Courtney Terrell, C.J:— This is a reference by the Commissioner of Income-tax under section 66 of the Income-tax Act, 1922. It has been placed before a full Court because the Crown desire to contest the soundness of an earlier decision hereinafter referred to.

The assessee, the Raja of Kanika, derives rather more than one half of his large income from agricultural rents. He has a residential palace upon his estate which extends over about 400 square miles, in which certain, quarters are allotted to certain of his zamindari staff. According to the case stated by the Commissioner “It contains the usual rooms to be found in such a palace including drawing room, dining room, billiard room and bed rooms, while there is a small detached guest-house containing one public hall and two bed rooms. The Income-tax Officer in making this assessment has taken Rs. 3,000 as the proportionate valuation of the portion of this palace which is not required for agricultural purposes.” The cost of the whole palace was about 4 lakhs of rupees. The proviso to section 2, sub-section (1)(c), of the Act exempts from taxation as agricultural revenue the notional income of a building

“which the receiver of the rent or revenue or the cultivator or the receiver of the rent-in-kind by reason of his connexion with the land, requires as a dewelling-house or as a store-house, or other out building.”

The Department contends that the words

“by reason of his connexion with the land requires as a dwelling-house”

mean that the proviso is only to apply to such portion, if any, of the building as should be needed dwelling-house, store-house or out building for the purpose of receiving of rents or cultivation or receiving of rent in kind as the case may be. The argument more shortly put is that the word “requires” is used in the sense of “needs” and that the words “by reason of his connexion with the land” mean as applied to this case “for the purpose of collecting the rent or revenue”.

This interpretation, if correct, would leave the taxable proportion of the notional income from the building to be assessed by the Income-tax Officer as a matter of fact and without appeal. Now I can see no indication in the Act of any circumstances which are to guide the officer in assessing the taxable proportion. There is for instance no indication whether the dwelling-house is to be of such a kind as to enable, the owner to reside in it for such time as may be necessary for the collection by him of his rents, or whether his family may properly be expected to accompany him. Or whether the distance from such other dwelling as he may own ought to be considered, or whether his social prestige or the need of displaying it to his tenants is to be taken into account. All these considerations and many others are according to the Department to be left to the officer as matters of fact within his sole discretion. Had this been the real intention of the Legislature one would have expected to find in the Act a set of guiding principles. On the other hand for assessing the revenue of a business the Act provides elaborate guides. For this reason alone I am of opinion that the Legislature had no such intention as suggested by the Department.

But apart from this consideration the words of the proviso are not capable of the construction suggested. The word “requires” means that the assessee demands to appropriate the building for the purpose of a dwelling-house or as a store-house or other out building and the words “by reason of his connexion with the land” mean that only the fact of his being a receiver-of-rent or revenue or the fact of his being a cultivator or the fact that he is a receiver-of-rent in-kind entitle him to claim any building as a dwelling-house, a store-house or an out building. If he should not occupy any of these positions in connexion with the land he is not entitled to claim, as tax free, accommodation of the kind specified. In other words the expression “by reason of his connexion with the land” is merely used to explain the nature of the class of persons entitled to exemption. It has been said that punctuation must not be used in construing a statute other than as a mere “temporanea expositio” and for this limited purpose it may be noticed that the words are not separated by a comma or otherwise from the words “the receiver of the rent or revenue or the cultivator or the receiver of the rent-in-kind,” whereas the verb “requires” is separated by a comma from the grammatical subject and the phrase “by reason of his connection with the land”. My conclusion is that this phrase has a qualitative and not a quantitative significance. Of course there must be a bona fide use of the building as a dwelling-house, store-house or out building and the assessee is not at liberty to claim arbitrarily the exemption of any building which he may at his own choice describe dwelling-house, store-house or out building without regard to the actual facts. For these reasons I am in agreement with the decision arrived at in the case of Maharajadhiraja of Darbhanga v. Commissioner of Income-tax.

It has further been argued that the income on account of buildings which is to be exempted from taxation is not the notional income but the actual income, if any, derived therefrom. This argument will hardly bear examination, and I will say no more than that I am in full agreement with the views of my learned brethren on this point.

The next matter for decision is as to whether mutation fees paid by the assessee's tenants upon succeeding to holdings or tenures by inheritance is within the definition of agricultural income furnished by the Act, that is to say, “any rent or revenue derived from land which is used for agricultural purposes”. It has been contended that the realization of these mutation fees is illegal and unenforceable. To my mind this is not a circumstance, even if it be the fact, which has any bearing upon the question to be decided. The tenants are admittedly in occupation of agricultural land and however illegal the sum so collected it is paid by the tenant to the landlord by reason of the relationship of landlord and tenant of such land. Such being the case the mutation fees paid are clearly income derived from land which is used for agricultural purposes and I agree with the former decision above referred to in which the same point was decided in favour of the assessee.

