Agricultural income exemption for nazar or salami paid to a landlord was upheld as revenue derived from land.

Nazar or salami paid by a tenant to a landlord for recognition of transfer of a non-transferable holding was treated as revenue derived from land because it flowed from the landlord's proprietary interest in agricultural land rather than from a separate transaction. On that reasoning, the receipt fell within the statutory definition of agricultural income as revenue derived from land used for agricultural purposes. The receipt was therefore exempt from assessment to income tax and not chargeable under the Income-tax Act, 1922.

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Issues: Whether nazar or salami paid by a tenant to a landlord for recognition of transfer of a non-transferable holding is revenue derived from land and therefore agricultural income within the meaning of the Income-tax Act, 1922, and whether such receipt is exempt from assessment to income tax.

Analysis: The Full Bench held that once nazar was accepted as revenue, it was difficult to deny that it represented profit coming to the landlord by virtue of ownership of the land. The receipt was not merely a payment for peace or a transaction divorced from the land, but a return flowing from the landlord's proprietary interest. On that footing, it answered the statutory definition of agricultural income as revenue derived from land used for agricultural purposes. The Court therefore rejected the earlier view that such receipt was not assessable as agricultural income.

Conclusion: Nazar or salami paid for recognition of transfer of a non-transferable holding is revenue derived from land, qualifies as agricultural income, and is exempt from assessment to income tax.

Final Conclusion: The reference was answered in favour of the assessee, and the receipt in question was held not chargeable to income tax.

Ratio Decidendi: A payment received by a landlord by reason of ownership of agricultural land, where the receipt is in substance a return from the land, is revenue derived from land and falls within the statutory exemption for agricultural income.

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