Skip to content


income-tax Officer Vs. Chander Bhan - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Chandigarh
Decided On
Judge
Reported in(1984)10ITD269(Chd.)
Appellantincome-tax Officer
RespondentChander Bhan
Excerpt:
.....lordships further clarified the issue in the following words : ... for the rent of agricultural land received by a usufructuary mortgagee is agricultural income not because he is a usufructuary mortgagee but because, being a usufructuary mortgagee, he has gone into possession and received the rent. the assessee, being a mortgagee, usufructuary or other, has gone into possession and rent that he received is agricultural income.the above case is on all fours applicable in favour of the assessee on the basis of facts available, about which there is no dispute.4. reliance of the learned departmental representative on the case of kunwar trivikram narain singh (supra) is misplaced due to distinction in facts. that was a case where an assessee was given the jagir in perpetuity and the.....
Judgment:
1. The sum and substance of all the grounds raised by the revenue in this appeal is in respect of the action of the AAC who considered that income earned by the assessee in a sum of Rs. 40,398 on account of leasing out of agricultural land, which was first taken by the assessee on mortgage with possession, is agricultural income and not revenue income, as held by the ITO.2. The learned senior departmental representative, Mr. R.K. Bali, mainly relied on the order of the ITO and submitted that reliance of the learned counsel for the assessee on the case of CIT v. Kameshwar Singh 1 SC Tax Cases 706, is misplaced because in the said case mutation in the name of the mortgagee-transferee was there but it is not so in the instant case. He relied on the cases of CIT v. Kunwar Trivikram Narain Singh [1965] 57 ITR 29 (SC) and Premier Construction Co. Ltd. v. CIT [1948] 16 ITR 380 (PC). He also relied on Kanga and Palkhivala's The Law and Practice of Income-tax, Vol. 1, Seventh edn., page 349. The learned counsel for the assessee, Mr. Prem Nath Jain, on the other hand, beside relying on the order of the AAC and the case of Kameshwar Singh (supra), mainly relied on the case of Mustafa AH Khan v. CIT 1 SC Tax Cases 721 (PC). He also submitted that in earlier years, addition of the type was never made by the revenue and he drew our attention to the assessee's compilation which mainly comprised of copies of the mortgage deeds and the agreement. He took us through one of the same and submitted that possession of the agricultural land which was mortgaged with the assessee by borrowers was admittedly given and the possession was undisputably of the assessee. After that the assessee could cultivate the said land by himself or could get it cultivated by any one and, therefore, income from the same in the hands of the assessee could not be anything but agricultural.

3. After taking into consideration the rival submissions and looking to the. facts available on record, we are unable to interfere in the finding of the AAC. There is no controversy about the following facts : (i) The assessee advanced loans to agriculturists on usufructuary mortgage.

(ii) The said mortgage deeds were duly registered and, as per the same, possession was to be with the assessee and he could do the cultivation of the said lands which was mortgaged with it in any way he liked.

(iii) That the very same lands, in most of the cases were given back on lease for cultivation to the mortgagors and it was as per the said agreement that the assessee was to be paid and was actually paid 'chokota'.

We are unable to hold the said income anything but agricultural because the same is driven from cultivation of agricultural land which was in possession of the assessee and which was got cultivated by the assessee as a mortgagee-lessor. The finding of the AAC is covered on all fours by the Privy Council decision in the case of Mustafa Ali Khan (supra).

In the said case, certain agricultural lands were mortgaged as per usufructuary mortgage deed by Nanpara Estate as mortgagor in favour of the Court of Wards, acting on behalf of the assessee, the Raja of Utraula, as mortgagee. Simultaneously the Court of Wards, acting on behalf of the assessee, leased back to the Raja of Nanpara by a lease of the same date the whole of the mortgaged property at an annual rent equivalent to the annual instalment payable under the mortgage, on the basis of above facts, their Lordships held as under : ... The salient and decisive fact was that the assessee being in possession of the mortgaged property was entitled to receive and received the rents thereof. That if the assessee was truly a usufructuary mortgagee within the meaning of Section 58(d) of the Transfer of Property Act, 1882 and in that capacity received the rent in question, it would be in his hands agricultural income and exempt from tax.

... if the assessee was not such a usufructuary mortgagee, then, notwithstanding that he went into possession and received the rent, it was not agricultural income.

With that observation, their Lordships further clarified the issue in the following words : ... For the rent of agricultural land received by a usufructuary mortgagee is agricultural income not because he is a usufructuary mortgagee but because, being a usufructuary mortgagee, he has gone into possession and received the rent. The assessee, being a mortgagee, usufructuary or other, has gone into possession and rent that he received is agricultural income.

The above case is on all fours applicable in favour of the assessee on the basis of facts available, about which there is no dispute.

4. Reliance of the learned departmental representative on the case of Kunwar Trivikram Narain Singh (supra) is misplaced due to distinction in facts. That was a case where an assessee was given the jagir in perpetuity and the quantum of pension being calculated was based on the revenue collections of the jagir. It was this income which was held to be nonagricultural. In that case, their Lordships of the Supreme Court held that as per arrangement available in the said case, the assessee had no interest in the land or in the land revenue payable in respect thereof and the source of income was the arrangement and income in that case was not derived from land, and, therefore, not agricultural income. It is not so in the instant case. Income in the instant case, is derived from agricultural land which came in possession of the assessee as usufructuary mortgage. Similarly, reliance of the learned departmental representative on the case of Premier Construction Co.

Ltd. (supra) also does not take the revenue's case any further. That was a case where payment of commission was to be worked out, on the basis of agricultural income. In that case, the company had agricultural income and the assessee claimed that as its remuneration was calculated with reference to the income of the company, part of which was agricultural income, such part of the remuneration as was proportionate to the agricultural income of the company, was itself agricultural income and as such exempt from income-tax. It was on the basis of these facts that their Lordships held : ... that the assessee received no agricultural income as defined by the Act, that it received remuneration under a contract for personal service calculated on the amount of profits earned by the employer, payable, not in specie out of any item of such profits, but out of any moneys of the employer available for the purpose and that the remuneration therefore was not agricultural income and was not exempt from tax. (p. 381) It is apparent that the above finding, on which the learned departmental representative relied, is on different set of facts. In the light of above discussion and mainly relying on the case of Mustafa Ali Khan (supra) and for the reasons given by the AAC in his order, his action is hereby confirmed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //