Maharajadhiraj of Darbhanga vs Commissioner of Income Tax

Dawson Miller, C.J.—Three questions arise for determination in this Reference:

(1) The first question is whether the petitioner is liable for additional Income Tax for the year 1920-21 upon a re-assessment made after the expiration of the next following year, that is, after the end of March, 1922. The additional sum claimed under the re-assessment is a large one amounting to Rs. 1,34,769-40 in respect of Income Tax and super-tex. It appears that the assessment for the year in question was made on the 23rd November, 1920, based upon a return of the income of the previous year as provided by Sections 17 and 18 of the Income Tax Act, 1918, then in force. When the return of the actual income for the year of assessment was received in 1921 for the purpose of provisionally assessing the income for 1921-22, an adjustment of the assessment for the year 1920-21 was made as provided by Section 19 of the Act. On the 28th March, 1922, it having been discovered that certain items of income had escaped assessment for the year 1920-21 a further assessment was made on those items under the provisions of Section 25 of the Act of 1918 and the demand in respect of that year appears to have been finally closed. Thus far no question arises but in pursuance of a demand made in 1922 that the assessee should file a fresh return of the actual income for the year 1920-21 a fresh return was filed and on the 27th January, 1923, a fresh assessment based on the actual income of 1920-21 was made. This showed an additional amount payable beyond that already assessed and paid. From the letter of demand and the revised assessment form enclosed therewith it appears that the assessment is made in respect of Income Tax payable for the year 1920-21. As this re-assessment was not made until more than a year had elapsed after the expiration of the year of assessment the assessee contended that he was not liable to any further tax than that already demanded for the year in question. He based his contention upon the provisions contained in Section 25 of the Income Tax Act of 1918. In my opinion this contention is well founded, but it is unnecessary to pursue the matter further as the learned Government Advocate admits that for the year 1920-21 the additional amount demanded is not recoverable and that the demand although purporting to be in respect of the tax payable for that year is really a demand for a subsequent year based upon the income of that year. It is clear that some confusion has arisen from the form in which the demand was made. It is sufficient to say that for the financial year 1920-21 the tax payable does not include the additional sum demanded.

(2) The second question is whether in computing the amount on which super-tax is payable by an individual or Hindu undivided family under the Income Tax Act of 1922 the amount received as dividends from a registered company should be deducted, or, if not, whether credit should be given for the super-tax already paid on those dividends by the company. It is contended that as the company itself pays super-tax upon its income before distributing dividends no further super-tax on such dividends should be payable by the share-holder or at least that credit should be given to him for the amount of supertax paid by the company proportionate to the amount of his dividends. Under the third schedule of the Act super-tax is payable upon income received in excess of Rs. 50,000. In the case of every company the rate payable is 1 anna in the rupee whatever the amount of excess over Rs. 50,000 may be. In the case of individuals and Hindu undivided families the amount of tax increases from 1 anna to 6 annas in the rupee according to the Increase of excess over Rs. 50,000. There is nothing in the Act from which it can be inferred that in computing the taxable income of individuals or Hindu undivided families for purpose of super-tax dividends upon which super-tax has been paid by the company should be deducted. The supertax payable by a company is a comparatively small tax charged at a fiat rate of 1 anna in the rupee. The super-tax payable by the individual is on a sliding scale increasing in proportion to the increase of income and is separately charged. In each case super-tax is levied on the total income under Sections 55 and 56 of the Act. By Section 16 in computing the total income the dividends payable to an assessee and a share-holder in a company are included. But although by Section 14, where the profits of the company itself have been assessed to Income Tax, the share-holder is exempt from paying a second Income Tax upon the amount of dividends received by him and already taxed as the income of the company no such exemption is provided in the case of super-tax. On the contrary Section 58 which applies the other provisions of the Act as far as may be to the assessment of super-tax expressly excludes the operation of Section 14. It is clear therefore that the intention of the Legislature was to charge super-tax upon the income of companies as well as upon the income of individual share-holders including in the income of the latter the dividends received from the company although they had already been charged to super-tax at the flat rate of 1 anna. It was contended that the company was the agent of the assessee for the purpose of paying tax and that credit should be given for the amount paid by the company on the dividends received but although this may be true in the case of Income Tax it is clear by the Sections already referred to that super-tax must be separately paid on the profits of a company by the company itself at the smaller rate and by the share-holder on the dividends received by him out of those profits as part of his income, the rate payable by him being on a sliding scale according to the amount of his total income. It follows that no exemption can be claimed by the assessee from the payment of super-tax in respect to the dividends received by him.

