# We are of opinion that the principles bid down in Northern Aluminium Co., Ltd v. Inland Revenue Commissioners(

- **Citation:** [1957] 1 S.C.R. 1019
- **Court:** Supreme Court of India
- **Decided:** 1957-04-24
- **Case number:** Civil Appeals Nos. 162 of 1955
- **Bench:** Bhagwati, Venkatarama Ayyar, J. L. Kapur J. L. Kapur J
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/we-are-of-opinion-that-the-principles-bid-down-in-northern-aluminium-co-ltd-v-1292
- **Pages:** 14

## Headnote

Salami-lndicia--lf capital
income-tax-Assam
Agricultural
1939), s. 2(a) (i).
rrceipt-Liability
to
agricultural
Income-tax
Act (Assam IX of
The true indicia
of
salami are ( 1) its single. nonrecurring
character and (2) payment prior to the cre.'.ltion
of the tenancy.
It is the
consideration paid by the tenant for being let into
po'session and can be neither rent nor re\'enue but is a capital
receipt in the hands of the landlord.
Kamakshya Narain Singh v. The Commissioner of Income Tax
(l<J43) L.R. 70 I.A. 180, relied on.
Case-law reviewed.
Rire11dra Kisliore ManikYa
v.
Secretary of State for India,
(1920) l.L.R. 48 Cal. 766, Meher Bono Khanum
v.
Secretary of
State for India, (1925) 1.L.R. 53 CaL 34, Raja
Rajendra Narayan
Bhanja Deo v. Commissioner af Income Tax, (1929) l.L.R. 9 Pat. 1
and Commissioner of Income Tax v. K. C. Manavikraman Rajah,
I.LR. 1945 Mad. 837, distin~ished.
Consequently,
where
payments
described· as
salamis
and
recci\'ed by cert3in zamindar assessecs as consideration for granting agricultural leases, by no means of a precarious nature, were
(1) (1946] I All E.R. 546.
(2) [19471 1 All E.R. 608.
1957
The Cammissioner
qf Excess Profits
Tax, West Bengal
v
T lit Ruby General
J,.,uronce Co. Ltd.
V enkalarama
Aryar ].
1957
April 24
1957
Thi Memh1r for th.I
Board of
~griculturol
In.come TIU, .Assam
v.
Smt. Sindhurani
Chaudhurani
1020
SUPREME COURT REPORTS
[1957]
all made prior to such
grants
and
were
of a non-recurring
character, but calculated at rates varying with the nature of the
lands and chargeable on every subsequent eviction and re-letting,
they were properly so described and were neither rent nor revenue
within
the
definition
of
'agricultural income'
contained
in
s. 2(a) (I) of the Assam Agricultural Income-Tax Act and could
not be assessed to tax under the Act.
CIVIL
APPELLATE
JuRISDICTION :
Civil
Appeals
Nos. 162 of 1955, 38, 39, 40, 41, 42, 43 and 44 of 1956.
Appeal from the judgment and order dated January
5, 1953, of the Calcutta High Court (Original Side) in
Income Tax Reference Appeal No. 12
of 1942 and
appeals from the judgment and order dated
July 2,
1952, of the Assam High Court at Gauhati in Agricultural Income Tax References Nos. 1, 2, 3, 7, 9, 6
and 8 of 1949 respec_tively.
Veda Vyasa and Nau nit Lal, for the appellants in
C. A. No. 162 of 1955 and respondents in C. As. Nos.
38 to 44 of 1956.
R. Bak;i, S. N. Mukerjee and R. R. Biswas, for the
respondents in C. A. No. lq2 of 1955 and appellants in
C. As. Nos. 38 to 41, 43 and 44 cf 1956.
Appellant in C. A. No. 42 of 1956 not represented.
1957. April 24. The Judgment of the Court was
delivered by
KAPVR · J.-In all these appeals the question for
decision is the character and purport of the payment
termed
'Salami'
and
whether it falls
within
the
meaning of "agricultural income" as defined
in the
Assam Agricultural Income Tax Act (Ass. IX of 1939)
hereinafter called the "Act".
