NASIM ALI, J. - These two appeals arise out of a suit for recovery of road cess, mine cess and income-tax charged on the royalty payable for a certain colliery under the terms of a registered indenture of lease. The trial Judge decreed the suit. On appeal by the Defendants to the lower Appellate Court the learned District Judge has affirmed the decree of the trial Judge for road cess and mine cess but has dismissed the Plaintiffs claim for income tax. Hence these two second appeals one (S. A. No. 856) by the defendants, and the other (S. A. No. 1003) by the Plaintiffs.
The point for determination in the two appeals is whether under the terms of the lease the Plaintiffs are entitled to recover (a) Road cess, (b) Mine cess, (c) Income tax, paid by them on the royalties reserved in the lease.
The relevant clauses in the lease are these :-
'(a).............. The lessee shall pay the royalties reserved in the lease at the time and manner appointed in that behalf and shall also pay and discharge all taxes, rates, assessments and imposition whatever, being in the nature of public demand which shall from time to time be charged, assessed or imposed upon the said mines or any part thereof by the authority of Government of India or the said local Government except demand of land revenue.......'.
It is contended on behalf of the lessee that the object of the covenant to pay taxes, rates, assessments and impositions was not to throw upon the lessee the burden of the assessments payable by the lessor under the statutes, but only to state the liability of the lessee to pay his share of the assessment under the statute laws. The words 'all taxes, etc.,' indicate that the lessee was made liable by the covenant for the whole of the impositions upon the demised mines payable by the lessor and the lessee and not simply for the portion payable by the lessee only. If the object of the covenant was to make the tenant liable for his share of the assessments only, there was no necessity for inserting it in the lease - because the liability was already fixed by the statutes. The covenant was not intended to be a mere surplusage but was framed with the object of throwing on the tenant the burden of obligations which, in the absence of such a covenant, might have fallen on the landlord.
The question is whether the burden of the obligations in the present case namely, road cess, mine cess and income-tax which was on the plaintiffs has been thrown on the defendants by the operation of the covenants in the lease.
The contention on behalf of the tenant is that these impositions do not come within the covenants in the lease as they are not charged upon the mines but are charged upon the landlord in respect of the mines.
Now, what is the difference between an imposition upon the mines and an imposition in respect of the mines All impositions are ultimately charged to the landlord or the tenant or both. Mr. Boses contention however is that when parties to a covenant use the words 'imposed, assessed or charged upon the premises' the meaning of the words is the sense in which the words are used in the statute. In support of his contention he invited our attention to the following passage in the judgment of BANKERS, J. in East Wood v. MacNab [1914, 2 K. B. 361] :
'When parties to a covenant use the words charged on premises the meaning of charged includes the sense in which the word is used in the statutes.'
In this passage the word 'includes' has been used by the learned Judge. This word is wider than the word 'means.'
[With regard to road cess and mine cess his Lordship held that the obligations cannot be limited to charges on the mines themselves but extended to charges imposed in respect of the on persons, namely landlord or tenant, and that the tenant undertook the liability to pay all charges of a recurring nature imposed by the statutes, whether they are described in the statute as imposed on the mines or on the lessor or the lessee in respect of them and that the decision of the Courts below on the point was right.]
As regards the claim for income tax, the contention of the lessor is that it is also within the covenant. For the purposes of decision in the case I do not express any opinion on this question as the Plaintiffs claim under this head fails for want of any materials to show what amount was imposed on them under the Income-tax Act for the demised mines only. The amount claimed by the Plaintiffs as income-tax has not been separately assessed on them by the income-tax authorities under the Income Tax Act. The amount claimed in the plaint has been laid at a certain figure by the Plaintiffs on calculation at a certain rate on their income from the mines. This rate is not the rate imposed on the Plaintiffs income from mines alone by the income tax authorities. It has been fixed not only with reference to the income from the mines but also with reference to their other sources of income. The amount claimed under this head is not therefore the amount imposed by the income-tax authorities under the Income Tax Act in respect of the mines only.
The result therefore is that both the appeals are dismissed. The parties are directed to bear their own costs in these two appeals.
EDGELY, J. - [His Lordship concluded as follows on the question of road-cess and mine-cess and then proceeded to deal with income tax.]
It seems to be clear, therefore, that the liability to pay the road cess and the Mines Board of Health cess arises directly in connection with the ownership of the mines or the receipt of income arising therefrom. These taxes are also separately assessed upon the persons concerned and they must I think be regarded as charges which the lessees have rendered themselves liable to pay under the terms of the covenant and I am opinion that the lessors have clearly contracted themselves out of any statutory liability which they would otherwise have incurred with reference to these taxes.
Different considerations apply, however, in the case of income tax. With regard to this tax I am in agreement with the learned District Judge in thinking that it is a personal tax. Further, as was pointed out by Lord Macnaghten in the case of the London County Council v. The Attorney General, income tax
'is a tax on income. It is not meant to be a tax on anything else. It is one tax, not a collection of taxes essentially distinct.'
In this connection it is argued by learned Counsel for the Appellants in Appeal No. 1003 of 1933 that income-tax must also be regarded as having been contemplated by the parties to the covenant, in view of the fact that mines are property and property is one of the heads of income chargeable to income tax under sec. 6 of the Income Tax Act (Act XI of 1922). It must however, be remembered that income-tax is assessed under sec. 23 of the Act not separately in respect of the various items mentioned in sec. 6, but upon the total income, of the assessee. Under sec. 2(15) of the Act the expression 'total income' means the 'total amount of income, profits, and gains from all sources to which this Act applies computed in the manner laid down in sec. 16', which latter section relates to exemptions and exclusions in determining the total income. Having regard to the provisions of the Income Tax act with regard to assessment, it would in this particular case be impossible to separate any income tax which might be payable upon the mines from the total amount of income-tax payable by the party concerned. The amount of the income-tax payable by a person who owns mines or derives any portion of his income therefrom is not separately assessed upon the mines and the income arising therefrom but is assessed upon his total income which is determined according to certain specific directions contained in the Income Tax Act. In my view such a tax cannot be said to be a tax upon the mines and could not have been in contemplation of the parties when the lease was executed.
I therefore agree that these two appeals must be dismissed.