There was a third point as to the admissibility of deductions on account of interest paid on overdrafts but this point does not now call for consideration.

The answer to the questions put by the Commissioner are in favour of the assessee.

Ross, J.:— It is conceded that the first question is answered by the decision in Maharajadhiraja of Darbhanga v. The Commissioner of Income-tax, but it is argued that case was wrongly decided. The learned Government Advocate advanced two alternative arguments.

The first was that this house property is taxable under section 9 and that no section of the Act exempts it from taxation. What is exempted by section 2, clause (1)(c), is income actually derived from a house of the kind therein referred to and as admittedly no income is actually derived from this house there is no exemption. There is more than one answer to this argument. What section 9 taxes is the annual value of buildings and, where the buildings are in the occupation of the owner, rules are given for ascertaining the annual value to him, which is thus notional income and is taxed as such. But if notional income is taxable, it must also be subject to abatement of tax. Income cannot mean one thing for the purposes of taxation and another for the purposes of abatement. There is therefore no reason for restricting income in section 2, clause 1(c), to income actually earned. Again, such a construction destroys the meaning of the clause. If a zamindar lets his house, then he does not require it and therefore it is outside the clause altogether. It is suggested that what the clause refers to is income derived from letting part of the house; but the clause only exempts income from a building owned and occupied by the receiver-of-rent, and so far as it is not occupied by him, it is not within the exception.

The alternative argument was, that advanced by the Commissioner of Income-tax that the house is too large for the assessee's requirements as a zamindar and is therefore assessable in part. But if the legislature had contemplated such an inquisition into the domestic affairs of the assessee as this argument involves, it seems to me that it would have been expressly provided for. As was observed by Lord, Hannen in. Tenant's case, income-tax is imposed not on the personal suitableness of the man's surroundings which must vary with the man and the same man in different circumstances, but on his income capable of being calculated. There are three requisites for exemption under this clause (1) the building must be owned and occupied by the receiver of the rent, (2) it must be on or in the immediate vicinity of the land; and (3) it must be a building which the receiver of the rent by reason of his connection with the land requires as a dwelling-house. The first two conditions are admittedly satisfied, and the question is about the third; and this question reduces itself to the meaning of the word ‘requires’. In my opinion the meaning is determined by the context and is limited only by the words immediately preceding and following it, namely, “by reason of his connection with the land” and “as a dwelling-house There is no reference, or suggestion of a reference, to the size of the house as a condition of exemption. The only test is that the receiver of rent has to occupy it as a dwelling house by reason of his connection with the land. If by reason of his connection with the land, he has to occupy that house (not a house as large as that), then the notional income derived from the occupation of that house is agricultural income and is exempt from taxation; otherwise the taxability of a zamindar's house would vary with his zamindari income, the size of his family and his personal tastes. A house free of tax in the hands of one might be taxable in the hands of his successor and a house free of tax at one time might be taxable at another. In my opinion the answer to this argument is that these considerations are outside the Act and that a construction of the section which involves such considerations is not the true construction. I therefore see no reason to alter the opinion expressed in the judgment in Maharajadhiraja of Darbhanga v. The Commissioner, of Income-tax to which I was a party.

On the second question, it is conceded that so far as the mutation fees are fees payable on succession to tenures, they are agricultural income; and this is said to be the result of section 14 of the Orissa Tenancy Act which entitles the landlord to a fee in the case of a transfer of a tenure by succession. But it is argued that mutation fees on the transfer of raiyati holdings by succession are not agricultural income because by section 30 of the Act the right of occupancy descends in the same manner as other immoveable property in the case of intestacy and any fee taken for mutation of names is an illegal cess. I am unable to see how the legality or illegality of a charge affects the source from which the income is derived. If a mutation fee on the transfer of a tenure is agricultural income, it is difficult to see on what principle the mutation fee on the transfer of a raiyati holding is not agricultural income also. In my opinion both these payments are equally revenue issuing from the land or, what is the same thing, from the relation of landlord and tenant.

Learned Counsel for the assessee pressed for a decision on the question of the legality of these charges. It is contended that section 30 merely states the rule of devolution of occupancy holdings in the case of intestacy and that the exaction of a mutation fee would be governed by custom, at any rate in a permanently-settled estate. It is said that this custom has been recognized in the instructions of the Board of Revenue in 1893 and that it is followed by the Government itself as proprietor of the Khurda estate. This may be so, but the question seems to me to be altogether outside the jurisdiction of the Commissioner of Income-tax; and, consequently, not fit for decision by this Court in the present proceeding.