C. A. No. 162 of 1955 is directed against the judgment of the Calcutta High Court dated January 15,
1953.
C. A. Nos. 38 to 44 of 1956 have been brought
against the judgment of Assam High Court dated
April 2, 1952. These matters were all heard together
in the Assam High Court and were disposed of by one
judgment.
C. A. No. 162 of 1955 relates to the assessment year
1941-42. The assessee in that case was a -/8/9 annas
..
S.C.R.
SUPREME COURT REPORTS
1021
co-sharer in a zamindari estate known as "Parbatjoar
estate" in Assam. The original assessee was Jyotindra
Narayan Chowdhury who died on January 25, 1953,
and on
his death his widow, Shrimati Sindhurani
Chowdhurani and others were substituted. The gross
agricultural income of the assessee was Rs. 89,633 and
income from salami was
Rs.
9.331-9-4
which was
received from settlement of 414 different holdings out
of which 278 were holdings of virgin lands and 136
were those of what are described as auction-purchase
lands. Out of the gross income from salami 15 per
cent. has been allowed as collection charges and the
amount in disput

## Text

S.C.R.
SUPREME COURT REPORTS
1019
We are of opinion that the principles bid down in
Northern
Aluminium
Co., Ltd.
v.
Inland
Revenue
Commissioners(
1
) and fo!cmd Revenue Commissioners v.
··N orthem Aluminium Co., Ltd.( 2 ) are applicable to the
decision of
the present case, and that a contingent
liability in respect of unexpired risk is not an "accruing
liability" within r. 2 of Sch. II to the Act.
The decision appealed from is correct, and this
appeal
must accordingly be dismissed with costs.
Appeal dismissed.
THE MEMBER FOR THE BOARD OF
AGRICULTURAL INCOME-TAX, ASSAM
v.
SMT. SINDHURANI CHAUDHURANI
(with connected appeals)
(BHAGWATI, VENKATARAMA AYYAR and
J. L. KAPUR
J. L. KAPUR J J.)
Salami-lndicia--lf capital
income-tax-Assam
Agricultural
1939), s. 2(a) (i).
rrceipt-Liability
to
agricultural
Income-tax
Act (Assam IX of
The true indicia
of
salami are ( 1) its single. nonrecurring
character and (2) payment prior to the cre.'.ltion
of the tenancy.
It is the
consideration paid by the tenant for being let into
po'session and can be neither rent nor re\'enue but is a capital
receipt in the hands of the landlord.
Kamakshya Narain Singh v. The Commissioner of Income Tax
(l<J43) L.R. 70 I.A. 180, relied on.
Case-law reviewed.
Rire11dra Kisliore ManikYa
v.
Secretary of State for India,
(1920) l.L.R. 48 Cal. 766, Meher Bono Khanum
v.
Secretary of
State for India, (1925) 1.L.R. 53 CaL 34, Raja
Rajendra Narayan
Bhanja Deo v. Commissioner af Income Tax, (1929) l.L.R. 9 Pat. 1
and Commissioner of Income Tax v. K. C. Manavikraman Rajah,
I.LR. 1945 Mad. 837, distin~ished.
Consequently,
where
payments
described· as
salamis
and
recci\'ed by cert3in zamindar assessecs as consideration for granting agricultural leases, by no means of a precarious nature, were
(1) (1946] I All E.R. 546.
(2) [19471 1 All E.R. 608.
1957
The Cammissioner
qf Excess Profits
Tax, West Bengal
v
T lit Ruby General
J,.,uronce Co. Ltd.
V enkalarama
Aryar ].
1957
April 24
1957
Thi Memh1r for th.I
Board of
~griculturol
In.come TIU, .Assam
v.
