Law:

Section:

JUDGMENT Chagla, CJ.-This is rather an unusual reference, in that the assessee is contending that he is liable to pay a larger amount and the taxing department equally emphatically insists that the liability of the applicant is a smaller liability. Of course, such a position would be inconceivable if the dispute was restricted to the payment of tax. No assessee ever contends that he is liable to pay more income-tax and no taxing department ever says that the assessee is liable to pay less tax. But this controversy arises because the liability is different in nature. The liability which the assessee wants to take up upon himself is the liability to pay to the State Government and the liability which the department wishes to impose upon the assessee is a liability to the Central Government in respect of income-tax. Now, the question arises this way. The assessee is the Thakore Saheb of Shivrajpur and the 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 Rs. 16,309 and Rs. 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…

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