(3) The third question is whether income derived from jalkar (fisheries), hat (markets) and ghatlagi (moorings and ferries) is liable to tax.

The assessee contends first that income derived from these sources is agricultural income and therefore exempt u/s 4, Sub-section (3), Clause (viii) of the Income Tax Act of 1922, and, secondly, that such income is exempt from assessment to Income Tax by the terms of the settlement under which he derives his title and the Regulations relating thereto.

As to the first contention there appears to be no foundation for the view that income derived from markets or moorings or ferries can be regarded as agricultural income, and the only argument addressed to us in support of this part of the case is that these things are in some way connected with the land. It was urged, I however, that fisheries were or might be in certain oases, as where the fishing is from tanks, so intimately connected with the pursuit of agriculture that they should be included under that designation. The popular conception of agriculture, even if it should include the rearing of live-stock and poultry fed on the produce of the land and requiring in certain cases cultivation of the land for grazing purposes, or otherwise, seems hardly wide enough to include the rearing of fish in rivers or tanks. Agricultural income is defined in Clause (2) of the Income Tax Acts of 1918 and 1922. The definition includes rent or revenue derived from land used for agricultural purposes as well as income derived from agriculture and from the sale of agricultural produce. The definition does not carry the case any further. The question is whether the rent paid for the fishing rights, or for the markets, ferries, or moorings is income derived from agriculture. In my opinion it is not. The fact that the Bengal Tenancy Act by Section 193 applies the procedure provided by the Act for the recovery of arrears of rent to suits for recovery of anything payable in respect of fishery rights and the like is of no assistance to the petitioner. It rather emphasises than otherwise the difference between revenue derived from land let for agricultural purposes and that derived from fisheries and the other sources of income mentioned in the section. Nor does it seem reasonable to hold that income derived from fishing over land covered by water and which is not used for any agricultural purpose is income derived from agriculture. Fish are not the produce of the land. Their natural element is the water and their cultivation and welfare depend in no sense upon agriculture. It may be that in certain eases the jalkar rights include the right to cultivate the soil of the tank, when dry, but the facts of this case do not show that the income sought to be exempted from tax was other than that derived from the right to catch fish. In my opinion the question whether income derived from jalkar, hats and ghatlagt is agricultural income and so exempt from Income Tax should be answered in the negative. The second contention arising upon this part of the case is that exemption can be claimed for income derived from the above sources by reason of the terms of the settlement under which the property is held coupled with the provisions of the Bengal Permanent Settlement Regulations. The argument is that the settlement covered the rights of jalkar and hat and that ghatlagi is included as an incident of the jalkar rights, and that the revenue permanently fixed for ever at the date of the settlement covered the whole liability to Government in respect of these rights as provided in Regulation I of 1793. It is conceded that the legislature has power to vary or modify the bargain entered into between the Government and the proprietors by the Permanent Settlement, but it is contended that this can only be done by clear and specific language in a statute and not by general implication, a test which the Income Tax Act does not satisfy. There can be no doubt that the Permanent Settlement exempted the proprietors for all time from enhancement of the revenue fixed in respect of the settled lands and three questions arise for consideration: (1) Does the settlement made with the predecessor of the assessee cover the jalkar and other rights; (2) does the imposition of Income Tax on the income derived from these sources vary the terms of the Permanent Settlement; and (3) if so, is the Income Tax Act sufficiently specific and unambiguous to indicate without reasonable doubt that it was the intention of the Legislature to vary the bargain made at the time of the Permanent Settlement.

