Zamindari abolition compensation bonds were not legal tender for agricultural income-tax arrears, and refusal to accept them was valid.

Zamindari Abolition Compensation Bonds were not legal tender for discharging agricultural income-tax arrears. Although the Uttar Pradesh Zamindari Abolition and Land Reforms Act and the compensation rules allowed arrears to be recovered by deduction from compensation money payable to an intermediary, the statutory scheme showed that payment of compensation by bonds satisfied the State's liability and the bonds were not cashable before maturity. Their negotiable character did not oblige the State to accept them for tax payment, so refusal to accept the bonds was valid.

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Issues: Whether Zamindari Abolition Compensation Bonds issued by the State could be accepted in payment of agricultural income-tax arrears recoverable under the statutory provisions governing vesting compensation and recovery from compensation money.

Analysis: Section 6(d) of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950, as amended, permitted recovery of arrears of agricultural income-tax by deduction from compensation money payable to the intermediary. Rule 8-A of the rules similarly authorised realisation of such dues from interim compensation or compensation payable. Section 68 of the Act and the compensation rules showed that payment of compensation in bonds satisfied the State's liability to the intermediary, and the bonds were not cashable before their due date. Their negotiable character did not make them legal tender or oblige the State to accept them for payment of tax dues.

Conclusion: The Bonds could not be compelled to be accepted in discharge of the agricultural income-tax arrears; the refusal to accept them was valid.

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