SHRI CHATRASINGHJI KESARI SINGHJI THAKORE versus COMMISSIONER OF INCOME-TAX, BOMBAY

Citation: [1966] 2 S.C.R. 440 · Decided: 28-10-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed

Judgment (excerpt)

SHRI CHATRASINGHJI KESARI SINGHJI THAKORE 
v. 
COMMISSIONER OF INCOME-TAX, BOMBAY 
October 28, 1965 
[K. SUBBA RAO, J. C. SHAH AND S. M. S!KRI, JJ.] 
Incon1e Tax-lvfining lease-Local cess payable under terms of lease 
hy lessee-Stans in excess of local cess paid :to lessor-Excess lvhether of 
•inconie' of lessor. 
A 
B 
The appellant gave certain mines on lease to a Syndicate. in lieu of 
C 
rents and 
royalty. 
By cl. 1 Part VII of the indenture of lease the 
Syndicate was also required to discharge all public demands in respect of 
the mines made by the State Government or the local authority, except 
land revenue. In compliance with the said clause the Syndicate paid 
certain sums for the periods ending July 31, 1951 and July 31, 1952 to the 
appellant as 'Local Fund Cess'. This Cess was calculated by the Syndicate 
as a percentage of the ient and royalties paid for the mines whereas 
under the relervant law the oess had to be a percentage of the land revenue, 
D 
and therefore the sums paid were much larger than due. For the assess-
ment years 1952-53 and 1953-54 the 
Income-tax Officer having juris-
diction over the area treated the amounts so paid rto the appellant as 
part of his income.. 
The appellant filed an appeal before the Appellate 
Assistant Commissioner and contended that the two sums were not tax· 
able because they re.presented Local Fund Cess collected by him on 
behalf of the State Government or Local Board, and also because they 
E 
were receipts "of a casual and non-f'zcurring nature." These contentions 
were accepted by the Appellate Assistant Commissioner but the Tribunal 
and the High Court in a reference under s. 66 of the Income-Tax Act 
upheld the view of the Income Tax Officer. 
The appellant came to this 
Court with certificate. 
HELD : (i) The Syndicate was not an inferior bolder under the appel-
lant. It was the appellant who was the. holder, and the liability to pay 
the local fund cess under the Bombay Land 
Revenue Code was 
his. 
Under the terms of Part VII cl. 1 of the indenture of lease the Syndicate 
ha<l agreed to pay to the appellant the amount of local fund cess which 
the latter had to pay to the Government. 
But by collecting the amount 
from the Syndicate under the terms of his contract, the appellant was 
not constituted an agent of the Government for recovering the cess. [446 
A-Cl 
F 
G 
(ii) The Syndicate merely sought to discharge what it believed was its 
contractual obHgation under the lease and in doing so it made payments 
which eocceeded the local fund 
cess payable by the 
appellant. 
The 
amounts so paid had a quality, if not identical, closely ;similar to refits 
and 
royalty. 
It was immaterial that if the true position had been ap-
preciated the Syndicate might not have paid the amounts. They were 
in fact paid by the Syndicate and were received and appropriated by 
H 
the appellant as if he was entitled to receive them. 
The difference bet-
ween the amounts which the appellant receivo<l and the amounts for which 
he could under the terms of the lease claim reimbursement must thertforc 
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• 
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• 
C. K. THAKORE V. C. I. T. (Shah, J.) 
441 
A 
be regarded as income within the meaning of the Indian Income-tax Act, 
and unless specially exempted, liable to tax. [445 E-G, HJ 
(iii) There is nothing in the Income-tax Act which prevents the Re-
venue authorities from determining the quantum of the1 amount which 
is payable by the appellant as local fund cess, when that question properly 
arises before them in the course of proceedings for assessment. [446 DJ 
B 
{iv) The fact that the Syndicate had filed suits to recover the excess 
amounts paid to the appellant as local fund cess did not affect the issue. 
The appellant had received certain amount under a contract with the 
Syndicate and if that amount was income 'the fact that the person who 
paid it might claim refund would not deprive it of its character of income 
in the year in which it was received. [447 G-H] 
( v) Assuming that the amounts sought to be included as income were 
C 
paid as a result of some mistake on the •part of the Syndicate, they had 
not the characteristic of casualness and it was not suggested that they 
were non-recurdng. [420 A-Bl 
D 
E 
F 
G 
H 
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 148 and 
149 of 1964. 
Appeal by special leave from the judgment and order dated 
April 14, 1960 of the Bombay High Court in Income-tax Refer-
ence No. 85 of 1957. 
Bishan Narain, .T. B. Dadach

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