Wort, J.:— This is a case stated by the Commissioner of income-tax under an order of this Court, dated the 22nd November, 1927. The Court required the Commissioner to state a case on three matters. As regards the third, however, the attitude adopted by the Commissioner before the, order of the 22nd November, 1927, appears to have been under a misapprehension of the facts and it has now been adjusted and the Crown concedes that the assessee is entitled to the deductions which were claimed in regard to this.

The remaining questions are two in number. The first is whether the house occupied by the assessee on his estate at Kanika is entitled to complete exemption as agricultural income under the provisions of section 2, sub-section (1)(c), and section 4(3)(viii) of the Income-tax Act.

The second question that arises is whether certain mutation fees which are a part of the zamindar's income are agricultural income within the meaning of section 2, sub-section (1)(a), of the Act.

It will be necessary in dealing with these points to state briefly the facts. The Raja of Kanika has a palace at Kanika which appears to have cost something like three lakhs of rupees apart from the zenana quarters. This palace is situated on his zamindari which is of an area of 439 square miles.

In the case stated it is admitted that the description of the palace complies with section 2, sub-section (1)(c), in that it is on or in the immediate vicinity of the land and that the building is owned and occupied by the assessee being the receiver of the rents and profits. The question which the Commissioner of Income-tax states arises is whether the whole valuation, that is the annual value of the residence of this zamindar should be exempted from income-tax regardless of the proportion between that valuation and his income from landed property and regardless further of the proportion which his income from landed property bears to his income from other sources. The Commissioner further states in the case that the assessee's income from rent proper is approximately 50 per cent, of his total income. Further he states that it is submitted that this palatial building is not required wholly and exclusively for agricultural purposes and that the question of valuation of what proportion of the total building the assessee should be assessed at is a question of fact in each case. The amount of the assessment of the building or a part thereof is undoubtedly a question of fact but nowhere in the Act does it provide that the dwelling house should be required for agricultural purposes. The Act uses the expressions “required dwelling house in connexion with the land”.

The second section defines “agricultural income”, and sub-section (1)(c) includes any income derived from any building owned and occupied by the receiver of rent or revenue of any such land, and eliminating irrelevant portions it goes on to provide that the land is on or in the immediate vicinity of the land and is a building which the receiver of the rent or revenue by reason of his connection with the land requires as a dwelling house, etc.

The question which arises is a question of mixed fact and law. But the real point before us, having regard to the findings of fact by the Commissioner, is what is the proper construction to be placed upon the words “required a dwelling house, in connection with the land”.

The question has already come up before this Court and it has been decided in the case of Maharajadhiraja of Darbhanga v. The Commissioner of Income-tax that it is sufficient to show that by reason of the assessee's connexion with the land he requires a dwelling-house in the vicinity and that it is not open to the Commissioner to consider whether the particular class of house is more or less the actual requirements of the zamindar. One of the questions really before us is whether that case was rightly decided.

I have already indicated the view which the Commissioner takes with regard to the meaning of these words, and, in my judgment, clearly the test which he applies is a fallacious one.

It is important to notice that there is a statement by the Commissioner that the Income-tax Officer in making this assessment has taken Rs. 3,000 as the proportionate valuation of the portion of this palace which is not required for agricultural purposes. I would be content in founding my judgment on this statement or the inference to be drawn from it, having regard to the other facts which have been found in the case. This last statement, in my judgment, is tantamount to saying that the Raja requires this palace as a dwelling-house in connection with the land, or to put it in other words, that having found that a portion of the building on the land is required for the purposes set out in the Act, the section has been complied with and that a Court is thereafter precluded from any further inquiry and that there is nothing in the Act to warrant his inquiring into what portion of the building is so required.

I have already stated that the Commissioner adds the words “required for agricultural purposes”; but there is no justification for these words “agricultural purposes” whatever. Equally there is no justification for the method which the Commissioner has adopted, namely, of testing the question by determining the proportion between “Agricultural income” of the zamindar to that of his total income.

However, as the question is really one as to the true construction of the Act, I propose to deal with the arguments which have been advanced with regard to it.

The first argument put forward by the learned Government Advocate on the construction of section 2 is one which is diametrically opposed to the contentions of the Income-tax Department, but that is immaterial, the contention being that when the word “income” is used in section 2, sub-section (1)(c) the meaning is actual income and not notional income; that is income must mean actual money received as a profit from the building.

It is further contended in support of this argument that there is only one section in the Act which deals with notional income and that is section 9. It is obvious that the Crown must be driven back as it was to the contention that the exception under section 2 was not an exception to section 9.

