The Member for the Board of Agricultural Income-Tax, Assam v. Smt. Sindhurani Chaudhurani

In the Assam cases Ram Labhaya J. said that by Agricu /lural settling the lands and accepting salami the landlord Income Tax, Auam parts with the right of immediate occupation. v. Sml. SitulhuraniJ Chau<fh,,rani The characteristics and incidence of salami disclosed from the "statements of the cases" are that it is a Kapur]. lump sum non-recurring receipt of money by a landlord from a tenant before making a settlement of the holding, which· in C'.A. No. 162 of 1955 varied from Rs. 7 to Rs. 10 per bigha and was less in other cases. He is also entitled to charge a fixed periodical amount of 11 annas per bigha per annum. Salami is charged when-ever a fresh settlement is made whether it is of a piece of virgin land or of an auction-purchase holding. Thus salami is a payment by a tenant to the landlord antecedent to the constitution of the reiationship of landlord and tenant. It is really a payment by the tenant to the landlord for being allowed to take posses-sion of the land for cultivation under the lease. In all those cases under appeal the leases were oral and the duration and conditions thereof were regulated by Statute-The Assam Tenancy Act. Salami is not a recurring or periodical payment or a fee or fine levied at fixed intervals from the tenant for the same holding.

In these cases it has not been contended or even suggested nor was it contended before tl1e Federal Court that salami is capitalised rent. As a matter of fact the Federal Court found that it was not rent. In consideration of the payment of salami an estate in land is transferred by the landlord to · the tenant although the estate taken by the tenant · in the first instance is a non-occupancy tenancy which grows into an occupancy tenancy by the efflux of time. But in no case in any of the appeals was action taken under s. 69 of the Assam Tenancy Act which regulates the rights and liabilities of non-occupancy tenants and no tenant was ejected from his non-occupancy tenancy.

On the other hand whenever action had to be taken for non-payment of rent and ejectment it was taken

1957 under s. 68 of the Goalpara Tenancy Act. This section

is as follows :

Tbt MmiMr for t/u

·Botml of A permanent tenure-holder, a raiyat at fixed rates, Agricultural or an occupancy tenant, shall not be liable to ejectment Income T wt, A.sstlln for arrears of rent, but his tenure or holding shall be

v. liable to sale in execution of a decree for the rent SmJ. Sindhunmi thereof, . and the rent shall be a first charge thereon. Chaudhurani In execution of decrees for arrears of rent the estates EafJVr J. of the occupancy tenants were sold, the purchaser in

all cases being the landlord himself and thus for recovering the arrears of rent the landlord had to bring to sale the right, title and interest of his tenant and after purchase of this right he relet the land, on receiv-ing the salami from the new tenant. This process again shows that the landlord did part with some interest in land, which cannot be said to be precarious, when he made the settlement of land on receipt of .<alami, which was a single non-recurring payment by the lessee for the acquisition of his rights under the lease. "Agricultural income" which, it is claimer! by the Board comprises salami, has been defined in s. 2(a)(i) of the Act. The relevant portion of this $ection is :

S. 2(a)(i). Any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in Assam or subject to a local rate assessed and collected by officers of the Govern-ment as such.

Salami is not rent and, therefore, unless it is revenue it will not fall within this definition.

"Income" was described by Sir George Lowndes in Commissioner of Income Tax v. Shaw Wallace & Co. ( 1) as· "a periodical monetary return coming in with some sort of regularity, or expected regularity, from definite sources." In Captain M aharai Kumar Go pal Saran Narain Singh v. The Commissioner of Income Tax, Bihar & Orissa( 2 ), Lord Russell of Killowen after referring to the definition given by Sir George Lowndes held that life annuity paid out of an estate is income.

Salami was described by Lord Wright in Kamakshya 1957 Narain Singh v. The Commissioner of Income Tax(1 ), a ca~e of a grant of a mining lease for a period of 999 The Memb<r ]or lhe years, in the following words : Board of Agriwltural "The salami has been, rightly, in their Lordships' lnc011M Tax, AsJam opinion, treated as a capital receipt. It is a single v. payment made for the acquisition of the right of Smt. Si11dhurani lessees to enjoy the benefits granted to them by the l'liaudht1ra1li lease. That general right may properly be regarded as a capital asset, and the money paid to purchase it Kapur]. may properly be held to be a payment on capital account."