Smt. Sindhurani
Chaudhurani
1020
SUPREME COURT REPORTS
[1957]
all made prior to such
grants
and
were
of a non-recurring
character, but calculated at rates varying with the nature of the
lands and chargeable on every subsequent eviction and re-letting,
they were properly so described and were neither rent nor revenue
within
the
definition
of
'agricultural income'
contained
in
s. 2(a) (I) of the Assam Agricultural Income-Tax Act and could
not be assessed to tax under the Act.
CIVIL
APPELLATE
JuRISDICTION :
Civil
Appeals
Nos. 162 of 1955, 38, 39, 40, 41, 42, 43 and 44 of 1956.
Appeal from the judgment and order dated January
5, 1953, of the Calcutta High Court (Original Side) in
Income Tax Reference Appeal No. 12
of 1942 and
appeals from the judgment and order dated
July 2,
1952, of the Assam High Court at Gauhati in Agricultural Income Tax References Nos. 1, 2, 3, 7, 9, 6
and 8 of 1949 respec_tively.
Veda Vyasa and Nau nit Lal, for the appellants in
C. A. No. 162 of 1955 and respondents in C. As. Nos.
38 to 44 of 1956.
R. Bak;i, S. N. Mukerjee and R. R. Biswas, for the
respondents in C. A. No. lq2 of 1955 and appellants in
C. As. Nos. 38 to 41, 43 and 44 cf 1956.
Appellant in C. A. No. 42 of 1956 not represented.
1957. April 24. The Judgment of the Court was
delivered by
KAPVR · J.-In all these appeals the question for
decision is the character and purport of the payment
termed
'Salami'
and
whether it falls
within
the
meaning of "agricultural income" as defined
in the
Assam Agricultural Income Tax Act (Ass. IX of 1939)
hereinafter called the "Act".
C. A. No. 162 of 1955 is directed against the judgment of the Calcutta High Court dated January 15,
1953.
C. A. Nos. 38 to 44 of 1956 have been brought
against the judgment of Assam High Court dated
April 2, 1952. These matters were all heard together
in the Assam High Court and were disposed of by one
judgment.
C. A. No. 162 of 1955 relates to the assessment year
1941-42. The assessee in that case was a -/8/9 annas
..
S.C.R.
SUPREME COURT REPORTS
1021
co-sharer in a zamindari estate known as "Parbatjoar
estate" in Assam. The original assessee was Jyotindra
Narayan Chowdhury who died on January 25, 1953,
and on
his death his widow, Shrimati Sindhurani
Chowdhurani and others were substituted. The gross
agricultural income of the assessee was Rs. 89,633 and
income from salami was
Rs.
9.331-9-4
which was
received from settlement of 414 different holdings out
of which 278 were holdings of virgin lands and 136
were those of what are described as auction-purchase
lands. Out of the gross income from salami 15 per
cent. has been allowed as collection charges and the
amount in dispute in this appeal therefore is Rs. 7,934.
The Agricultural Income Tax Officer held this sum to
be
"ag~icultural income" by his order dated November 10, 1941, which was affirmed on appeal to
the
A:sist:mt Commissioner of Agricultural Income
Tax.
The revision taken to the Commissioner under s. 27 of
the Act was dismissed but at the instance of the assessec the following two questions were referred for the
opinion of the High Court.
( 1) Whether the single non-recurring premia or
salamis paid
to the landlord assessee
once only as
consideration for the settlement of agricultural land at
the time of granting a lease can be held to be income
within the meaning of the Act)
(2) Whether single non-recurring premia· or salamis
paiLl to the landlord assessee as consideration for the
settlement of agricultural land once only at the time
of granting lease when such premia or salamis are not
dependent on the rate of rent charged, can be held to
be income within the meaning of the Act?
The Calcutta High Court by its judgment dated
April 12, 1945, held these receipts to be "agricultural
income." Against this judgment an appeal was taken
to the Privy Council but on the abolition of the jurisdiction of the Privy Council the appeal was transferred
to the Federal Court and was heard by that court as
C. A. No. 30 of 1949. That court set aside the judgment of the High Court and remitted the case to the
High Court "to be dealt with again after ascertaining
and considering the following additional factors likely
1957
TltliMembtr fo(tltl
BMrd of
Agriadtu ral
lr1&ome Tax, AJSam
v.