If the first of these questions should be answered in the negative the assessee will be liable as the other two questions do not in that event arise. On this point the Commissioner has found as a fact that the documents produced in support of the assessee''s contention contain no evidence that the items under consideration were included in the assets when the jama was assessed and permanently fixed at the date of the settlement. If this finding is accepted there is an end to the matter. The Sanad under which the assessee holds has not been produced but copies of an application made by Raja Madbo Singh Bahadur for permanent settlement of Pargana Hati, etc., dated the 7th April, 1800 and an amaldastak of the same date have been put in evidence. If the settlement was in accordance with the application it would appear from the schedule attached to each of these documents that rents arising from hat and jalkar were included in the assets upon which the jama was assessed. It is not clear, however, whether these documents cover the whole of the estate now held by the assessee in respect to which the tax has been levied and if we should be of opinion that the imposition of Income Tax in respect to the items under consideration is contrary to the terms of the settlement and that the Income Tax does not sufficiently clearly purport to modify the settlement regulation it would be necessary, I think, to refer the case back to the Commissioner to take further evidence and arrive at a definite finding upon the question whether these sources of income were included in the assets upon which the revenue was settled in 1800. It is not very clear why the Commissioner arrived at his finding but I gather that he was of opinion that the documents produced were not conclusive evidence of the terms of the settlement. I think, however, they raise a presumption in favour of the assessee as the applications for settlement made by the proprietors at the time in question were, as a rule, a counterpart of the actual settlement made and were part of a single transaction completed at the same time, just as a kabuliyat is a counterpart of a patta. There is no explanation forthcoming why the sanad or sanads under which the assessee holds have not been produced but I consider it would be highly unsatisfactory in a case of this nature raising important questions of principle to determine the matter by a reference to the onus of proof when the real facts are probably capable of ascertainment. I propose therefore to consider first the other two points which arise on this part of the case. By the Permanent Settlement it was the revenue or rent payable to Government as the paramount landlord that was fixed in perpetuity. It is argued that the effect of the imposition of Income Tax is not to increase the revenue or rent so payable, but it is clear, I think, that the imposition of such a tax is in fact to increase the revenue under another name. The jama permanently fixed at the date of the settlement was calculated upon a percentage of the rents and profits at that time derived from the ownership of the land. Income Tax is based upon the same rent and profits as they now exist, and it is impossible in my opinion to escape from the conclusion that a tax, under whatever name, upon the same sources of income would increase the duty payable under the name of revenue and which, by the Permanent Settlement, it was agreed should then be fixed for ever. By Article 6 of the Regulation it was a part of the bargain that the proprietors "will enjoy exclusively the fruits of their own good management and industry, and that no demand will ever be made upon them, or their heirs or successors, by the present or any future Government, for an augmentation in the public assessment in consequence of the improvement of their respective estates." An argument was addressed to us based upon the Cess Acts which beginning in 1871, and still continuing, imposed a tax for the maintenance of roads and public works upon all holders of estates or tenures assessed upon the annual value of their lands even when those lands are also assessed to revenue. It was urged that the right to collect such taxes had never been disputed; but whether the Cess Acts do or do not constitute a breach of the bargain entered into with the proprietors by Lord Cornwallis in 1793--and the question has given rise to much controversy in the past�the Cess Acts themselves leave no room for doubt that it was the intention of the Legislature to impose the cess upon revenue-paying lands, thereby expressly exercising that power which it admittedly possesses, and no valid argument can be based upon the analogy of those enactments. I consider that the Income Tax Act, if and in so far as it charges income derived from property included in the original settlement with the proprietor and assessed to revenue, varies the terms of Regulation I of 1793.