For the purposes of this argument the Crown relies upon the case of Alexander Tennant and Robert Sinclair Smith. The judgment in that case however gives no support to this argument. The judgment which related to the assessment of a bank manager under Schedule D of the Income-tax Act in England then in force, that is to say the Act of 1842 and the question therein arising was whether the occupation of a house provided for him by his employer was an emolument within the meaning of that schedule. The words in that judgment relied upon by the Crown are those in Lord Halsbury's speech “that the thing sought to be taxed is not income unless it can be turned into money”.

The case as I have stated dealt with words quite different from those we have to construe. In effect the argument is this: that wherever the word “income” is used it means actual moneyor money's worth and not notional income in the sense of an annual value of a house occupied by the assessee. One answer to that argument is that the Income-tax Act as its name denotes deals with the taxation of Income under several heads and one is “property” [Section 6(iii)]. That so far as property is concerned notional income is taken. In other words section 9(1) provides that the assessee in regard, to Property shall be taxed on the bona fide annual value.

I think that statement is sufficient to meet the argument that actual income only is dealt with by the Act. The Crown in the case stated recognises this to be a case of notional income but says that it is an exception to the general meaning of the word income. But the plain construction of section 2 is a complete answer to the argument. The Act must be construed so as to give it a reasonable meaning. The effect of the construction contended for would be to repeal the provisions of section 2 or to make them a nullity. The dwelling house to be exempt must be owned and occupied by the receiver of the rents and profits of the agricultural land, and it must be required dwelling house. If it is occupied how can actual cash income accrue from it and indeed if it is occupied by a third person who will pay rent and thus render income to the owner, how can it be said that it is required dwelling house by the owner-assessee. In my judgment this is an impossible construction.

The main argument however is that there must be some sort of relation or rather proportion to be fixed as between the dwelling house and the land or zamindari and that is always a question of fact for the Commissioner. The words to be construed therefore are (substituting the phrases used, so far as their positions in the section are concerned) “required dwelling house in connexion with the land.” Now it is not argued that the Commissioner would be required, nor is he required, to enquire into the actual reasonableness of the demands of the Raja so far as the dwelling house is concerned. That is to say he may live in any style he likes and have a palace or a hut. But it is said that the words “in connexion with the land” place limits upon or condition the Raja's requirements with regard to a dwelling house so far as the exemption from taxation is concerned. Do these words warrant any such argument? The Crown contends that the words warrant the following enquiries which the case stated suggests:—

(i) whether the assessee occupies the house qua landlord;

(ii) what proportion does his income from land, bear to, his income from other sources;

(iii) whether the palace is required exclusively for agricultural purposes.

The Crown contends as to (i) that the assessee does not occupy the house qua landlord. Then in what capacity does he occupy? In my judgment inasmuch as he is entitled to a partial-exemption according to the case stated he does in fact occupy the house qua landlord. That is to say that this or that part of the palace is not required by his occupation qua landlord or for agricultural purpose is either enquiring into the assessee's personal habits or tastes, an enquiry quite irrelevant on any construction to be placed upon the section, or to apply a test which the language of the Act in no way warrants. The section says, requires dwelling house in connexion with the land, not requires, as a dwelling house in connexion with and for the purposes of the land (or agriculture). If we were to read “for the purposes of agriculture” into the section which in effect the argument of the Crown contends for, the whole house would be outside the provisions of the section. Neither the dining room nor any of the living rooms are required, in connexion with the land any more than the billiard room or the zenana quarters placing the construction desired by the Crown upon the section.

In my judgment if the argument on behalf of the Crown is right then the construction contended for in the case stated is the only tenable one, that is that only “Zamindari katcherries, Manager's offices and buildings of that nature” are exempt, and that contention is clearly wrong on any plain reading of the section, the sub-section stating as it does that dwelling houses, or store house or other out-buildings are exempt.

In my opinion the words we have to construe in connexion with the land merely make it necessary for the assessee to establish the relation between himself and his house with the land in order to claim exemption. Such relation in this case is established fact and in my judgment any further enquiry is precluded. The hypothetical case of a person building a palace on a few bighas of land with say one small holding seems hardly to touch the point. First, such a case in India is unlikely to occur and secondly, the case is so extreme that neither as a question of law or fact could it be stated that such a house was required dwelling house in connexion with the land: on the other hand the land would be required in connexion with the house or as one of its amenities an exemption for which the Statute does not provide. I would therefore hold that the case of Maharajadhiraj of Darbhanga v. The Commissioner of Income-tax was rightly decided on this point and should be followed. In addition I think there can be no doubt that but for the exception contained in the sub-section under discussion, this palace would be taxable under section 9 as property. The assessee could not be heard to say that not all the palace was occupied by him and therefore not all of it should be taxed. The same construction should be placed upon the words under consideration whether they in fact involve exemption or taxation. I see nothing in the Act to justify the argument that being required as a dwelling house yet only a portion is to be exempt.

