Jyoti Prasad Singh Deo Bahadur vs Commissioner of Income Tax

Dhavle, J.—The question raised in this reference is whether it is assessee, the proprietor of zamindari Chakla Panchkote, or his younger sons, that are assessable to Income Tax in respect of the income from certain royalties.

The zamindari is not subject to the ordinary rules of Hindu law as regards devolution by inheritance, but is impartible and held exclusively by the eldest son of each successive Raja, as the holder is called, younger sons who are excluded from the actual inheritance by a kulachar or family custom being entitled to maintenance from the Raja for the time being: Nilmoni Singh Deo v. Hinglu Lal Singh Deo [1880] 5 Cal. 256. This maintenance may be either by direct money allowance or it may be provided by the grant of landed property, such grant being resumable on the death of the grantor by his successor and also by the grantor himself on the death of the grantee. It appears from the khorposh sanad produced in the case that the assessee fixed Rs. 25,000 a year as the maintenance allowance of his two younger sons and that in lieu of it he settled certain mauzas with them. The terms of the sanad (sic) the grants to realize from tenants the minimum royalty and commission with interest." And they require the grantee to pay road cess, public work cess or Income Tax, or any other tax or cess which will be legally payable on the sum realized by him. It has been contended on behalf of the assessee that he has made over the whole of his proprietary interest in the mauza to the grantee. But this overlooks the fact that the sanad not only reserves to the grantor what is called the royalty coal, but also requires the grantee to obtain the grantor''s approval to the resettlement of any land that may be surrendered by the tenant or purchased by the grantee in auction sale in the execution of the decrees. This last reservation is, on the face of it, of no small importance in these mauzas on account of the coal found or expected in them. It has been urged on behalf of the assessee that the test of what has been conveyed to the grantee should be whether or not the grantor could sue the tenants for rents or give them acquittances for rents paid by them.

That test however will not show whether or not the grantor has substantially parted with his rights in the mauzas. The grant is expressly resumable on three months notice at the will of the grantor, the grantee being debarred from raising any objection to such resumption. Mr. Jayaswal has urged that this provision of resumption is in accordance with kulachar and is no more than a brutum fulmen which will not be enforced by the Courts; but it is difficult to see, on the terms of the sanad, how the grantee could resist the resumption by the grantor, especially as the contention that the maintenance of the grantee was a charge on the mauzas in question was quite properly given up the position then is that the assessee has not parted with all proprietary rights in the mouzas but has made an assignment of the royalty resumable in his pleasure on three months'' notice, in lieu of the maintenance which he was under personal obligation to provide. It has been contended on behalf of the assessee that even so the royalties that may be recovered by the grantee under the sanad cannot be regarded as part of the income of the assessee. But it (sic) well settled that where a portion of the income is withheld at the source before the income reaches the assessee, the test of whether such portion is or is not part of the assessee''s income is whether the withholding merely represents a share in the income itself to which the assessee has only a residual claim after the prior claim has been met. In Hudson v. Gribble [1903] 1 K.B. 517 it was argued in the Court of appeal that the Income Tax being a tax in income, could only apply to income which actually reached the hands of the tax payer within the year, and that where by a term of contract of service entered into voluntarily it was provided that the employer might defer payment of a portion of a salary from time to time payable to a person in his employ, for the purpose of a thrift fund, the portion of which payment was so deferred would not be taxable income. In negativing the contention Mathew, L.J. observed:

The consequence of the contention would be very remarkable. Suppose that a marriage settlement contained a covenant by the husband to set aside a certain portion of his ''income every year and invest the sum on certain trusts, for the benefit of his family; it would follow, if the argument put forward is correct that the sum so set aside would not be taxable. Such a conclusion would I think be impossible.

The income from the mauzas in the present will clearly not cease to be the income of the assessee for the purpose of Income Tax Act until he parts with it irrevocably; such assignment as he has made of the royalty is merely in lieu of personal obligation arising not before but after the accrual of the income to him, and once the income accrues, it is immaterial that its ultimate destination is governed by a resumable or other assignment or even by statute, Mersey Docks and Harbour Board v. Lucas (3) and Sowery v. Harbour Mooring Commissioners of Kings'' Lynn (4).

I would accordingly answer the question referred to us by saying that the Raja is assessable in respect of the income from the royalties. I would also direct that the assessee pay Rs. 100 as the costs of the hearing.

Courtney-Terrell, C.J.

I agree.