The last point which arises on this part of the case is whether the Income Tax Act of 1922 is explicit enough in its terms to repeal the exemption created by the Permanent Settlement Regulation, for it must be conceded that such repeal cannot be effected merely by words of general import or by implication (Maxwell, 6th Edn., Chap. VII, Section 3). The Madras High Court in the case of The Chief Commissioner of Income tax, Madras v. The Zamindar of Singampatti 1922 Mad. 325 had to consider the effect of the Income Tax Act, 1918, upon the Madras Regulation XXV of 1802. The Madras Regulation is certainly no more comprehensive or emphatic than the Bengal Regulation of 1793 which declares that "no alteration will be made in the assessment which they (the proprietors) have engaged to pay but that they and their heirs and lawful successors will be allowed to hold their estates at such assessment for ever." The Income Tax Act of 1922 now under consideration is substantially similar in terms to that of 1918 for this purpose. It provides by Section 4(1): "Save as hereinafter provided this Act shall apply to all income, profits or gain, as described or comprised in Section 6, from whatever source derived, accruing, or arising, or received in British India." By Section 6 the six heads of income chargeable to Income Tax include (iii) property and (vi) other sources. The exceptions to which the Act shall not apply are set out in Section 4(3). These include agricultural income but there is no general exception of income derived from revenue-paying estates settled under the Regulation. The words imposing the tax are no doubt wide enough to cover the income now under discussion but there is no express modification or repeal of the exemption already existing under the Regulation. The Madras High Court in the case above mentioned held that it was impossible to treat as a legal and effective abrogation of the exemption the words of Section 3 of the Income Tax Act, 1918, which as stated are of similar import to those of the later Act. I see no reason to take a different view from that held by the Madras High Court. Moreover it appears to me to find support from the judgment of the House of Lords in The Associated Newspapers, Limited v. The City of London Corporation [1916] 2 A.C. 429. In that case by the Statute VII, Geo. III, Ch. 37, certain land in the City of London reclaimed from the James was declared to vest in the owners free from all taxes and assessments whatsoever. About 80 years later, in 1848, the City of London Sewers Act was passed imposing a new rate upon every occupier of a house or building within or partly within the City of London "whether such person shall be now liable in respect of such house or building to be assessed to the relief of the poor or be not liable in respect thereof by reason of such house or building being situate in any precinct or extra-parochial place or otherwise." The House of Lords held that these words did not take away the express exemption granted by the earlier statute.

An argument was based upon the express exemption of agricultural income from the operation of the Act. This express exemption does not, in my opinion, necessarily lead to the conclusion that all other kinds of income derived from permanently settled lands were to be deprived of the benefit of the Permanent Settlement. The Act applies to the whole of British India and not only to the permanently settled area. It was apparently the policy of the Legislature, as appears from the definition of agricultural income in Section 2, to exempt agricultural income derived from all lands paying either revenue or a local rate to Government and whether permanently settled or not, and apart from any clear expression of intention to vary the Permanent Settlement, I do not think it would be legitimate to draw an inference from the general language of Section 1 that what was not excluded was included even if previously exempt by the Regulation. Nor do I consider that in determining the question now before us any assistance can be derived from considering such enactments as Drainage and Embankment Acts which in exchange for new benefits conferred, levy a rate upon zemindars and others to provide for the cost. The Income Tax is for general purposes of revenue and is not allocated to any special purpose connected with the land or from which the land derives a peculiar benefit. But even if there should be found here and there on the statute book a tax imposed in apparent contravention of the Permanent Settlement, and no objection taken, I should hesitate to say that such a state of affairs would conclude the question now under consideration.

I have had an opportunity of perusing the judgment about to be delivered by my learned brother with which I regret I am unable to agree. The question I think is one of some difficulty but I can find nothing in the Income Tax Act of 1922 indicating an express intention to deprive the proprietors of permanently settled lands of the exemption created by the Bengal Settlement Regulation of 1793.

In the circumstances and for the reasons stated in an earlier part of this judgment, I think that the case should be remanded to the Income Tax Commissioner to determine the following question of fact, namely, whether the jalkar, hat and ghatlagi rights in respect of which the exemption is claimed formed a part of the assets taken into consideration in settling the jama at the date of the settlement with the predecessors-in-title of the assessee. The parties will be at liberty to adduce fresh evidence upon the question for determination.

Mullick, J.

The only point which I propose to discuss is, whether the petitioner is entitled to exemption in respect of the income from jalkars, ghatlagi and markets. On all the other points the petitioner must clearly fail.

It is accordingly necessary at the outset to examine what was the precise nature of the bargain which the East India Company made with the Zamindars of Bengal by the Permanent Settlement Regulation (Regulation I of 1793). Article II of the Regulation states that "the Marquis of Cornwallis, Governor-General in Council, now notifies to all zamindars, independent talukdars and other actual proprietors of land paying revenue to Government, in the provinces of Bengal, Bihar and Orissa, that he has been empowered by the Hon''ble Court of Directors for the affairs of the East India Company to declare the jama, which has been or may be assessed upon their lands under the Regulations above mentioned, fixed for ever."

