Maharaj Dhiraj of Dharbhanga vs Commissioner of Income Tax

Dawson-Miller, C.J.—This matter came before the Court in January last upon a reference by the Income Tax Commissioner for determination of certain questions of law, one of which was whether income derived from jalkar, hat and ghatlaggi was liable to income tax. The decision of the Court on that occasion was that if these items were included in the assets when the jama was assessed at the time of the Permanent Settlement the Income Tax Act was not sufficiently specific to indicate that it was the intention of the Legislature to vary the bargain made at the time of the Permanent Settlement and that income from such sources was not chargeable to income tax. As there was some doubt, however, whether jalkar, hat and ghatlaggi rights had been taken into account as part of the assets of the assessee''s zemindari in assessing the jama at the time of the Settlement the case was remitted to the Income Tax Commissioner to determine the question of fact whether the jalkar, hat and ghatlaggi rights in respect of which the exemption was claimed did form a part of the assets taken into consideration in settling the jama at the date of the settlement with predecessors-in-title of the assessee. The Commissioner of Income Tax has considered the question submitted to him and has made a report containing his findings. These findings, however, have been qualified in certain respects and the assessee now challenges the qualifications upon various grounds. With regard to the jalkar or fishery rights no serious question arises. The Commissioner finds that jalkar was included in the assets of the Permanent Settlement and points out that in the rules for the resumption of sayer passed in 1790 which are referred to in Regulation XXVII of 1793 the rights of phalkar, bankar and jalkar, were exempted from the resumption and remained vested in the landholders. He has submitted an opinion, however, at the end of his report that under Article 2 of Regulation I of 1793 it was only the jama assessed upon the lands which was fixed for ever and that there was no undertaking not to enhance the assessment upon incorporeal rights whether or no, the assets of such rights were included in the Permanent Settlement. In offering this opinion the Commissioner appears to ma to be traveling outside his province. This question was determined by the Court on the previous occasion and after consideration of the Regulation relating to the subject.

With regard to hat or markets his general finding is that in so far as hats or gunjes are concerned, the general Regulations leave the zemindar the right to take ground rents and if the assessee is now being taxed only in respect of ground rents it is not necessary to consider his claims based on specific documents. There can be no doubt from a perusal of Regulation XXVII of 1793 that in resuming the sayer the Government did not intend to divest the landholders of collections made by them as consideration for the use of grounds, shops or other buildings belonging to them and that ground rents whether in markets or in other parts of the zemindari were the exclusive property of the zemindar. The Regulation states "In the adoption of the above arrangements, the Governor-General-in-Council had no intention to divest the landholders of any collection they had made, under the denomination of sayer, not in reality a duty but a consideration for the use of grounds, shops, or other buildings belonging to them. As however, the rent of warehouses (golah) and shops (dokans) had in general been received by the officers employed to collect the gunje, hat, and bazar duties, and had frequently been let in farm with them, and as the rent paid for orchards, pasture ground and fisheries had been sometimes included in the sayer under the denominations of phulkar, bankar, and jalkar, the Governor-General-in-Council thought it necessary to declare expressly, that it was by no means his intention to include in the resumption of the sayer then ordered, the monthly or annual rents paid for grounds or buildings erected thereon, of whatever description or the phulkar, bankar and jalkar, such rents being properly the private right of the proprietors, and in no respect a tax or duty on commodities, the exclusive right of Government." The exemptions claimed in respect of hats in the present case are claimed as income derived from ground rents of the land or house in the hats. The Commissioner, however, is apparently not satisfied that the rent so received by the assessee did not include some illegal exactions in the nature of internal duties or tolls which were reserved by the Permanent Settlement as the exclusive property of Government. He says, "It is common knowledge that wherever bazar dues are realised not only ground rent is collected but also other duties, which may be levied either on every person who brings goods into the bazar or from both purchaser and seller in every transaction or in other ways. No doubt, the zemindar who lets out a bazar in thicca does not himself collect internal duties but I think it is safe to say that the thiccadar invariably does. In so far as this question is one of fact no evidence whatever has been offered that the zemindar''s receipts for bazar settlement are really ground rents. If they are not ground rents the assessee has to prove that these internal duties were included in the assets of the permanent settlement. In my opinion be has failed to do this." Whether by this finding the learned Commissioner intends to exclude from exemption the whole of the income derived from hats or only a portion thereof is by no means clear, but in his summary of his findings at the end of his report it would appear that he intended to find that the ground rent of the gunjes or markets specifically mentioned in the Schedule prepared at the time of the settlement were included in the assets although it would seem that his view is that such ground rents as were not specifically mentioned were not included. Nor does he arrive at any definite findings as to how much of the exemptions claimed may be justified as ground rents or how much he regards as payment in respect of internal duties. It seems to me, however, that the Commissioner is not entitled to deprive the assessee of his right to exemption of income received by him as ground rent payable by the lessee for the land and houses in the markets. It is quite clear from the Regulation that these ground rents were included in the assets as the property of the zemindar at the time of settlement and the mere fact that the lessee may in some instances abuse his rights and enforce illegal exactions from those using the markets, is not itself any ground for depriving the zamindar of his legal rights. The rents from markets ate I think just as much mal rents as the rent from agricultural or any other species of land. The exemptions are claimed as being ground rents from markets, ferries and fisheries and if the Commissioner is not satisfied that the income received is in fact ground rent he has ample power to call upon the assessee to produce his books or other documents relating to the collections and to enforce the attendance of witnesses to give evidence upon a question about which he has any doubt (See Sections 22(4) and 37 to 39 of the Income Tax Act, 1922): The Commissioner may, if he thinks fit, investigate further into the matter by calling for the production of evidence or documents to show the exact nature of the collections made under the head of ground rents for which exemption is claimed but he is not entitled on mere suspicion to assume that that which was received in the name of ground rent is not in fact that which it purports to be. It does not appear that the assessee has been called on to produce his collection papers or his contracts with the thiccadars which would show the nature of the income derived from the sources named.

