Mining royalty as income and road cess liability: broad statutory language can capture periodic receipts, while procedural notice may be waived.

Royalty from mining leases was treated as part of the mine's annual net profits for road cess purposes, because the statutory scheme assessed the mine as the unit and allowed later apportionment between owner and occupier. The same royalty was also held to be income under the Income Tax Act, as "income" was read broadly to include periodic receipts from a source and the amount did not fall within the statutory exemptions. A notice objection under section 424 was treated as waivable, since it was not raised at the amendment stage and was taken only after the trial had substantially progressed.

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Issues: (i) Whether royalty received from mines was assessable to road cess under the Road Cess Act, 1880. (ii) Whether the same royalty was taxable as income under the Income Tax Act, 1886. (iii) Whether the objection based on want of notice under section 424 of the Code of Civil Procedure barred the amended claim for refund of income tax.

Issue (i): Whether royalty received from mines was assessable to road cess under the Road Cess Act, 1880.

Analysis: The cess was levied on the annual net profits from mines. The statutory scheme treated the mine as the unit of assessment and not merely the share of profits in the hands of one person. The word "owner" in section 72 was read in the context of the Act to include a person having possession or control over the mine, and the royalty payable to the landlord formed part of the annual net profits from the mine. Section 81 provided for apportionment between owner and occupier after assessment, which showed that the royalty itself was not exempt from cess.

Conclusion: The royalty was liable to road cess, and this issue was decided against the assessee.

Issue (ii): Whether the same royalty was taxable as income under the Income Tax Act, 1886.

Analysis: The word "income" was construed broadly to include periodical receipts such as mining royalty. Royalty was treated in substance as rent or income from a source, and it did not fall within the exemptions in section 5. The fact that the receipt might also represent capital in another legal sense did not prevent it from being taxed where the Act clearly brought it within the charging provision.

Conclusion: The royalty was taxable as income, and this issue was decided against the assessee.

Issue (iii): Whether the objection based on want of notice under section 424 of the Code of Civil Procedure barred the amended claim for refund of income tax.

Analysis: Although notice under section 424 was treated as applicable to such a claim, the objection was held to have been waived. The defendant had not raised the point when leave to amend the plaint was sought and only took it after the trial had progressed substantially. The notice requirement was for the defendant's benefit and could be waived or lost by inconsistent conduct.

Conclusion: The objection was waived and did not bar the amended claim; this issue was decided in favour of the assessee, but it did not alter the final result.

Final Conclusion: The royalty from the mines was lawfully liable both to road cess and to income tax, and the challenge to the assessment failed in substance despite the waiver ruling on notice.

Ratio Decidendi: Royalty from mining leases is part of the annual net profits of the mine for cess purposes and constitutes income for income-tax purposes when the charging statute uses language broad enough to include such periodical receipts; a procedural notice intended for the opponent's benefit may be waived by conduct.

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