"The Regulations above-mentioned" mean the Regulations for the Decennial Settlement made on the 25th November 1789 and the 10th February 1790.

Article III recites "that the Governor General in Council declares to the zamindars, independent talukdars and other actual proprietors of land with or on behalf of whom a settlement has been concluded under the Regulations above mentioned, that at the expiration of the terms of the settlements no alteration will be made in the assessment which they have respectively engaged to pay, but that they and their hairs and lawful successors will be allowed to hold their estates at such assessment for ever."

Article 6 runs as follows: "It is well known to the zamindars, independent talukdars and Other actual proprietors of land, as well as to the inhabitants of Bengal, Bihar and Orissa, in general, that from the earliest times until the present period the public assessment upon the land has never been fixed, but that, according to established usage and custom, the rulers of these provinces have from time to time demanded an increase of assessment from the proprietors of land; and that, for the purpose of obtaining this increase, not only frequent investigations have been made to ascertain the actual produce of their estates, but that it has been the practice to deprive them of the management of their lands, and either to let them in farm, or to appoint officers on the part of Government to collect the assessment immediately from the raiyats." The Section further recites: "The Governor-General in Council trust that the proprietors of land, sensible of the benefits conferred upon them by the public assessment being fixed for ever will exert themselves in the cultivation of their lands under the certainty that they will enjoy exclusively the fruits of their own good management and industry and that no demand will ever be made upon them or their heirs or successors, by the present or any future Government, for an augmentation of the public assessment in consequence of the improvement of their respective estates." Article 7 recites that "the jama is to be considered entirely unconnected with and exclusive of any allowances which have been made to them in the adjustment of their jama for keeping up thanas or police establishments, and also of the produce of any lands which they may have been permitted to appropriate for the same purpose."

But the Company in whom were vested the rights of the Sovereign, were the owners of the land, For reasons into which it is not necessary to enter, they decided that the zamindar, independent talukdar or proprietor was the person best entitled to settlement. A limited right of ownership was conferred upon him not only in respect of the owner''s share of the produce of the soil but also in the soil itself. The demand was based on contract and it was open to the zemindar to decline to engage. If he accepted the engagement not even the total destruction of the property was a ground for remission. The demand had some of the attributes of a land tax but it was not a, tax in reality, the transaction was a sale of the owner''s rights on the basis of the capitalised value of the assessment. There the assessment approximated to the economic rent, it was in effect rent for use and '' occupation, but the frequency with which estates came under the hammer for arrears of revenue immediately after the Permanent Settlement indicates that in practice the assessment had no relation to the actual rents collected from tenants or to the value of the produce which would have been recovered if the land had been rented to them. The fact is that tempted by the income to be derived from the cultivation of the waste land which according to some reports was more than one-third of the whole area and by the offer of an interest in the soil itself the zamindar entered into a gamble. The Company offered to convert him from an office-holder to an owner in fee simple in return for a fixed price. Though the price was heavy he paid it, but there is no reason for holding that he purchased thereby an immunity from all future taxation. In one capacity the Company represented the Sovereign and the general community, they were also the owners of the soil, they surrendered to the zamindar no part of their rights in the former capacity which included the right to tax but only a portion of their rights of ownership, namely, the right to the produce of the soil, and it seems clear from the context that the declaration that the jama was unalterable could only refer to the limited purposes of the contract. Indeed having regard to the fact that the proceeds of the Settlement constituted the principal source of revenue at that time, it is difficult to see how any general exemption from taxes upon profits could have been intended, for to a proprietor whose only source of income is the product of his estate, every tax he it personal, direct or indirect is a tax upon land. It is immaterial that the tax is calculated on the value of his land, that is merely a matter of machinery and whether the basis of calculation is the produce of his land or the number of his servants or the income from his trade or profession, the tax in the end falls upon the land given if it were conceded that the assessment had all the attributes of a land tax (which I have already found it had not) no exemption from future taxation was expressly or by implication given and therefore the decision in The Associated Newspapers Limited v. Corporation of the City of London [1916] 2 A.C. 429 has no application. Here there was no exemption from taxation but merely a promise that the rent would not be enhanced, and therefore the question whether the general words of subsequent taxing statutes are sufficient to exonerate the assessee does not arise.