The next point relates to the mutation fees. Sir Sultan Ahmad on behalf of the Crown admits that, the basis of the Commissioner's contention so far as the fees secured by the Raja on the transfer of tenure was wrong and that the assessee is entitled to treat these as agricultural income within the meaning of the Act and therefore exempt. However his admission as I understand it goes only so far as the case in which the amount chargeable by the Raja is one which he is entitled by law to recover and not so far as any excess amount is concerned.

The other mutation fees are those realised from occupancy raiyats and it is contended that as these are illegal abwabs, they can in no sense be termed Revenue from land within the meaning of section 2, sub-section (1)(a).

In dealing with this latter point therefore I shall deal with that portion of the mutation fee on the transfer of tenures which is stated by the Crown to be illegal.

In the first place it was argued that the test which was to be applied in order to discover whether mutation fees could be treated as “agricultural income” within the meaning of the section, depended upon the question whether these fees were enforceable or not and this argument was supported by the case of King-Emperor v. Probhat Chandra Barua where it was decided that fees on petitions payable with regard to transferable holdings (as these were) were not “agricultural income” With this case I shall deal presently, but whether this authority decides that the legality of the fees is the real, test, in my judgment it is impossible to say that the character of the fee is altered by the fact that it is irrecoverable; rent may be irrecoverable by reason of the fact that it is higher than the amount reserved in a lease, or that in an occupancy holding, an enhancement not allowed by the Statute law is claimed. But the real character of both still remains, that of rent, and to repeat, to say that a thing is changed in character by reason of its being irrecoverable is beside the point.

It is contended by the respondent that mutation fees in respect, of occupancy holdings were recoverable by means of a custom which existed for many generations past. But in the view that I take of the matter whether they are recoverable or irrecoverable is irrelevant in coming to a conclusion whether these fees are “agricultural income” and therefore that question had not been decided. The case which I have quoted and upon which the learned Government Advocate relies mentions the authority of Meher Bano Khanum v. Secretary of State for India and the learned Judges deciding that case have differentiated the case of King-Emperor v. Probhat Chandra Barua on the ground that what the learned Judges were referring to was nazar which was paid by a tenant for the recognition of a transfer of a nontransferable occupancy holding and that in effect salami or nazar paid, in those circumstances really amounted to the capitalised value of a part of the rent for a new settlement. In my judgment, quite clearly, if that was the basis of the decision in the case of Meher Bano Khanum v. Secretary of State for India then what the Court was there deciding was that nazar was rent for the reason that capitalised rent is rent.

The question which we have to determine is whether these fees are rent or revenue within the meaning of section 2, sub-section (1)(c) and these fees do not cease to be revenue by reason of the fact that nazar was capitalised rent. These fees are not rent.

One of the questions, therefore, for determination is whether the Legislature in using the expression “rent” or “revenue” intended by the word “revenue” something other, than “rent”. In my opinion the word “revenue” is not to be construed as ejusdem gener is with rent. “Rent” has characteristics which are well known to lawyers. “Revenue” whilst it may be a species of agricultural income has, in my judgment, a wider meaning than rent.

Now from what source do these fees come? Is it by reason of the relation that the person recovering them has with the land? I think this question must obviously be answered in the affirmative; and apart from the fact that they may not be recoverable in law, I do not see any distinction between nazar and salami in the case of a tenure and the fee paid with regard to occupancy holdings. If the former is “revenue”, I do not see how it can be argued that the other is not revenue as well. In this connection it is important to notice again that what the case of King-Emperor v. Probhat Chandra Barua has decided is that nazar was revenue although the reason which is given in the case of Meher Bano Khanum v. Secretary of State for India for that decision is that nazar was in the nature of rent. It is not suggested before us that the fees in this case are rent, but it is argued it is not revenue. If that is the ratio decidendi of the case of Meher Bano Khanum v. Secretary of State for India, then it would appear to be of no assistance to us in determining the question of whether these fees are revenue within the meaning of section 2.

The Oxford Dictionary definition of the word “revenue” has been referred to in the case stated but I see no support for the Crown's argument from that definition; the definition is “a return, yield, or profit of any land, property or other sources of income.” Can it be doubted for a moment that this is a return or yield or profit from “property or landed property”? It is undoubted that but for the ownership of this land, this source of income, using that word in a neutral sense, Would not be available to the assessee. I would hold, therefore, this is agricultural income in the sense that it is revenue from land.