Smt. Sindhura.i
C/;audhurani
Kapur}.
1957
The ll!imber for tM
Board /)f
Agricultural
Income Tax, AsJam
v
Smt. Sindhurani
Chaudhurani
Kapu' ].
1022
SUPREME COURT REPORTS
[19571
to show the true nature of the receipts described as
salami in the present case.
"l. The number of settlement of waste lands and
abandoned holdings during the . accounting year and
the maximum and the minimum extel)ts settled and
salami received.
2. Does the salami vary with the quality of the
land,
the
facilities
for
irrigation and such other
fa vourabie factors?
3. How many
tenants ejected
under section
69
during the accounting year ;ind how long they had
been in occupation before such eviction?
4. Is salami received
when lands are relet after
eviction?
5. Is salami that is paid in the zamindary of the
assessee in the nature of a 'present' given by the
tenant to the landlord for the permission to occupy the
land or whether it is in substance a premium payable
by lessee at the inception of the tenancv ?"
After the remand the case was again stated
by
the Member of Assam Board of Agricultural Income
Tax, Dr. Goswami, and
answers to these questions
were:
1. Total number of settlements were 414,
maximum extent being 59 bighas 2 Cottahs and 10 Dhurs,
and salami Rs. 161-8-0! and minimum extent was 15
Cottahs and salami received therefrom Rs. 2-11-9.
2. Rate of salami varies with the quality of the
lands, two fixed rates being Rs. 7 per bigha for jungle
lands and Rs. 10 per bigha for non-jungle lands.
3. There was no eviction of tenants under section
69 of the Goalpara Tenancy Act. but action was
taken in a large number of cases under section 68 of
that Act.
4. Salami is realized when
lands
are
relet
after
eviction.
5. Salami is not in the nature of a present. It is
a compulsory payment by the tenant to the landlord
at the inception of the tenancy.
In the Statement of the Case the Board said that the
zamindar's business or vocation was letting out holdings
S.C.R.
SUPREME COURT REPORTS
1023
against payment. The area of land held by him
was a large one "which he lets out piecemeal to various
tenants on conditions among others that the would-be
teμant will first pay a fee which he prefers to call
'salami'
and that he will pay an annual rent." It held
that this
payment was not "a windfall", that t!ie
"'salami' arose from the landlord's business of letting
out his lands, and .......... is an income'', that because
of the "regularity or
periodicity" attached to the
receipt of salami, "it satisfies the test of 'income' "
and therefore the amounts received as salami were
"agricultural income" within s. 2 (a) ( 1) of the Act.
On a consideration of the facts found by the Board
in this case and after reference to the reported judgments of the various courts, the Calcutta High Court
held that the amounts received by the .assessee
as
salami were not "agricultural income" and the Board
has brought this appeal (C. A. No. 162 of 1955) against
that judgment.
In the Assam Appeals also the areas of land held by
the assessees were large and total income in the case
of "Parbatjoar estate" was Rs.
1,15,510 and in the
case of Mechpara estate it was Rs. 2,82,106 which was
divisible amongst the various co-sharers.
Salami rates
in Parbatjoar estate varied from Rs. 7 per bigha for
forest land to Rs. 10 per bigha for other lands depending upon the quality of the land. In Mechpara estate
the rates in hilly tracts were Re. 1 to Rs. 2 for good
sali land and Re. 1 to Rs. 6 for other class of land and
in the plains they varied from Rs. 2 to Rs. 3 for good
sali land, and Re. 1 to Rs. 6 for other lands and As. 8
to Re. 1 for newly formed Char lands. In Bijni Raj
estate the minimum salami was
Rs.
1 per bigha
irrespective of the area of the land. In Gauripur estate
the holdings were settled by auction and the amount
of salami was determined by the demand, depending
upon the quality of land and facilities for irrigation.