Therefore in the absence of any clear and unambiguous declaration by the authors of the Permanent Settlement, I think it is permissible to invoke the aid of the principle of "Contemporary Exposition." Here it is not a case of one or two stray statutes in the administration of which the strict Rule of construction has been overlooked. On the contrary a uniform course of dealing is disclosed which shows that profits from permanently settled estates have been taxed for the purposes of the State without express words revoking the exemption alleged to have been given by the Permanent Settlement Regulation, and I have been unable to discover a single statute in which any such exemption has expressly or by implication been recognised.

To illustrate this attitude of the Legislature it will suffice to refer to a few important statutes. In these no question of benefits sought by the subject arises: he has no option to accept the obligation or refuse; the discretion to impose the obligation is absolute and unconditional; it is not open to the assessee to contend that he has derived no benefit therefrom. Though in principle indirect taxes or taxes imposed for services rendered stand on the same footing for the purposes of the present discussion I have for the sake of convenience chosen only statutes imposing direct taxes. It seems to be immaterial whether the funds raised are for a stated object or for the general purposes of the State.

The first of the statutes which I propose to cite is the Zamindari Dak Cess Act of 1862. Within a few years of the Permanent Settlement, Regulation XX of 1817 was enacted imposing upon zamindars the duty of maintaining peons for the purpose of carrying the post from one police station to another. The Regulation made no distinction between permanently settled and temporarily settled estates. The liability was next converted into a direct tax by Act VIII, B.C., of 1862, and all zamindars, Sudder farmers and other persons paying revenue to Government in respect of lands situated within the district were liable to contribute for the payment of the establishments required for the purpose of maintaining the zamindari daks. Again no distinction was made in the Act between permanently settled and temporarily settled estates and the general words used were accepted without question for nearly 50 years as creating a liability on both classes of estates. The Zemindari Dak Cess Act has since been repealed but that circumstance does not affect the question of contemporaneous exposition.

I next desire to refer to the District Road Cess Act (Act X of 1871) and the Provincial Public Works Act (Act II of 1877) both of which were repealed and consolidated by Act IX (B.C.) of 1880. Act X of 1871, provided for local revenue for the construction and maintenance of roads and other means of communication and Act II of 1877 was enacted for the levy of a cess for the construction and maintenance of provincial public works. In respect of the charging sections, there is no material difference between the Act of 1880 and those of 1871 and 1867. Their object was the imposition of cesses upon all Immovable property situated within a district. This is clear from Section 5 of Act IX of 1880. Section 6 enacts that the Road Cess and Public Works Cess shall be assessed on the annual value of lands and on the annual net profits from mines, quarries, tramways and other Immovable property, ascertained respectively as in this Act prescribed. Part II of the Act gives Rules for the mode of assessment, and makes special reference to the mode in which summary valuation is to be made of revenue-paying estates and tenures. The Act has always been construed as applying to permanently and temporarily settled estates alike and if any exemption was granted to the former by the Permanent Settlement, there must be somewhere in the Act a clear and unambiguous declaration of the Legislature''s intention to revoke the same Obviously the reference to revenue-paying estates in Part II will not suffice, because it does not necessarily include permanently settled estates, and unless the general words of Sections 5 and 6 are adequate to charge the same the hitherto accepted construction is indefensible. It is permissible therefore to infer that those who were charged with the administration of the Act were of opinion either that the exemption was never given or that if given the general words of Sections 5 and 6 were adequate to revoke it.

