Law:

Section:

Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Assessment year 1947-48 - Assessee made settlement of coal-bearing lands of non-agricultural character with various persons and one of important clauses in agreement was that lessee would pay to assessee entire road-cess payable under Bengal Cess Act, 1880 - However, under provisions of 1880 Act lessee was liable to pay half amount of cess and landlord was liable to pay other half and if either part paid more than half of cess amount he was liable to recover excess from other party - Whether since assessee-lessor realized entire amount of cess from tenants, half amount of cess realized in excess from tenants was tantamount to income in assessee's hands and was liable to be taxed - Held yes FACTS The income of the assessee consisted mainly of royalties and surface rents from coal-bearing lands which were not of agricultural character. The assessee had made settlement of these lands with various persons and one of the important clauses in the agreements was that the lessee should pay to the assessee the entire road-cess payable under the Cess Act 1880. Under the Cess Act the assessee was liable to pay cess to the authorities at the rate of one anna per rupee. During the accounting year the assessee realised from his lessees sum of Rs. 4,609 on account of road cess in addition to the rents and royalties stipulated in the various agreements. The ITO held that the entire amount of Rs. 4,609 should be included in calculating the total income of the assessee. On appeal, the AAC held that the assessee had not derived any advantage or benefit from the realisation of cess from the lessees in accordance with the agreements. He, therefore, excluded the sum of Rs. 4,609, from the total income of the assessee. The income-tax authorities took the matter in appeal to the Tribunal and it was contended on their behalf that the AAC had no warrant or justification for excluding the sum of Rs. 4,609, from the assessee's total income. The Tribunal considered the provisions of the Cess Act and reached the conclusion that the tenant and the landlord were each liable to pay half the road cess levied under the Cess Act.…

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