Similarly in the Chapter Trust estate holdings were
settled by auction. The finding of the High Court
was:
"It is . abundantly clear from the above statement
of facts that the rates of salami vary with the quality
1957
Tht mtmber for the
Boart! of Agricullural
Incomt Tax, Assam
v
Smt. Sindhurani
Chaut!hurani
Kapur].
1957
Till Mtmb,, for 1111
B°"'"of
Agrialll....Z
Inconw Tu, As.ram
v.
Sm/. Sindlitrani
Chowlhurani
KaJJl'T j.
1024
SUPREME COURT REPORTS
[1957}
of la!ld in each estate. They have no relation to rent
which is admittedly fixed and invariable.
Lands are settled generally in small plots;
The
highest figure received as salami in a single transaction
in the years with which we are concerned was in
Parbatjoar. A sum of Rs. 621 was received on a
settlement of an area measuring 88 B., 14 K.,
15 D.
.In Mechpara an area measuring 165 B., 16 K., 12 D.,
was settled for Rs. 318. The minimum extent of area
settled in one transaction was also in Mechpara. Lands
measuring only 2 K. was settled. Salami received was
Rs. 3-5-0.
Between these two extremes the extent of
areas settled varies."
There were no evictions under s. 69 of the Assam
Tenancy Act of non-occupancy tenants but ejectments
did take place and action was taken under s. 68 of the
Act. After the re-statement of the case on the lines
suggested by the Federal Court, the Assam High Court
held that "salami" is
not rent but revenue derived
from land and is therefore income ........ "
The questio)l for decision is whether the amounts
received as salami are rent or revenue
within the
definition
of
"agricultural
income"
and
therefore
liable to agricultural income-tax.
The basis of the first Calcutta Judgment dated May
12, 1945, in C.A. No. 162 of 1955 was that salamis were
a normal and regular feature of these estates and there
was periodicity. When the matter came up in appeal
to the Federal Court the learned Chief Justice was of
the opinion that the receipt termed salami if nothing
more is stated in respect of it cannot be treated as a
capital receipt and therefore exempt from taxation nor
could it merely as such be treated as income and therefore assessable to income-tax. Mahajan J.
(as he then
was) said : "It may be a recurring or a periodical
payment if it is a fee or a fine levied annually on the
holder of rent-free tenures as a quit rent; on the other
hand, it may not be a periodical payment or a recurring
payment if it is in the form of gratuity or offering on
receiving a lease or settling for the revenue or on
receiving any favour real or implied." He was of the
opinion that in the former case it would be agricultural
S.C.R.
SUPREME COURT REPORTS
1025
income but in the latter case it would be a capital
receipt being the price for that small "modicum of
ownership which the landlord transfers to the tenant."
In the Assam cases Ram Labhaya J. said that by
settling the lands and accepting salami the landlord
parts with the right of immediate occupation.
The characteristics and incidence of salami disclosed
from the "statements of the cases" are that it is a
lump sum non-recurring receipt of money by a landlord
from a tenant before making a settlement of the holding,
which· in C'.A. No. 162 of 1955 varied from Rs. 7 to
Rs. 10 per bigha and was less in other cases. He is
also entitled to charge a fixed periodical amount of 11
annas per bigha per annum. Salami is charged whenever a fresh settlement is made whether it is of a piece
of virgin land or of an auction-purchase holding. Thus
salami is a payment by a tenant to the landlord
antecedent to the constitution of the reiationship of
landlord and tenant. It is really a payment by the
tenant to the landlord for being allowed to take possession of the land for cultivation under the lease. In all
those cases under appeal the leases were oral and the
duration
and conditions thereof were regulated
by
Statute-The Assam Tenancy Act.
Salami is not a
recurring or periodical payment or a fee or fine levied
at fixed intervals from the tenant for the same holding.