In my judgment, all the points which are before us should be answered in favour of the assessee, that is to say that on the facts proved or admitted the whole of the palace at Kanika should be exempt under section 2. The fees on the transfer of tenures and the fees for the mutation of names with regard to occupancy holdings are agricultural income within the meaning of the section referred to.

Kulwant Sahay, J.:— The questions which arise for determination in this reference under section 66, of the Income-tax Act are (1) whether any portion of the valuation of the assessee's palace at Kanika is taxable, or, whether on the other hand, the whole valuation of this palace should be exempted as being agricultural income within the meaning of section 2(1)(c) of the Act; (1) whether mutation fees paid by the assessee's tenants upon succeeding to holdings or tenures by inheritance are covered by the term “agricultural income” as defined in section 2 of the Act, and (3) whether the assessee can be allowed as an admissible deduction the amount of interest which he has paid on overdrafts during the “previous year”.

As regards the first point: section 4(3) sets out the classes of income to which the Act shall not apply, and one of these classes is agricultural income. “Agricultural income” is defined in section 2(1) of the Act. section 2(1)(c) makes income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator, or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any portion mentioned in sub-clauses (ii) and (iii) of clause (b) is carried on. To this there is a proviso to the effect that the building is on or in the immediate vicinity of the land and is a building which the receiver of the rent or revenue or the cultivator or the receiver of the rent-in-kind by reason of his connection with the land, requires as a dwelling house, or as a store house or other out-building. The question is whether the assessee can rely upon this proviso for exemption of his house from taxation. Section 6 of the Act gives the heads of income, profits and gains which shall be chargeable to income-tax in the manner provided in the Act, and one of these heads is “Property”. The manner in which ‘property’ is chargeable to income-tax is given in section 9, sub-section (1) of which provides that the tax shall be payable by an assessee under the head “property” in respect of the bona fide annual value of the property consisting of any buildings or lands appurtenant thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of his business, subject to certain allowances set out in the section. In the case of buildings in the occupation of the owner it is the notional income upon which the tax is to be payable. It is contended on behalf of the Crown that the house in question in the present case is taxable under section 9, and that what is exempted by section 2(1)(c) is income actually derived from any building owned and occupied by the receiver of the rent or revenue and does not include the notional income of the building. In my opinion this contention is unsound and cannot be accepted. Section 2(1) of the Act gives the definition of “agricultural income”, and chapter III deals with taxable income; section 6 gives the heads of income and section 9 provides for the mode of determining the income taxable under the Act under the head “property”. Such income under section 9 in respect of buildings in the occupation of the owner must be notional income, and the argument of the learned Government Advocate that what is exempted by section 2(1)(c) is actual income is contrary to the provisions of the Act itself.

The real question, however, for determination is what is the meaning of the proviso to section 2(1)(c). In order that the income derived from any building may be held to be agricultural income, it is necessary that the Wilding must be (1) on or in the immediate vicinity of the land and (2) it is a building which the; receiver of the rent or revenue or the cultivator or the receiver of the rent-in-kind by reason of his connection with the land requires as a dwelling house or as a store house or other out-building. It is conceded in the present case that the building in question is on or in the immediate vicinity of the land. It has been found by the Commissioner as a fact that a part at least of the building is required by the receiver of the rent or revenue as a dwelling house, by reason of his connection, with the land. The question is whether there is any justification in the Act for the Commissioner to decide what portion of the building the assessee does in fact require as a dwelling house by reason of his connection with the land. In my opinion, the moment it is found that the building or any portion of it is required by the receiver as a dwelling house the income derived from such building would become agricultural income and exempt from taxation. The argument that the word “requires” gives the Income-tax Authorities the power to determine what portion of the building is as a matter of fact required by the assessee in his capacity of receiver of the rent is, in my opinion, not warranted by the terms of the section. I agree with the reasons given by my Lord the Chief Justice and by Ross and Wort, JJ., for holding that the construction sought to be placed upon the proviso by the Income-tax authorities is not warranted by the terms of the section. It would no doubt be open to the Income-tax authorities to hold that a particular building on account of its size or situation is not a building which the receiver of rent or revenue does require, by reason of his connection with the land, as a dwelling house and in that case it would be open to them to assess the income from the entire building, but the moment they find that the house is required by the receiver of the rent or revenue by reason of his connection with the land dwelling house or a store house or other outbuilding, it is beyond their jurisdiction to determine what portion of the building is or should be required by the assessee as such receiver of the rent or revenue. In my opinion the case of Maharajadhiraj of Darbhanga v. The Commissioner of Income-tax was correctly decided and I would answer the first part of the first question in the negative and the second part in the affirmative.

