Dawson Miller, C.J:— This case comes before us under section 66 of the Income-tax Act upon a case stated by the Commissioner of Income-tax. The Assessee, the Maharaja Bahadur of Huthwa, complains in respect of two items upon which he has been assessed to income-tax. The first item is the income upon certain Government securities valued at 41 lakhs of rupees which were deposited with the Imperial Bank to secure an overdraft which during the year of assessment has been taken at a sum of close upon 13 lakhs of rupees. The interest payable upon the overdraft amounted to Rs. 82,179. The securities which were lodged with the Bank to secure payment of the interest upon that overdraft brought in an income in the way of dividends of Rs. 1,59,000. These dividends as they fell due were received by the Bank under a general power of attorney granted by the assessee to the Bank. They were credited to his account and from month to month the sums due for interest on the overdraft were in the same way; debited to the assessee's account. The assessee contends that this source of income, at all events to the extent of Rs. 82,179, which represents the interest on the overdraft paid to the Bank, should be deducted from his taxable income. The argument put before us in the case is, in the first place, that these securities having been hypothecated to the Bank by way of security for the overdraft are in fact no longer the property of the assessee and ought to be treated as the property of the Bank. The Bank, however, merely has a charge upon the interest of these properties to secure payment of the interest on the overdraft and possibly a charge upon the corpus to secure repayment of the overdraft itself but the securities in no way cease to remain the property of the assessee and the dividends payable on the securities are undoubtedly part of the income of the assessee.

The main argument addressed to us is an argument based really upon the analogy of the deductions which are made in the case of a business where if the business concerned borrows money from the Bank in order to invest it in the business as part of its capital, then the interest payable to the lender upon the sum so borrowed may be deducted from the profits of the business. The principle in such a case is no doubt a sound one, and it has been recognised by the framers of the Income-tax Act but only in the case of income derived from business. Under section 10 of the Income-tax Act the tax is payable under the head “business” in respect of the profits or gains of the business carried on by the assessee, but from such profits or gains certain deductions are allowed in computing the taxable income. One of these deductions is,

“in respect of capital borrowed for the purpose of the business where the payment of interest thereon is not in any way dependent on the earning of profits, the amount of the interest paid.”

It seems, to me quite right and proper, and in fact it is the law, that where persons carrying on business have to borrow money for the working capital of their business, that which they have to expend in order to obtain the capital should be deducted from the actual profits which they make; but in the case of a private individual no such considerations necessarily arise. In the present case it cannot be said that the overdraft was in any way obtained for the purpose of carrying on any business or, except to the extent of about 3½ lakhs, for the purpose of investment producing profits which might be considered as income. In fact we do not know for what purpose the overdraft was taken with the exception of the sum named. Apart from that sum of 3½ lakhs it does not appear that any of it was invested. It is noticeable that in the corresponding section, which applies to the present case, namely, section 8 of the Act, no such deductions are there mentioned. That section says

The tax shall be payable by an assessee under the head. “interest on securities” in respect of the interest receivable by him on any security of the Government of India or of a Local Government, or on debentures or other securities for money issued by or on behalf of a local authority a company.

Had it been intended that where a private individual borrows money either from his Bank, or from any other source, he should be entitled to deduct the interest thereon from his taxable income I have not the slightest doubt that some provision would have been made to that effect in the Act, but in the other sections of the Act, apart from those dealing with income derived from business, we find no such exemption included. Prima facie therefore the assessee is bound to pay income tax upon all the profits which come under the head of “interest on securities.” Section 4 of the Act states in very broad terms what sort of profits and gains are to be taxed. It provides that

“Save as hereinafter provided, this Act shall apply to all income, profits or gains, as described or comprised in section 6, from whatever source derived, accruing or arising, or receiving in British India, or deemed under the provisions of this Act to accrue, or arise, or to be received in British India.”

The income in the present case clearly comes within that section and, unless the assessee can shew that by some provision in the Act he is entitled to deduct the sum claimed from his taxable income, he must primal facie fail. He is unable in the present case to shew any such exemption coming within the Act itself. I have mentioned the fact that a sum of about 3½ lakhs of the overdraft was taken for investment. Those investments form part of the securities deposited with the Bank, and it is interesting to note that the interest on the loan to that extent amounting to Rs. 19,644 has been allowed by the Commissioner as a deduction from the taxable income. This appears to have been done under general instructions from the Central Board of Revenue. Under what provision of the Act it is done has not been discussed, but it seems fair and reasonable that such deductions should be made.

A further point which is of a technical nature was made on behalf of the assessee that the income was not really received by him. It was, however, received by his attorney and received on his account, and although his attorney had a charge Upon it for the interest due upon the overdraft that makes it none the less income received by the principal. It was received by the agent on behalf of the principal. On this part of the case therefore I consider that the assessee's claim fails.

The other point relates to a sum of Rs. 3,107 which comes under the head of “Income received from other sources.” The actual source from which this income is derived is stated by the Commissioner in the case. It is called nimak sair, that is, income from the settlement of the right to collect a particular kind of earth in a particular area during a particular season for the purpose of extracting saltpetre. It appears that earth of this description is found upon the assessee's zamindari. The right to extract that earth is apparently let out to tenants and in return for that right the assessee receives something in the nature of rent or royalty. It was contended that this is merely casual income and non-recurring. That fact, however, seems to be concluded by the findings of the Commissioner. He states in his case that it is not casual income. It is shewn in the return for the years 1923–1924, 1924–1925 and 1925–1926. It is thus clearly capable of repetition, and finally he says that, in his opinion, the receipts from nimak sair are neither casual nor non-recurring. That is a finding of fact and unless that finding of fact was come to by some improper process or by failure to give effect to some rule of law it is binding upon this Court. It has not been shewn to us that the facts before the Commissioner were not such as to justify him in coming to that conclusion and, therefore, by his conclusion we are bound.

It was further argued with regard to this part of the case that the income derived from this source is really not income at all, but in the nature of a sale of a part of the earth appertaining to the assessee's zamindari, in other words that it was a transfer of one kind of capital into another, namely, the transfer of this particular sort of earth into money. It is, however, of a recurring nature and it is not casual and in such cases it seems to me that it is quite impossible to distinguish the rents or royalties, whatever they may be called, arising from this source, from the rents or royalties arising from the letting of coal or other minerals in the earth, or income which arises from the produce of the earth whether it be that on the surface or whether it be that beneath the surface provided that it is not non-recurring or casual, and provided that it is not in the nature of a sale. On this point therefore I think that the assessee's case must fail.

The result is that the decision of the Commissioner of Income-tax must be upheld and this application must be dismissed. The Commissioner is entitled to his costs in this case.

Foster, J.:— I agree.