Non-Agricultural Income from a mela on agricultural land is taxable under the Income Tax Act rather than subject to road-cess.

The court addressed whether profits from an annual mela held on agricultural land constitute agricultural income or fall within the Cess Act's tenure-holder charge. It applied the statutory definitions to conclude that mela profits arise from non agricultural use of land and are not agricultural income exempt under the Income Tax Act; an administrative Board of Revenue rule treating such profits as cessable was ultra vires and inconsistent with statutory tax allocation. Outcome: mela profits are chargeable to income tax rather than road cess, and the appeal succeeds for the assessee.

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Issues: Whether the profits derived from an annual mela held on agricultural land are liable to road-cess under the Cess Act or to income-tax under the Income Tax Act.

Analysis: The matter concerns whether holders of a mokurari jama who derive profits from holding a mela on land fall within the statutory notion of tenure-holder for assessment to road-cess, or whether those profits are non-agricultural income taxable under the Income Tax Act. The definition of tenure-holder in the Cess Act is broad and could include holders of interests in land other than estates or cultivating raiyats; immovable property is defined so as to exclude crops and buildings. The Income Tax Act exempts agricultural income, and profits from the mela arise when the land is used for non-agricultural purposes (the mela), so such profits are not agricultural income exempt under the Income Tax Act. Administrative guidance in a Board of Revenue rule treating mela profits as cessable was considered, but that rule was held beyond the authority conferred by the empowering provision and inconsistent with the statutory allocation of tax liability between income-tax and cess.

Conclusion: The profits of the mela are not agricultural income exempt from income-tax and therefore are chargeable to income-tax rather than road-cess; the appeal is allowed in favour of the assessee.

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