As regards the second point: I agree for the reasons given by my Lord the Chief Justice and by Ross and Wort, JJ., that mutation fees paid by tenants upon succeeding to holdings or tenures are covered by the term “agricultural income” as defined in section 2 of the Act. The question whether such fees are legally recoverable or not is a question beyond the jurisdiction of the Income-tax authorities. The words “rent or revenue derived from land which is used for agricultural purposes” in section 2(1)(c) of the Act are wide enough to cover receipts by landlords in the shape of mutation fees.

As regards the third point: the learned Commissioner finds that the assessee is entitled to claim deduction of the amount of interest which he has paid on overdrafts during the previous year and the question does not arise for determination.

Macpherson, J.:— Under section 66 of the Indian Income-tax Act, 1922, the Commissioner of Income-tax has, as required by this Court in its order of the 22nd November, 1927, stated a case on three questions and referred the same to this Court with his own opinion thereon. The assesses is the proprietor of the Kanika estate in Orissa.

The first question is whether any portion of the valuation of the assessee's palace at Raj-Kanika is taxable or whether on the other hand the whole valuation on this palace should be exempted as being agricultural income within the meaning of section 2(1)(c) of the Act.

1. The facts are briefly these. The gross, income of the assessee comes to Rs. 3,90,000, of which income from agricultural rent is approximately Rs. 2,10,000. The manager's, office which also houses the zamindari staff, is a separate and older building. In the palace proper only seven of the zamindari staff are accommodated and practically the whole of the building is used as a residence for the assessee and for visitors. It was built in 1912 at a cost of Rs. 3,00,000 and zenana quarters were subsequently added at a cost of Rs. 1,00,000. It has the ordinary accommodation of a palace and there is a detached guest-house. The Commissioner states:

“The Income-tax Officer in making the assessment has taken Rs. 3,000 as the proportionate valuation of the portion of the palace which is not required for agricultural purposes.”

It would appear that the expression “required for agricultural purposes” here means “which the assessee by reason of his connection with the land requires as a dwelling house”.

The Commissioner sets out that it is the contention of his department that the palace is not occupied by the receiver of rent nor required by him qua landlord as a dwelling house, store house or other outbuilding. The assessee's income from rent proper is approximately fifty per cent, of his total income, and it is contended that

“the assessee requires or his built his palatial residence not because he requires such, a building by reason of his connection with the land but because his total income and high social position demand.”

The Commissioner submits that “this palatial building is not required wholly and exclusively for agricultural purposes and that the question of the valuation of what proportion of the total building assessee should be assessed is a question of fact to be decided in each case”, regard being had in coming to a decision to the provisions of the proviso to section 2(1)(c) of the Act and in particular to the point whether the building in question or the whole of the building is required (as a dwelling house) by reason of the assessee's connection with the land. The assessee, he repeats, has been taxed only on a small portion of the annual valuation of the palace proper.

The short point therefore is whether the palace proper is a building which the assessee (who is admittedly the receiver of the rent or revenue derived from the land of the Kanika estate which is used for agricultural purposes and which is assessed to land-revenue in British India) by reason of his connection with the land requires as a dwelling house. If it is such a building, the annual value of it is agricultural income and the Act does not apply to it as admittedly it is on the land; if it is not such a building, the Act applies.