In these cases it has not been contended or even
suggested nor was it contended before tl1e
Federal
Court that salami is capitalised rent. As a matter of
fact the Federal Court found that it was not rent. In
consideration of the payment of salami an estate in
land is transferred by the landlord to · the
tenant
although the estate taken by the tenant · in the first
instance is a non-occupancy tenancy which grows into
an occupancy tenancy by the efflux of time. But in
no case in any of the appeals was action taken under
s. 69 of the Assam Tenancy Act which regulates
the rights and liabilities of non-occupancy tenants and
no tenant was ejected from his non-occupancy tenancy.
On the other hand whenever action had to be taken
for non-payment of rent and ejectment it was taken
1957
T lie Memh1r for 1/16
Board of
Agricu /lural
Income Tax, Auam
v.
Sml. SitulhuraniJ
Chau<fh,,rani
Kapur].
1957
Tbt MmiMr for t/u
·Botml of
Agricultural
Income T wt, A.sstlln
v.
SmJ. Sindhunmi
Chaudhurani
EafJVr J.
1026
SUPREME COURT REPORTS
[1957]
under s. 68 of the Goalpara Tenancy Act. This section
is as follows :
A permanent tenure-holder, a raiyat at fixed rates,
or an occupancy tenant, shall not be liable to ejectment
for arrears of rent,
but his tenure or holding shall be
liable to sale in execution of a decree for the rent
thereof, . and the rent shall be a first charge thereon.
In execution of decrees for arrears of rent the estates
of the occupancy tenants were sold, the purchaser in
all
cases being the landlord himself and thus for
recovering the arrears of rent the landlord had to bring
to sale the right, title and interest of his tenant and
after purchase of this right he relet the land, on receiving the salami from
the
new tenant. This
process
again shows that the landlord did part with some
interest in land, which cannot be said to be precarious,
when he made the settlement of land on receipt of
.<alami, which was a single non-recurring payment by
the lessee for the acquisition of his rights under the
lease.
"Agricultural income" which, it is claimer! by
the
Board comprises salami, has been
defined in
s. 2(a)(i) of the Act. The relevant portion of this
$ection is :
S. 2(a)(i). Any rent or revenue derived from land
which is used for agricultural purposes, and is either
assessed to land revenue in Assam or subject to a local
rate assessed and collected by officers of the Government as such.
Salami is not rent and, therefore, unless it is revenue
it will not fall within this definition.
"Income" was described by Sir George Lowndes
in Commissioner of Income Tax v. Shaw Wallace &
Co. ( 1) as· "a periodical monetary return coming in with
some sort of regularity, or expected regularity, from
definite sources."
In Captain M aharai Kumar Go pal
Saran Narain Singh v. The Commissioner of Income
Tax, Bihar & Orissa( 2 ), Lord Russell of Killowen after
referring to the definition given by Sir George Lowndes
held that life annuity paid out of an estate is income.
(1) (1932) L.R. 59 I. A. 2o6, 212.
(2) (1935) L.R. 62 I.A. 207.
S.C.R.
SUPREME COURT REPORTS
1027
Salami was described by Lord Wright in Kamakshya
Narain Singh v. The Commissioner of Income Tax(1 ), a
ca~e of a grant of a mining lease for a period of 999
years, in the following words :
"The salami has been, rightly, in their Lordships'
opinion, treated as a capital receipt. It is a single
payment made for the acquisition of the right of
lessees to enjoy the benefits granted to them by the
lease. That general right may properly be regarded
as a capital asset, and the money paid to purchase it
may properly be held to be a payment on capital
account."
The importance lies in the use of the words "the
money. paid to purchase it'', i.e., the right of the lessee
to enjoy the· benefits granted under the lease.
In Raja Shiv Prasad Singh v. The Crown(2) where
also the lease was a mining lease 'for a period of 999
years, salami was described as a sum which is payable
at the inceptioq of the lease and as a non-recurring
payment in the nature of a premium for granting a
lease:
In Commissioner. of Income Tax v. Maharajadhiraj
Kumar Visheshwar Singh( 8 )
an area
measuring 4i
bighas of land was settled for an indefinite (bemead)
period on a yearly rent and in the event of default of
two consecutive instalments the lessee could be dispossessed and was also liable to other penalties. This
land was settled with the lessee to enable him to build
a "gola house" and a platform for the rice mill. The
lease was taken to be in the nature of a permanent
lease and it was held that salami represented the price
for
parting
with the
land
was
not merely an .
advan:::e rent and as it was not a recurring payment,
it did not fall within the definition of the word 'income'
as given in Commissioner of Income Tax v. Shaw
Wa.1/ace & Co.( 4 ).