I next proceed to consider the Bengal Municipal Acts. The earliest Act which empowered the Local Government to constitute a corporation and to raise funds was Act XXVI, B.C., of 1850. That Act was followed by Act XX of 1856, which again was followed by Act VI of 1868 (The District Towns Act) which allowed only one basis of calculation, namely, the circumstances and property of the persons to be beneficed and the funds to be applied to the maintenance of the Police, to the repair of roads, to conservancy, vaccination, general improvement and maintenance of dispensaries The next important Act on the subject is Act XXVI, B.C., of 1884 which empowers a municipality to levy ten different kinds of taxes, one of which is a rate on buildings, lands and holdings. The rate is to be levied on the annual value of the lands calculated upon the gross annual rate at which the holding may reasonably be expected to let. It is clear that where a holding comprises either a part or the whole of a permanently settled estate it is liable to be rated on its annual profits. No distinction is made between permanently settled and temporarily settled estates and so far as I know permanently settled estates are always assessed although there are no express words revoking the provisions of the Permanent Settlement.

Again the Embankments Act (Bengal Act II of 1882) empowers the Government to remove embankments and alter water-courses for the purposes of protecting lands and to recover the expenses from the zamindars of the estates thereby benefited or protected in proportion to the respective benefits derived. No exemption from liability is made in favour of permanently settled estates.

Similarly the Drainage Act (Act VI of 1880) empowers the Local Governments to frame a scheme for better drainage and improvement of lands and to apportion the cost upon each landlord in respect of his improved lands, such cost being the first charge upon the lands in question and not avoidable by the sale of such lands for arrears of revenue. The Act makes no discrimination between permanently settled and temporarily settled estates.

Next the Court of Wards Act (Act IX, B.C., of 1879) empowers the Collector to take charge under certain circumstances of the property of a proprietor and to apply part of the profits in paying for the expenses of management and supervision. This is a tax payable out of the profits of the estate and no distinction is made between permanently and temporarily settled estates.

Again the Village Chowkidari Act (Act VI, B.C., of 1870) empowers the village panchayat to levy for the payment of village chowkidars a rate on every person owning or occupying a building in the village according to his circumstances and the property to be protected. The tax is to be calculated on the income derived from the property or according to the value of the land which the owner or occupier holds without regard to the nature of his settlement with Government in the event of his holding the land as a proprietor.

Finally the Bengal Tenancy Act empowers the Local Government to order a record-of-rights and to recover from the landlords the costs of the operations in such proportions as the Local Government may determine. The proprietor of a permanently settled estate has always been considered liable to contribute although no special provisions prescribing such liability are contained in the Act.

Therefore it seems to me that even if it be conceded that the exemption now claimed refers only to direct taxes as opposed to indirect taxes, such as the Stamp Act, the Court Pees Act, the Probate Act and the Bengal Settled Estates Act, the uniform view of the Legislature has been either that No. exemption from any future tax based on the profits of the estate was ever given or that if given, then general words not materially different from those used in the Income Tax Act (Act XI of 1922) are sufficient to revoke it.

It is necessary therefore to consider whether anything is to be gathered from the Income Tax Act itself as to the intention of the Legislature in respect of non-agricultural income from permanently settled estates.

The first Income Tax Act, namely, Act XXXII of 1860 seems to have made no exemption in favour of the proprietor of a permanently settled estate who like others had to pay the prescribed percentage upon his profits. Agricultural income was not exempted and yet no question seems to have been raised as to any breach of the Permanent Settlement. Next Act II of 1878 was passed to provide among other things for an insurance against famine. The Act was in force in the United Provinces and the Punjab but in Bengal the Local Government adopted similar legislation by passing Act III, B.C., of 1878 and for the first time agricultural income was now exempted. The next Act, namely, Act II of 1886, converted the tax into a general Income Tax (by an Act applicable to the whole of India) and taxed non-agricultural income of all kinds, and in regard to the matters material to the point now under consideration, the provisions of the law have remained unchanged in the present Act, namely, Act XI of 1922. The scheme of this last-mentioned Act is ability to pay with the exception that agricultural incomes are exempt. Agricultural income is defined in Section 2 as rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in British India or subject to local rate assessed and collected by officers of Government as such. It would seem then that profits derived from non-revenue paying agricultural lands are liable to the tax. Non-agricultural income derived from a temporarily settled estate would be liable but according to the petitioner, if derived from a permanently settled estate it would be exempt. It is possible that the agricultural income of a temporarily settled estate should have been exempted from Income Tax in consideration of the periodical re-assessment to which the estate was subject, but although considerations of distributive justice are not relevant it does seem strange that the Legislature should have considered it necessary to exempt the agricultural income of the permanently settled proprietor also who enjoys the advantages of fixity of tenure and of rent.

