1944 (12) TMI 2 - HC - Income Tax

Deduction for Jama Paid on Coal Lands Upheld by High Court

Commissioner of Income-Tax, Bihar and Orissa Versus Raja Sri Sri Kalyani Prasad Deo, Panchkote

Commissioner of Income-Tax, Bihar and Orissa Versus Raja Sri Sri Kalyani Prasad Deo, Panchkote - [1945] 13 ITR 17 Issues:Interpretation of Section 12(2) of the Indian Income-tax Act, 1922 regarding deduction of jama paid from estate revenue in computing assessable income from royalties.Analysis:The case involved a reference under Section 66(1) of the Indian Income-tax Act, 1922, regarding the deduction of jama paid by the assessee, the Raja of Panchkote, from the estate revenue in computing assessable income from royalties derived from coal fields leased out to lessees. The main question was whether the jama paid should be allowed as a deduction under Section 12(2) of the Act. The Income-tax Officer and the Appellate Assistant Commissioner disallowed the deduction, stating that the jama was fixed long ago, and the income from coal fields was not a determining factor in assessing the jama. They held that the expense was not solely incurred for earning the income and hence not deductible under Section 12(2).However, the Appellate Tribunal took a different view, emphasizing that an apportionment of the revenue paid should be made as a deduction in computing income from non-agricultural sources, citing the principle laid down in the case of Probhat Chandra Barua v. Emperor. The Tribunal directed that the proportionate amount of revenue paid should be deducted. The Commissioner of Income-tax, Bihar and Orissa, referred the question to the High Court for opinion.The High Court, in its judgment, relied on the precedent set by Lord Russell of Killowen in the case of Probhat Chandra Barua. The Court held that the assessee, deriving non-agricultural income from coal fields within his zemindary, was entitled to claim a deduction for the jama paid for the lands producing the royalties. The Court emphasized that the tax should be on 'income, profits, and gains' after making proper allowance for the jama paid. It rejected the argument that it was impossible to ascertain the jama payable for the lands and emphasized the entitlement of the assessee to claim the deduction.The Court also noted the relevance of Section 9(1)(v) of the Act allowing a deduction for land revenue paid in respect of property and rejected the argument that such a provision was absent in Section 10 or Section 12. Ultimately, the High Court answered the reference by stating that the assessee was entitled to claim a deduction for the jama paid, attributable to the coal lands producing the royalties included in the assessable income. The Court also awarded costs to the assessee.