1. This reference arises out of the assessment of income-tax under Act VII of 1918 of the income derived by the Zemindar of Singampatti from forests and fisheries within the ambit of his zemindari. The assessee objects to the assessment, (a); on the ground that income is agricultural income within the meaning of Section 4 of the Act, and, therefore, not chargeable to income-tax, and (b) that the assessment is illegal as contravening the terms of his permanent sanad of the zemindari and the provisions of Regulation XXV of 1802.
2. It is convenient to consider first the effect of the sanad a copy of which has been filed before us, and the terms of the Regulation. The sanad is a lengthy document largely reproducing the language of the Regulation under which it was granted. Its general effect is this, that in view of the bad effect of fluctuations in the assessment of land revenue both in obstructing the development of the country and diminshing the security of property, the British Government has resolved 'to fix for ever a moderate assessment of public revenue on the lands' held by zemindars and others: and to that end has fixed the permanent annual junta (total demand) of the Singampatti Zemindari at 2,300 star pagodas. Clause 4 of the sanzd says: 'This permanent assessment of the land-tax on your zemindari is exclusive of the revenue derived from the manufacture and sale of salt and salt-petre, exclusive of the sayer or duties of every description, whether by sea or land the entire administration of which the Government reserves to itself; exclusive of the abkari or tax on the sale of spirituous liquors, and intoxicating drugs, exclusive of the excise which is or may be levied on commodities or articles of consumption; exclusive of all taxes personal and professional, as well as of those from markets, fair and bazaar; exclusive of lakheraj lands (lands exempt from payment of public revenue) and of all other alienated lands paying a small quit rent (which quit rent unchargeable by you is included in the assets of your zemindari); and exclusive of an lands and trussooms heretofore appropriated to the support of Police establishment. The Government reserves to itself the entire exercise of its discretion in continuing or abolishing temporarily or permanently the articles of revenue included, according to the custom and practice of the country, under the several heads above stated.'
3. A later clause (No. 8) provides that no increase of the fixed junta shall ever be made, whatever changes or improvements the grantee's interest or pleasure may lead him to introduce into the zemindari.
4. This is the grant under which the zemindari has been held since 1802. A dispute at one time arose as to whether it included the forest tract with which we are now concerned, or only covered the villages and cultivated lands situated on the plains and contiguous thereto. This dispute was settled by the judgment of this Court in Sivasubramanya v. Secretary of State for India in Council 3 Ind. Dec. 595 cofirmed on appeal by the Privy Council in Secretary of State for India in Council v. Nellakutti Siva Subramania Tevar 15 M. 101 : 181 A. 140 and it was decided that the forest tracts also were included in the zemindari held under the sanad, and that the latter was not confined to the plain village and cultivated tracts. The learned Government Pleader has, however, argued that the psishcush was calculated on the rental of cultivated lands actually received by the zemindari at the time of the grant, and that no allowance was made for profits to be made out of forests and fisheries. He would have us, therefore, hold that income from such sources was not included in the jama, which was commuted into a fixed peishcush, and is, therefore, assessable to tax apparently under any designation.
5. Admittedly there is no record of the basis of calculation of the peishcush for the zemindari. It is quite possible that only the rentals of cultivated lands were taken into account; receipts from other sources being at that time so small as to be negligible. But, even assuming this to be so, it does not follow that the neglected items were not included in the commutation. On the contrary, it seems to us they must be held to be covered by the permanent annual jama of the zemindari. Put in simple language, the effect of the document seems to be that, subject to the payment of the peishcush and the various demands referred to in Clause 4 the zemindari is given to the zemindar to make what he can out of it (the possibilities of improvements and developments being distinctly contemplated) free of all further demands from Government. If it had been intended to exclude profits from foresrts and fisheries, such profits would surely have been mentioned in Clause 4 along with such items as salt, sayer, abkari, exicse and markets. We may add that if the Government Pleader's contention is correct, then, apart from the claim to ownership of the forests, which was first put forward by Government in 1865 and finally negatived by the Privy Council decision in 1891, it was at any time open to Government to add to the peishcush a direct cess on the forests, without having recourse to the indirect medium of the Income-Tax Act. As far as appears, there has never been any question of doing this.
6. It was argued that 'income-tax' is covered by the fifth item in Clause 4, ('all taxes, personal and professional').
7. We do not think this argument can be accepted. The last sentence in the clause shows that, as regards Clause 4, the Government had in mind items of taxation then in force and income-tax is of much later invention. Exactly what imposts were had in the mind under this head we are not in a position to say: but the allocation of the words 'personal' and professional' seems to suggest taxes on individuals by reason of their status (caste or calling). Power to levy a tax in the shape of a percentage on income derived from the zemindari itself would apply to the rental of cultivated lands just as well as to income from forests and would render entirely nugatory the guarantee of fixity of demand,' which was the key-note of the Government's policy.
8. We can only conclude, therefore, that peishcush was fixed in commutation not only of the rentals of cultivated lands but also of all income which might be derived from forests or fisheries: and the Sanad and Regulation alike make it clear that these incomes in the hands of the zemindar were exempted from further taxation by the Government.
9. For the explicit nature of the exemption we may quote the words of Section 1 of the Regulation which recites that Government has resolved 'to fix for ever a moderate assessment of public revenue on such lands, the amount of which shall never be liable to be increased under any circumstances;' and these words are produced in Clause 2 of the sanad with the immaterial substitution of the word 'charge' for 'increase'.
10. That this exemption applies to taxes which might be imposed thereafter, as well as to taxes in force at the time of the sanad is clear from the judgment of the House of Lords in Associated Newspapers; Limited v. City of London Corporation (1916) 2 A.C. 429 : 115 L.T. 419 : 60 L.J. 694. and it is no less clear from the judgment. that although it is competent to the Legislature to withdraw or modify such an ex emption by subsequent enactment, this can only be done expressly and not in general; terms or by implication. For the latter proposition we may also refer to Maxwell on Interpretation of Statutes (6th Edition) Chapter VII, Section 3.
11. There is nothing in the Income-Tax Act to indicate that the attention of its framers was ever drawn to Regulation XXV of 1802; and we find it impossible to treat as a legal and effective abrogation of the exemption the words of Section 3.
12. 'Save as hereinafter provided, this Act shall apply to all income from whatever source it is derived if it accrues or arises or is received in British India, or is, under the provisions of this Act, deemed to accrue or arise or to be received in British India.'
13. In our opinion the assessee's objection based on the term of the sanad is sound and must prevail.
14. It is, therefore, not necessary to determine whether income from forests and fisheries comes under the definition of agricultural income. At first glance it may seem difficult to include either, and especially the fishery income. It may, however, be pointed out that a reference to Murray's and Webster's Dictionaries shows that the word 'agriculture,' while sometimes used in the narrow sense of the art, or science of cultivating the ground, is also used in a much wider sense so as to include' even 'forestry' according to Webster. In which sense it was used by the framers of the Income-Tax Act would be a matter for determination and to this end, it would not be out of place to consider the probable reason for the exemption of agricultural income from income-tax. No other reason is suggested than the equity of exempting from further burden, income which had already paid toll to the State in the shape of land revenue. This applies equally nether the land is liable to raiyatwari assessment, or whether Government demands have been permanently commuted as in the case of a permanently settled estate. Logically, the exemption from further burden should apply to both; and it would seem that it ought to cover all sources of income which had been commuted under a Permanent Settlement.
15. We would answer the reference by saying that the income from forests and fisheries in the Singampatti Zemindari is not liable to income-tax.
16. The s ssessee's costs will be borne by, Government, Vakil's fee will be Rs. 25.