G. C. DAS J. - This is a reference by the Agricultural Income-tax Tribunal, Orissa, under sub-section (2) of section 29 of the Orissa Agricultural Income-tax Act, 1947, by which the following question of law was referred to this court :
'If a person holding zeraity lands in the district of Ganjam and deriving bhag produce by letting out those lands can be said to be a landlord within the meaning of section 2(h) of the Act and the bhag produce received by him can be said to be rent so as to entitle him to claim the statutory deduction of 20% of such collections as collection charges ?'
The assessee, P. V. Jagannath Rao, was assessed under sub-section (3) of section 20 of the Orissa Agricultural Income-tax Act for the assessment years 1948-49 and 1949-50. He claimed certain deductions under rule 3(1) of the Rules framed under the Orissa Agricultural Income-tax Act. The taxing officer as well as the first appellate authority negatived his contention. When the matter came up in second appeal before the Tribunal, the only question raised was whether the assessee possessing zeraity lands, and letting out those lands on bhag and getting bhag produce can be said to have derived rent so as to be entitled to the statutory deduction of 20% of such collections. The admitted fact was that such produce shares were received from zeraity lands by letting out the same to tenants under bhag. It was contended on behalf of the revenue that such rent-in-kind is not 'rent' to which the statutory deduction can apply. The Tribunal found that notwithstanding the definition of 'rent' as given under the Madras Estates Land Act that it does not include such produce rent, it is included within the meaning of the word 'rent' under section 2(h) of the Orissa Agricultural Income-tax Act. 'Agricultural income' has been defined under section 2(a) (1) to mean any rent or income derived from land which is used for agricultural purposes, and is either assessed to land revenue in the State of Orissa or subject to a local cess or rate assessed and collected by officers of the State Government as such. Under section 6 of the Act, the 'agricultural income' referred to in sub-clause (1) of clause (a) of section 2 shall be deemed to be the sum realised in the previous year on account of agricultural income mentioned in the said sub-clause (1) after making certain deductions. We are concerned with clause (c) of section 6 which lays down that 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 Tribunal eventually held such collections by the assessee to be 'rent'-in-kind, and allowed 20% deduction as contemplated under rule 3(1) which says that the deduction for collection charges to be allowed under clause (c) of section 6 shall be 20% of the total amount of the rent which accrued due in the previous year.
The only controversy as appears in this case is whether the bhag produce received from a tenant is 'rent' within the meaning of section 2(a) (1) of the Agricultural Income-tax Act. The Tribunal was not quite correct when it said that notwithstanding the definition of 'rent' as given under the Madras Estates Land Act that it does not include such produce rent, it is included within the meaning of the word 'rent' as used in section 2(h) of the Act. At the time when the assessment was made in the present case, the Orissa Tenants Protection Act, 1948, was in force. Section 2(c) of that Act defines 'landlord' to mean a person, whether proprietor, sub-proprietor, tenure-holder or raiyat or under-raiyat, either in the raiyatwari area or in the zamindari area or landholder or permanent under-tenure-holder, whose land a person, whether immediately or mediately cultivates as a tenant. Clause (e) of section 2 of that Act defines 'rent' to include whatever is lawfully payable or deliverable by a tenant to the landlord on account of the use or occupation of the land held by the tenant.'Tenant' has been defined under clause (g) of section 2 to mean a person who, under the system generally known as bhag, sanja, kata or such similar expression, cultivates the land of another person on condition of delivering to that person (i) either a share of the produce of such land, or (ii) the estimated value of a portion of the crop raised on the land, or (iii) a fixed quantity of produce irrespective of the yield from the land, or (iv) produce or its estimated value partly in any one of the ways described above and partly in another. We are, however, not concerned with the rest of the section. Certain modifications to Madras Act (1 of 1908) was made under section 13 of the Orissa Tenants Protection Act which provides that the provisions of this Act shall, as far as may be, read and construed as forming part of the Madras Estates Land Act, 1908, or as the case may be, of the Orissa Tenancy Act. Thus, it is evident that the landlord received that amount which was lawfully payable by the tenant for the use or occupation of the land held by the tenant. In the well known case of Commissioner of Income-tax v. Kamakhaya Narayan Singh, the controversy with regard to the interest on arrears of rent whether taxable or not under the general Income-tax Act was set at rest. Lord Uthwatt while delivering the judgment of the Board observed :
'Rent is a technical conception, its leading characteristic being that it is a payment in money or in kind by one person to another in respect of the grant of a right to use land.'
The matter appears to have been concluded by this judgment of the Judicial Committee. The Tribunal, in our opinion, is right in holding that the produce rent received by the landlord in the instant case is 'rent' within the meaning of section 2(a) (1) of the Orissa Agricultural Income-tax Act. Thus, our answer to the question is in the affirmative, and the reference is answered accordingly.
Parties to bear their own costs.
R. K. DAS J. - I agree.
Reference answered accordingly.