Deduction of proportionate land revenue allowed in computing royalty income from coal lands within a zemindary.

Income from royalties arising out of coal lands within a zemindary had to be computed on the real income, profits and gains from the source, not on gross receipts. The proportionate jama attributable to the lands producing the royalty income was therefore deductible in assessing taxable income. The need for further evidence to apportion the exact amount did not defeat the legal right to deduction, and the same principle applied even though a deduction was also recognised under the property head. The assessee was entitled to deduct the proportionate land revenue attributable to the coal lands.

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Issues: Whether the proportionate amount of land revenue (jama) paid in respect of the coal lands from which royalty income arose was deductible in computing assessable income under the relevant provision.

Analysis: The income in question arose from royalties derived from coal lands forming part of the assessee's zemindary. The governing principle was that assessment must be made on the real income, profits and gains from the source and not on gross receipts. Following the binding authority relied upon, proper allowance had to be made for the jama assessed and paid in respect of the lands producing the royalty income. The fact that the exact apportionment might require further evidence did not defeat the legal right to deduction. The reference to the deduction allowed under the property head did not alter the position, because the same principle controlled the computation of income from this source.

Conclusion: The assessee was entitled to deduct the proportionate jama attributable to the coal lands from which the royalty income arose.

Ratio Decidendi: In computing income from a source within a zemindary, the taxable amount must be determined after allowing the proportion of land revenue properly attributable to the lands producing that income, so that tax is levied on income, profits and gains and not on gross receipts.

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