Manoharlal J.
who gave a concurrent judgment, at page 824 described salami as the
amount of money which a landlord "insists on receiving as a condition precedent for parting with the land
in favour of the lessee." He also held that salami
(1) (19!3) L.R. 70 I.A. 180, 190.
(3) (1939) l.L.R. 11! Patna 805.
(2) (192.1) I.L.R. 4 P;ltna 73-
(4) (1932) L.R. 59 I.A. 206, 212.
1957
The Memb<r ]or lhe
Board of
Agriwltural
lnc011M Tax, AsJam
v.
Smt. Si11dhurani
l'liaudht1ra1li
Kapur].
1957
The Afember. for the
Board of
Agricultural
l11come Tax, AsJam
v.
Smt. Si11dhurani
Chmufh11rani
Kapur,].
1028
SUPREME COURT REPORTS
[1957]
could not be treated as a revenue receipt and that it
was received by the landlord "not because of the use
of the land but before the land was put into use by the
assessee."
The same court in Province of Bihar v.
M aharaja Pratap U dai Nath Sahi Deo ( 1 ) followed the
definition of the word 'salami' as
given in Kumar
Vishesluvar Sing/i's case.
Harries C.J. there held that
where salami cannot be regarded as payment of rent
in advance, it will not be income and would, therefore,
not be taxable. He said "prima facie, salami is not
income, and it is impossible upon the facts as stated to
say that salamis received ............ constitute part of
h.is. income."
,
Rankin C.J. in Re Gooptu Estate Limited( 2 ) held
payment of one lakh of rupees as salami not to be
income. In that case it was demanded and paid in
respect of resettlement of a lease which had still to run
for 48 years but had been forfeited for the non-payment of rent.
In certain cases, however, payment by way of salami
has been held to be 'agricultural income'. In Birendra
Kishore Manikya v. Secretary of State for India( 3 ) it
was held that the consiclcration for the grant of a
lease is the capitalised value of the sum periodicallv
payable along with the premium so that "the larger
the one element the smaller. the other." On this basis
the premium paid for the settlement of waste lands or
abandoned holdings was regarded 'as rent or revenue'
derived from land and therefore within the definition
of agricultural income in section 2 ( 1) (a) of the Indian
Income Tax Act. This was a case which was decided
under the Indian Income Tax Act and the question
whether it was a capital receipt or revenue receipt and
therefore exempt or not from taxation did not arise
because the Bengal Agricultural Income Tax Act was
passed in 1944 and the Assam Act in 1939. It was
not necessary for the purpose of that case to decide
whether it was a capital receipt or revenue because
what was to be decided was whether salami was
(1) (1947) I.L.R. 20 Patna 699, 722.
(2) (1929) 50 C.L.J. 375·
(3) (1920) I.L.R. 48 Cal. ,SG.
S.C.R.
SUPREME COURT REPORTS
1029
exempt from incomeotax under. s. 2(a) (i) of the Indian
Income Tax Act. As a matter of fact the assessee
argued
in that
case
that these
sums
constituted
"agricultural
income".
Moreover
the
dictum
the
smaller
the
salami the higher the rent and vice-versa
did not receive acceptance by the Federal Court when
the
present
matter was
heard in that court before
remand (C.A. No. 30 of 1949).
In Meher Bano Khanum v. Secretary of State for
India( 1 ) 'salami' was defined to be an amount received
by the landlord for the recognition of the transfer of a
non-transferable holding which was paid to the landlord because of his ownership of the land. It was held
to be "agricultural income" as it was "rent or revenue"
within the meaning of that expression. The Standing
Counsel who appeared for the Secretary of State in
that case conceded that it was not revenue but his
argument was that it was not revenue derived from
land but that it was an incident of the transfer and
not of tenancy and therefore· · did not flow from the
land. In neither of these cases was it argued whether
salami was a revenue receipt or capital receipt.