The importance lies in the use of the words "the money. paid to purchase it'', i.e., the right of the lessee to enjoy the· benefits granted under the lease.

In Raja Shiv Prasad Singh v. The Crown(2) where also the lease was a mining lease 'for a period of 999 years, salami was described as a sum which is payable at the inceptioq of the lease and as a non-recurring payment in the nature of a premium for granting a lease:

In Commissioner. of Income Tax v. Maharajadhiraj Kumar Visheshwar Singh( 8 ) an area measuring 4i bighas of land was settled for an indefinite (bemead) period on a yearly rent and in the event of default of two consecutive instalments the lessee could be dis-possessed and was also liable to other penalties. This land was settled with the lessee to enable him to build a "gola house" and a platform for the rice mill. The lease was taken to be in the nature of a permanent lease and it was held that salami represented the price for parting with the land was not merely an .

advan:::e rent and as it was not a recurring payment, it did not fall within the definition of the word 'income'

as given in Commissioner of Income Tax v. a Shaw Wa.1/ace & Co.( 4 ). Manoharlal J. who gave con-current judgment, at page 824 described salami as the amount of money which a landlord "insists on receiv-ing as a condition precedent for parting with the land in favour of the lessee." He also held that salami

(1) (19!3) L.R. 70 I.A. 180, 190. (3) (1939) l.L.R. 11! Patna 805.

(2) (192.1) I.L.R. 4 P;ltna 73- (4) (1932) L.R. 59 I.A. 206, 212.

1957 could not be treated as a revenue receipt and that it

was received by the landlord "not because of the use The Afember. for the of the land but before the land was put into use by the

Board of assessee." The same court in v. Agricultural Province of Bihar l11come Tax, AsJam M aharaja Pratap U dai Nath Sahi Deo ( 1 ) followed the

v. definition of the word 'salami' as given in Kumar Smt. Si11dhurani Vishesluvar Sing/i's case. Harries C.J. there held that Chmufh11rani where salami cannot be regarded as payment of rent

in advance, it will not be income and would, therefore, Kapur,]. not be taxable. He said "prima facie, salami is not

income, and it is impossible upon the facts as stated to say that salamis received ............ constitute part of h.is. income." , Rankin C.J. in Re Gooptu Estate Limited( 2 ) held payment of one lakh of rupees as salami not to be income. In that case it was demanded and paid in respect of resettlement of a lease which had still to run for 48 years but had been forfeited for the non-pay-ment of rent.

In certain cases, however, payment by way of salami has been held to be 'agricultural income'. In Birendra Kishore Manikya v. Secretary of State for India( 3 ) it was held that the consiclcration for the grant of a lease is the capitalised value of the sum periodicallv payable along with the premium so that "the larger the one element the smaller. the other." On this basis the premium paid for the settlement of waste lands or abandoned holdings was regarded 'as rent or revenue' derived from land and therefore within the definition of agricultural income in section 2 ( 1) (a) of the Indian Income Tax Act. This was a case which was decided under the Indian Income Tax Act and the question whether it was a capital receipt or revenue receipt and therefore exempt or not from taxation did not arise because the Bengal Agricultural Income Tax Act was passed in 1944 and the Assam Act in 1939. It was not necessary for the purpose of that case to decide whether it was a capital receipt or revenue because what was to be decided was whether salami was (1) (1947) I.L.R. 20 Patna 699, 722. (3) (1920) I.L.R. 48 Cal. ,SG. exempt from incomeotax under. s. 2(a) (i) of the Indian 1957 ' Income Tax Act. As a matter of fact the assessee argued in that case that these sums constituted Th • Member for tire "agricultural income". Moreover the dictum the Board ef smaller the the higher the rent and vice-versa Agricu/t1Jra/ salami did not receive acceptance by the Federal Court when Income Tax, Assam v. the present matter was heard in that court before Smt. Sindhurani remand (C.A. No. 30 of 1949). Chaudhurani

