TaxTMI 
TaxTMI 
TaxTMI 
1960 (4) TMI 90
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....e assessment years are 1952-53 and 1953-54. The Thakore Saheb had leased out certain of his lands to the Shivrajpur Syndicate Ltd. Under the lease, the syndicate was liable to pay rent and royalty and it was also liable to pay and discharge all taxes, rates, assessments and impositions whatsoever being in the nature of public demands which shall from time to time be charged, assessed or imposed upon or in respect of the mines or works of the lessee or any part thereof by authority of the Government of India, or the Government of Bombay or otherwise. Therefore, the lessee was liable to pay rents, taxes and rates as the lessor was in law liable to discharge. It is clear, in our opinion, that before the lessee can be made liable to pay any amount under this clause of the lease, the condition precedent is the liability of the lessor to pay any tax or rate. To put it in a different language, under this clause the lessor became entitled to collect from the lessee the amount of taxes or rates which he in law was liable to pay. Now, the lessee company paid to the assessee two sums of ₹ 16,309 and ₹ 39,515 in these two assessment years respectively in respect of local cess, and....
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....something which is received by the assessee without any such legal liability ? Now, with respect to the Tribunal we do not agree with the view taken by it that the liability of the assessee on a true construction of the lease was to pay an amount equivalent to the cess. The language used by the contracting parties in the lease is clear and unequivocal. The liability of the lessee is to pay and discharge all taxes, rates, assessments and impositions whatsoever in the nature of public demands which shall from time to time be charged, assessed or imposed upon or in respect of the mines or works of the lessee. Therefore, as we pointed out, there must be a charge or an assessment upon the lessor in respect of his lands or mines and some demand being made by a public authority before the lessee can become liable to pay anything to the lessor under this clause. Now, the question that really the Tribunal should have considered and which it has failed to consider is what is the liability of the assessee in law with regard to the payment of the cess and turning to the relevant provisions of the law, which is the Bombay Local Boards Act, 1923, we have first section 75 which constitutes the l....
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.... pays a certain amount to the Government which is known as Jama and he pays the cess only on the basis of that Jama. In other words, he treats the Jama as the assessment of the village fixed under section 94(1)(a). Again, this is something which the Tribunal will have to ascertain whether the amount of the assessment of the village is the same as the Jama paid by the assessee, or whether the amount of the assessment is different from the Jama paid by the assessee. In the latter case, whatever may be the Jama that the assessee may pay, his liability to pay the cess would be on the basis of the actual assessment of the village. If, on the other hand, the assessment and the Jama is the same, then the cess would be on the basis of the Jama. Section 96 provides that the cess described in section 94 shall be levied, so far as may be, in the same manner, and under the same provisions of law, as the land revenue. In this case the land revenue is collected by the assessee and part of it or may be the whole of it as Jama is paid to the Government. Therefore, with regard to the cess it would also be for the assessee to collect the cess and pay it to the Government. Then we have section 104 wh....
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....e with which we are concerned was made on nth December, 1947. The principal clause of it that need be stated here is as follows: "The lessee shall pay the rents and royalty reserved by this lease at the time and in the manner provided in Parts V and VI and shall also pay and discharge all taxes, rates, assessments and impositions whatsoever being in the nature of public demands which shall from time to time be charged, assessed or imposed upon or in respect of the mines or works of the lessee or any part thereof by authority of the Government of India or the Government of Bombay or otherwise except demands for land revenue." It was in accordance with this clause that the syndicate paid, and the assessee received, the two sums of ₹ 16,309 and ₹ 39,515, which are the subject-matter of the question before us. The syndicate described these sums as being in respect of "local fund cess". Before the Income-tax Officer the assessee claimed exemption in respect of any tax on these two sums on the ground that they represented his agricultural income. That contention necessarily failed. Before the Appellate Assistant Commissioner, he raised three contentions....
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....39,515 in these two assessment years respectively in respect of local cess, and the taxing department sought to bring these amounts to tax. The contention of the assessee was that these amounts represented local cess which he was liable to pay to the State Government and therefore these sums did not constitute his income. It is important to note that he admitted his liability in respect of these amounts. It is true that there is a finding of fact by the Tribunal that no demand was made by the district local board in respect of these amounts, nor is there any evidence to show that in fact the assessee had discharged any liability in respect of local cess amounting to these two sums. But whether the district local board made a demand or not, whether the assessee paid any amount for local cess or not, we have a clear admission on the part of the assessee on the record that in law he is liable to pay these amounts in respect of local cess to the district local board. It seems to us clear that, if there is a legal liability imposed upon the assessee to pay to the district local board in respect of local cess these two amounts, then these two amounts cannot and do not represent income. I....