That this inequality should be further accentuated by exempting his non-agricultural income seems difficult of explanation.

Further if the contention of the petitioner is carried to its logical conclusion the results would be as follows: In non-agricultural areas he ought to pay neither cesses nor Income Tax while the proprietor of the temporarily settled estate would pay both. In regard to incomes from jalkara, the Local Government has by notification exempted them from cess but if the contention of the petitioner is correct the exemption should have been notified only in respect of temporarily settled estates and the notification in its present general form is inapt and too widely framed.

A similar objection applies to the drafting of Section 2 of the Act if the Permanent Settlement Regulation is sufficient to exempt the petitioner''s agricultural income.

Again in Municipal areas the petitioner should pay neither Municipal rates nor Income Tax on jalhars while the temporarily settled proprietor is liable to pay both.

But a far more important matter is, that the petitioner would also be exempt from Income Tax on royalties from mines within his permanently settled estates.

It is now conceded that the Permanent Settlement, unless a contrary intention was expressly indicated, carries with it subsoil rights and hitherto every proprietor, whether temporarily or permanently settled, has been considered liable to pay Income Tax in respect of royalties on minerals, see Manindra Chandra Nandi v. The Secretary of State for India (1907) 34 Cal. 257. The Income Tax Act makes no reference to minerals and the decided oases show that the charging sections apply to all royalties.

Why then should the charging sections, namely, 4 and 6, not be sufficient to impose a liability on all other property not expressly exempted in the Act. I cannot see any indication that the Legislature while using such wide and general language intended to make some limitation in favour of non-agricultural income arising out of the profits of permanently settled estates.

The results at which I have arrived may, therefore, be summed as follows:

(1) There was no exemption from future taxation granted by the Permanent Settlement Proclamation similar to that given be the appellants in Associated Newspapers, Limited v. Corporation of the City of London [1916] 2 A.C. 429. The provisions of 7, Geo. III Chap. 37, material to that ease prescribed that the owners and proprietors of the several wharves and grounds then abutting under the river Thames and adjoining the area in question were vested with the proprietary rights in the said wharves and grounds according to their respective interests free from all taxes and assessments whatsoever. No unlimited exemption of this kind was granted to the proprietors of permanently settled estates. It was an exemption limited to the particular objects of the settlement, namely, use and occupation of the settled area and the jama fixed for ever was the consideration for such use and occupation. The Grown did not in any way surrender its other rights on behalf of the general community. If this view is correct, the absence of any reference in the Income Tax Act to the Permanent Settlement is immaterial.

(2) If 6bis view is not correct, then at least the language of the Permanent Settlement is ambiguous and does not clearly and distinctly give any exemption from all future taxes and rates. The meaning of the Legislature being doubtful, contemporary exposition can be resorted to and I have endeavoured to show that the uniform view of the Legislature and its servants has been that the Permaneat Settlement Regulation did not intend to Surrender all Insure rights of taxation in respect of the profits of the estates thereby affected.

(3) If the language of the Permanent Settlement Regulation is not ambiguous and if it clearly indicates an intention to Surrender all such future rights of taxation then the interpretation placed upon statutes similar to the Income Tax Act, can be called in aid for the purpose of explaining the meaning of the words used in the Act. If such a course leads to the conclusion that similar general words have hitherto been considered sufficient to revoke the exemption granted by the Permanent Settlement then the absence of express words in the Act will not prejudice the Crown and the affirmative language of the Act is sufficient to revoke the exemption in question.

The result therefore is that in my opinion the profits of jalkar, ghatlagi and market rights are chargeable with Income Tax, but the point is one of considerable difficulty and I express this opinion with hesitation. On other points I agree with the learned Chief Justice and as his opinion on the question of law, which I have endeavoured to discuss, must prevail, I agree to the order for further inquiry which he proposes to make.