In Meher Bano Khanum v. Secretary of State for India( 1 ) 'salami' was defined to be an amount received Kapur]. by the landlord for the recognition of the transfer of a non-transferable holding which was paid to the land-lord because of his ownership of the land. It was held to be "agricultural income" as it was "rent or revenue"

within the meaning of that expression. The Standing Counsel who appeared for the Secretary of State in that case conceded that it was not revenue but his argument was that it was not revenue derived from land but that it was an incident of the transfer and not of tenancy and therefore· · did not flow from the land. In neither of these cases was it argued whether salami was a revenue receipt or capital receipt.

In a Full Bench of the Patna High Court in Raja Rajendra Narayan Bhanja Deo v. Commissioner of Income Tax(~ ) mutation fees were held to be agri;:ul-tural income but that was a case of payment after the relationsh:p of landlord and tenant had come into existence. Similarly in the Commissioner of Income Tax v. K. C. Manavikrarnan Raja!i(3) monies paid for the renewal of leases were held to be agricul-tural income within the meaning of s. 2 ( 1) (a) of the Indian Income Tax Act. Here again the monies were paid not for the constitution of the relationship of landlord and tenant but after that relationship had come into existence and for its continuance.

In H. H. Maharaja Sir Bir Bikram Kishore Manikya Bahadur v. The Province of Auam(' ), a case under the Act, Harries C.J. referred to Kamakshya Narain Singh's case( 5 ) and held that it had to be decided on

(1) (1925) I.L.R. 53 Cal. 34· (4) (1948) 53 C.W.N. 164.

(2) (1929) I.L.R. 9 Patna 1. (5) (1943) L.R. 70 I.A. 180, 190.

(3) I.L.R. 194 5Mad. 837.

1957 the facts of each case whether salami was agricultural

income or not because it was not known in respect of T ht Member for t/u what transaction the am.ount was received.

Board of Agricultural The Orissa High Court in S. M. Bose v. Secretary, Income Tax, A.1.ram Board of Revenue( 1) has held that salami is not a

v. payment of rent in advance nor is it income but is a Smt. Sindhurani payment by way of capital receipt. It was contended

C/ulUdhurtmi before us that the Privy Council in Kamakshya Narayzn

Sing h's case( 2 based its decision on the wasting nature Kapur]. )

of the assets under the lease. But the definition given by Lord Wright is in general terms and just describes what the characteristics of a payment by way of salami are without any reference as to the nature of assets under a lease. · In all these appeals before us the assessees derived considerably large amounts of income from agricul-tural holdings. It is not shown as to what the number of the holdings were but they must have been consider-ably large. On the oth~r hand the number of settle-ments was comparatively small-a few hundreds and consisted of settlements of virgin lands as well as of auction;purchase lands and were not derived from the same holdings at regular intervals. This and the find-ings of fact given above negative the finding as to "regularity and periodicity" of pa,yment of salami and also that it "arose out of business of letting out his land," The payments by 'way of salami were made by the prospective lessees anterior to the constitution of the relationship of landlord and tenant as the price for the lessor agreeing to the parting of his rights in an agricultural holding in favour of the proposed lessee. In Principles of Mohamadan Law by Macnaughton salami is-defined as;

"a free gift by way of compliment or in return of a favour."

In Wilson's Glossary the meaning given to it is :

"a complimentary present, a douceur. ........... ; a present to a superior upon being introduced to him; a gratuity or offering on receiving a lease ...... "

(1) A.LR. 1955 Orfosa 288. (2) (1943) L.R. 70 I.A. 180, 190. In the Arabic-English Dictionary by Johnson it t957 means:

Tiii Member for lh1 " ........ a present on being introduced to a superior; Board sf earnest money ; a free gift from a farmer to Govern- ..4gri&u/lurtil ment on taking lands .......... " Incom1 Ta:c, Ars•m In Vol. I of Baden Powell's "Land Systems of British v. Inclia" it is stated at page 543; Smt. Sindhurani CAautlhurai " ...... the Zamindar, to raise money, had sold so many taluqs or under farms for 'salami' or fees paid Kapur J down .... "

Thus all these definitions show that salami is a payment by the tenant as a present or as price for parting by the . landlord with his rights under the lease of a holding. It is a lump sum payment as consideration for what the landlord transfers to the tenant.