The next question which arises on these findings is that the Commissioner would apparently exclude from exemption the ground rents in respect of all existing hats except those specifically mentioned in the settlement papers as then existing. It is not contended that the ground rents of markets which came into existence subsequently to the permanent settlement would not be part of the zamindar''s assets, but the Commissioner points out that in the settlement document, relating to the different parganas of the assessee''s zamindari only a few hats or gunjes are specifically mentioned and argues from this that there may have been others then existing, and still subsisting about which nothing is said and which were therefore not included. It is probably correct to say that there are hats now existing within the Darbhanga Raj about which no specific mention is found in the settlement papers, but Regulation XXVII of 1793 is so clear and emphatic in stating that such rents were to be retained by the proprietors that it cannot reasonably be presumed that any markets then existing were intended to be excluded without specific mention of the fact in the settlement papers. I do not think that any inference can be drawn that any markets now existing in fact existed at the time of the permanent settlement although they were not mentioned in the settlement papers. The natural and only proper inference appears to me to be the exact opposite, for we find in the rules for the resumption of sayer passed on the 17th June 1790 and set out in Regulation XXVII of 1793 the following article:

2nd, no monthly or annual payments now made or which may be hereafter made for the use of the land or houses, shops or other buildings erected thereon, being clearly of the nature of rents and not duties or taxes, are to be understood to be within this prohibition but all such rents are to be enjoyed by the proprietors entitled thereto as heretofore.

The irresistible inference therefore is that the settlement left to the zemindar the ground rents of land, shops, etc., in all the then existing hats except such, if any, as were specifically excluded and if more hats are now shown to exist than appear in the settlement papers it must be presumed, in the absence of evidence to the contrary, that they have sprung up since the settlement. If they existed at the time of settlement they were left under the general regulation to the zemindar in the absence of any specific exclusion. The onus is not on the assessee to prove inclusion but upon the Crown to prove exclusion.

The learned Commissioner appears also to have had some doubt as to the proper rendering in idiomatic English of the word "sewa" where it appears in the application of the assessee''s ancestor for settlement of pargana Hati, a part of the Darbhanga Raj. According to his view the proper translation of the word was "with the exception of". If this be accepted as accurate he thought that the application excluded settlement of gunjes or markets although he states he had been shown a dictionary dated 1802 prepared under the orders of the East India Company which says that the word may also mean "in addition to". The truth is that the meaning of this word appears to depend upon the context in which it is found and it may be in many cases rendered into English either by the words "in addition to" or by the words "apart from." A simple example may be given where either rendering would be accurate in English. The sentence "apart from this house I have many others" might equally well be expressed by saying, "in addition to this house I have many others". The matter, however, is not one of much importance as it is clear from the settlement papers that ground rents for markets as distinguished from tolls or other internal duties in connection therewith were included in the schedule of the assets settled with the zemindar. In fact the Commissioner states." I agree that the gunjes mentioned in the schedule must apparently be included."

With regard to Pargana Haveli Kharagpur which was settled for 20 years in 1844 and permanently settled in 1866 the Commissioner has pointed out that although the markets were included in the settlement, the Income Tax Act of 1860, was then in force and he states, "It is clear that non-agricultural income of this Pargana must have been assessed or at least assessable to income tax under the Act of 1860 and there is nothing in the rubakar of 1866 to indicate that such income would in future be exempted from income tax". With respect to the Commissioner, the exemption is claimed under the permanent settlement regulations which apply as much to subsequently settled lands as to lands settled in 1793. Moreover this question is one which was disposed of by this Court at the previous hearing and it is not open to the Commissioner to re-open that decision.

With regard to ghatlaggi it is agreed that the ghats were settled with the assessee''s ancestors. The Commissioner takes the view, however, that settlement of ghats ordinarily means the right to collect tolls or ferry dues and not the right to mooring dues. In my opinion this is giving much too narrow a construction to the rights incident to the settlement of ghats. The proprietor is just as much "entitled to be" paid for the use of the ghats for purposes of mooring as he is to take dues from those using the ghats for other purposes.

The case must be remanded to the Commissioner of Income Tax to be dealt with according to our ruling upon the questions dealt with in this judgment. He is at liberty, however, if he should think fit, to call for further evidence as to the exact nature of the exemptions claimed by the assessee under the head of ground rents for hats.

It is necessary to deal with the costs of the hearing originally as well as the hearing after remand. We think that the petitioner, having substantially succeeded both in the original petition upon the case stated and in the application to us after remand, is entitled to his costs and we assess the hearing fee in respect of both the applications together at a sum of Rs. 500.

Foster, J.

I concur.