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Issues: Whether selami received for settlement of agricultural holdings constituted agricultural income within the meaning of Section 2(a)(1) of the Assam Agricultural Income-tax Act of 1939.
Analysis: The receipt had to satisfy the statutory requirements of being rent or revenue derived from land used for agricultural purposes and assessed to land revenue or local rates. On the facts found after remand, the payment was a single compulsory amount taken at the inception of the settlement, in addition to recurring rent, and was received in respect of virgin lands or lands purchased in execution of rent decrees. It varied with the quality of land and was not shown to be advance rent or a mere present. The character of the receipt was therefore examined on its substance, and it was held to be a payment for permission to enter and enjoy the settlement, not a recurrent return in the nature of income.
Conclusion: Selami in the circumstances of the case was a capital receipt and not agricultural income. The assessee was not liable to agricultural income-tax on the amount sought to be assessed.
Ratio Decidendi: A compulsory payment taken at the inception of a settlement, where it is in substance consideration for entry into the holding and not a periodic return from the land, is a capital receipt and does not constitute agricultural income.
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