The manner in which the leases were dealt with and the fact that in no case was a non-occupancy tenant evicted and his tenure was allowed to mature into an occupancy holding shows that the leases were •in practice not so precarious as was suggested by the

Board, but had an element of stability and perma-nency attached to them. Therefore, when a tenant paid salami he did so in order to get in return an estate in the land owned by the zamindar. Salami is thus not rent and both parties have proceeded on that basis and it could not be called revenue within the meaning of the word used in the definition of agricultural income under s. 2(l)(a) of the Act because it was a payment to the landlord by the tenant as a consideration for the transfer of a right in zamindari lands owned by the landlord. It has therefore all the charactenstics of a capital payment and is not revenue.

In the result appeal No. 162 of 1955 brought by the State of Assam is dismissed with costs throughout and the appeals brought by the assessees in C.A. Nos. 38 to 44 of 1956 are allowed, the judgment of the High Court set aside and the referred questions answered in the negative. The assessees will have their costs in this court in one set and the courts below except in appeal No. 42 of 1956 where the appellant was not present.

~IS. C. India/59

1957 but it appears that she could not be served and given

notice of the hearing of the appeal and, therefore, Flu Member for l/u although her appeal is allowed, as it is based on a point

Board of Agrici.:ltural com,non to other appeals, the parties will bear their Income Tax, A.Ham own co'ts in that appeal.

v. Appeal No. J(,2 of 1955 dismissed. Smt. Sindhurani Appeals Nos. 38 to 44 of 7956 allowed. Chaudhurani Kapur J.

1957

BASH!RUDDIN ASHRAF

Apil, 25 v.

THE STATE OF BIHAR

( S. R. DAS C.J., JAF!'AR IMAM, s. K. DAS, GOV!NDA

MENON and A. K. SARKAR JJ.) i\!t!tatvalli-A.fajlis, powers of-Budgct-Mutatva//i's fai/u,·e to prcpart• and send copy to Afaj/is-Coni·ictio'1-Validity-Sentence of fine, in default imprisonment-Legali:y-l?ihar TVaqfs Act, 1947 (Bi*ar Act 8 of 1948), ss. 58, 65-Con.ctitution of India, Art.,. 19 (!) (g).

The appellant failed to prepare a bud_gct of the Waqf Estate of \Yhich he \Vas the mutawalli, for the year 1952-53 and send a copy of it to the Majlis· before J:-inuary 15, 1952, :is he was hound to Jo unJt•r s. 58( I) of the llihar Waqfs Act, 1947, ond \•:as convicted hy the Magistrate under s. 6--5( I) of the J\ct :inJ stntcncc<l to pay a fine of Rs. iOO, in default to nn(~crgo fifteen cbyc; -~iriplc imprisonment. It was contended for him that the con\·iction and sentence \Vere nor \·al id ber:iuse (I) s. ;g l)[ thi.: Act contravened Art. I9(1)(g) of the Constilution of India, :?.'i it g:ivc unrestricted po\ver to the Majlis to alter or modify the budget prepared by the muta\valli without a right of appc:II against the action of the ?i.1ajlis and so in1poscd an unreasonable restriction on the muta\valli in c1rrying on hi.o; occup:ition as such, :Ind (2) s. 65 of the Act did not provide for any impri~on­ ment in default of payment of fine.

lleld, that hav1ng regard to the fact th:-it a muta\\':tlii occupies the position of a man:igcr or custodian and the supervi-sin:i over him by the :tvfaj!i<; with the respect to due administration of the \vaqf property is neccss:iry and that the 11owers of the !'vfajlis to olter or modify the budget prepared by the mutawalli are controlled by sub-s. ( 6) of s. 58 of the Act. the restrictions imros-:d by s. 58 of the Act on the exercise of his powers