opportunity of being heard.'
This seems clearly to indicate that the Orissa Legislature assumes, that an order declining to interfere, is a prejudicial order and hence specifically provides that the Revenue Commissioner is under no obligation to hear the assessee in such a case.
14. I am, therefore, of the opinion that an order declining to interfere in revision under Section 28 of the Orissa Agricultural Income-Tax Act is an order prejudicial to the assessee within the meaning of Section 29 thereof.
15. Learned Counsel for the Collector of Agricultural Income Tax has also argued that since the Revenue Commissioner refused to state the case, not on the ground that the question of law arises, but on the ground that he has no jurisdiction, Sub-section (3) of Section 29 has no application and that we have consequently no power to require the Revenue Commissioner to state a case. I am not prepared to agree with this contention. When the Revenue Commissioner erroneously thinks that he has no jurisdiction and therefore declines to consider whether any question of law arises for reference, he has refused to state the case 'on the ground that no question of law arises' for his consideration because he has no jurisdiction to consider it.