Capitalised redemption of land revenue removes "assessed to land revenue" status and defeats agricultural income exemption.

A lump-sum capitalised redemption of recurring land revenue extinguishes the annual revenue demand in perpetuity and converts the land into revenue-free land. On that footing, the land no longer remains "assessed to land revenue" within the meaning of section 2(1)(a) of the Indian Income-tax Act. The assessee could therefore not claim exemption on the basis that the land continued to be assessed to land revenue after redemption.

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Issues: Whether the land from which the assessee derived agricultural income remained "assessed to land revenue" within the meaning of section 2(1)(a) of the Indian Income-tax Act after the land revenue had been redeemed by a lump-sum capitalised payment.

Analysis: The land had originally been subject to recurring land revenue, but the Government accepted a lump-sum payment equal to the capitalised value of the revenue and thereafter conveyed the land as free and discharged from all Government land revenue or any charge in the nature thereof. The redemption was not a mere suspension of collection; it extinguished the recurring revenue demand in perpetuity. Once the whole land revenue was commuted and redeemed, the land ceased to remain assessed to land revenue and became revenue-free in law and in fact.

Conclusion: The land was not assessed to land revenue for the purpose of section 2(1)(a) of the Indian Income-tax Act, and the assessee was not entitled to claim exemption on that basis.

Ratio Decidendi: A capitalised lump-sum redemption of land revenue extinguishes the recurring assessment of land revenue and converts the land into revenue-free land, so it no longer satisfies the statutory requirement of being "assessed to land revenue".

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