Agricultural income from land revenue share remains exempt where the settlement creates a direct, continuing right to the revenue itself.

A direct and continuing right to receive a share of land revenue can retain the character of agricultural income where the receipt is derived from the land revenue itself, even though the recipient's original rights in the land have been extinguished. The settlement here conferred a perpetual entitlement to one-fourth of net land revenue collections after deductions, and the Government acted only as collector before passing the amount on. The receipt was neither a mere allowance or pension from general funds nor a fixed sum unrelated to the revenue source. It was therefore treated as agricultural income and fell outside tax liability under the statutory definition.

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Issues: Whether the sum received under the settlement dated 7 July 1837 constituted agricultural income as rent or revenue derived from land within section 2(1)(a) of the Income-tax Act, 1922, and was therefore exempt from tax.

Analysis: The settlement divested the assessee's predecessors of all rights in the land but conferred in perpetuity a right to receive one-fourth of the net land revenue collections after deducting tahsil expenses. The right created was not a mere allowance or pension payable out of any funds at large, nor a fixed sum calculated by reference to revenue. The source of the receipt remained the land revenue itself, and the Government, in collecting and passing on that one-fourth share, acted only as collector of the revenue to which the assessee was entitled. The receipt therefore fell within agricultural income under the statutory definition.

Conclusion: The sum was agricultural income and was not liable to tax; the question was answered in favour of the assessee.

Ratio Decidendi: Where a settlement confers a direct and continuing right to receive a share of land revenue itself, the receipt retains the character of agricultural income, even if the landholder's original rights in the land have been extinguished and the amount is collected by the Government before being paid over.

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