Now the proviso to section 2(1)(c) limits the building owned and occupied by the assessee the valuation of which is agricultural income under the definition, to a building of the class described in the proviso—it must be one which the receiver of the rent or revenue of the land by reason of his connection with the land requires as a dwelling house. The submission on behalf of the assessee is practically that this proviso is satisfied if the building is one which or a part of which the receiver of the rent or revenue of the land by reason of his connection with the land uses (or even states that he uses) dwelling house. But such does not appear to be the intention. It is indeed not even arguable that mere use or allegation of use or even allegation of need satisfies the proviso. It is sufficient therefore to discuss the case where the building is one a part only of which the assessee by reason of his connection with the land requires as a dwelling house, where the word ‘requires’ is taken as equivalent to ‘needs’. Now if the Legislature had contemplated that the assessee's requirement by reason of his connection with the land of a part merely of the building as a dwelling house would be sufficient, what prevented it from saying that? The connotation of the expression “by reason of his connection with the land requires” must be “needs as appropriate and convenient for his calling as a receiver, of the rent or revenue derived from the land”. The learned Counsel for the assessee would practically read the proviso (so far as material) as “Provided that……the receiver of the rent or revenue………by reason of his connection with the land requires a dwelling house”. But the enactment contemplates that he must by reason of his connection with the land require the particular building as a dwelling-house. In, this Province the case of the great Indigo Concerns of North Bihar readily occurs to one. The residence of the owner or manager was appropriate to the extensive landed interests of the Concern. But it is otherwise when on the dissolution of the Concern that building is acquired with some neighbouring land constituting, but a small fraction of the territory of the Concern and is occupied by the purchaser mainly not by reason of his connection with the adjoining land but for merely residential reasons or from considerations of local prestige or for sporting purposes or some similar object. The Legislature cannot have intended to exempt such purchasers from income-tax on the building. To my mind language has been employed which indicates an intention to discriminate between the requirements of the assessee as the landlord and his requirements as an individual. In the present instance it is found as a fact that the whole palace is not a building which the assessee as receiver of the rent or revenue of the land “by reason of his connection with the land requires as a dwelling house”, and accordingly it is not such a building as is described in section 2(1)(c) read with the proviso, and therefore the notional income thereof is not agricultural income so as to be under section 4(3)(viii) outside the application of the Act. Strictly therefore the whole palace fails within section 9 and it was apparently open to the Commissioner to assess the notional income from it accordingly. No doubt the Income-tax Department has further found that a portion of the palace comes within the proviso and it has not assessed the income from such portion, to income-tax. But we are not concerned here with the attitude of the department in taking what may be less than its full right except to this extent that if, as is contended (in my opinion erroneously), the total annual value of the whole palace and not the proportionate value of the portion not required as a dwelling-house by the receiver of the rent or revenue of the land, is Rs. 3,000, the assessment would still not be illegal. It is however sufficient in the present reference to answer the first portion of the question in the affirmative and the second portion in the negative. In my opinion the reference in Maharajadhiraj of Darbhanga v. The Commissioner of Income-tax was not correctly decided.

The second question is whether mutation fees paid by the assessee's tenants upon succeeding to holdings or tenures by inheritance come within the definition of ‘agricultural income’ as defined in the Act, so that the Act does not apply to them. As admittedly the land is assessed to land-revenue in British India, the point shortly is whether these fees come within the expression “any rent or revenue derived from land which is used for agricultural purposes”. The tenants referred to are of two classes (1) tenure-holders, and (2) raiyats.

A tenure-holder pays the fee under section 14 of the Orissa Tenancy Act. The Commissioner points out that the fee is not within the definition of ‘rent’ under that Act and indicates that if the expression “revenue” is to be taken in so wide a sense ‘agricultural income’ would include illegal realisations, such as abwabs. This however does not appear to be the 0 correct criterion since “rent” in the Tenancy Act has by definition a restricted meaning appropriate to such an enactment but inappropriate to an Income-tax Act, and the learned Government Advocate is unable to contend that the fee paid by a tenure-holder to the landlord under the statute is not “rent or revenue derived from the land” and therefore “agricultural income”.

As to the succession fees paid by the raiyats in this permanently-settled estate, the Commissioner considers that they are illegal impositions under section 84 of the Orissa Tenancy Act, the exaction of which is punishable by fine under section 83. In short “the landlord is charging a fee for keeping his jamabandi up to date, which it is his duty to do without any fee”, and the payment is therefore one without consideration.

Here again the chief fallacy appears to lie in the Commissioner's assumption that the expression “rent” in the Income-tax Act, 1922, has the same meaning as it has in the Orissa Tenancy Act-Payments to the landlord which are not “rent” under the Tenancy Act which term is as usual in such enactments defined for the purpose of the Act as “whatever is, lawfully payable……”, may well be “rent” derived from the land within the meaning of the Income-tax Act, where not the legality or morality but the character and origin of the income are in point.

It has been urged, not very convincingly perhaps, that the payment is even “rent” within the meaning of the term in the Tenancy Act but it is not necessary to determine the point. The small fee legally or illegally paid by a raiyat to his landlord for the mutation in the landlord's papers of his name by virtue of succession appears not to be a mere payment for a service but to fall within the wide expression “rent or revenue derived from the land”, irrespective of any dissection of the individual terms “rent” and “revenue”. I would answer the question in the affirmative.

The third point is whether the assessee can be allowed as an admissible deduction the amount of interest which he has paid on certain overdrafts during the “Previous Year”. The Commissioner points out that the assessee can be allowed interest for 1924-1925 on Rs. 501-4-0 borrowed on the 13th October, 1923, and a deduction of ‘interest which accrued on Rs. 3,030” in the period 22nd October 1924 to 31st March 1925. There is no controversy on this point and I would answer it in the affirmative.