In a Full Bench of the Patna High Court in Raja
Rajendra Narayan
Bhanja Deo
v.
Commissioner
of
Income Tax(~ ) mutation fees were held to be agri;:ultural income but that was a case of payment after
the relationsh:p of landlord and tenant had come
into existence.
Similarly
in
the
Commissioner
of
Income Tax v. K. C. Manavikrarnan Raja!i(3) monies
paid for the renewal of leases were held to be agricultural income within the meaning of s. 2 ( 1) (a) of the
Indian Income Tax Act.
Here again the
monies
were paid not for the constitution of the relationship
of landlord and tenant but after that relationship had
come into existence and for its continuance.
In H. H. Maharaja Sir Bir Bikram Kishore Manikya
Bahadur v. The Province of Auam(' ), a case under the
Act,
Harries
C.J.
referred to Kamakshya
Narain
Singh's case( 5 ) and held that it had to be decided on
(1) (1925) I.L.R. 53 Cal. 34·
(2) (1929) I.L.R. 9 Patna 1.
(3) I.L.R. 194 5Mad. 837.
(4) (1948) 53 C.W.N. 164.
(5) (1943) L.R. 70 I.A. 180, 190.
1957 '
Th • Member for tire
Board ef
Agricu/t1Jra/
Income Tax, Assam
v.
Smt. Sindhurani
Chaudhurani
Kapur].
1957
T ht Member for t/u
Board of
Agricultural
Income Tax, A.1.ram
v.
Smt. Sindhurani
C/ulUdhurtmi
Kapur].
1030
SUPREME COURT REPORTS
[1957]
the facts of each case whether salami was agricultural
income or not because it was not known in respect of
what transaction the am.ount was received.
The Orissa High Court in S. M. Bose v. Secretary, ·
Board of Revenue( 1) has held that salami is not a
payment of rent in advance nor is it income but is a
payment by way of capital receipt. It was contended
before us that the Privy Council in Kamakshya Narayzn
Sing h's case( 2 ) based its decision on the wasting nature
of the assets under the lease. But the definition given
by Lord Wright is in general terms and just describes
what the characteristics of a payment by way of salami
are without any reference as to the nature of assets
under a lease.
·
In all these appeals before us the assessees derived
considerably large amounts of income from
agricultural holdings. It is not shown as to what the number
of the holdings were but they must have been considerably large. On the
oth~r hand the number of settlements was comparatively small-a few hundreds and
consisted of settlements of virgin lands as well as of
auction;purchase lands and were not derived from the
same holdings at regular intervals. This and the findings of fact given above negative the finding as to
"regularity and periodicity" of pa,yment of salami and
also that it "arose out of business of letting out his
land," The payments by 'way of salami were made
by the prospective lessees anterior to the constitution
of the relationship of landlord and tenant as the price
for the lessor agreeing to the parting of his rights in an
agricultural holding in favour of the proposed lessee.
In Principles of Mohamadan Law by Macnaughton
salami is-defined as;
"a free gift by way of compliment or in return of
a favour."
In Wilson's Glossary the meaning given to it is :
"a complimentary present, a douceur. ........... ; a
present to a superior upon being introduced to him; a
gratuity or offering on receiving a lease ...... "
(1) A.LR. 1955 Orfosa 288.
(2) (1943) L.R. 70 I.A. 180, 190.
S.C.R.
SUPREME COURT REPORTS
1031
In
the
Arabic-English
Dictionary
by
Johnson
it
t957
means:
" ........ a present on being introduced to a superior;
earnest money ; a free gift from a farmer to Government on taking lands .......... "
In Vol. I of Baden Powell's "Land Systems of British
Inclia" it is stated at page 543;
" ...... the Zamindar, to raise money, had sold so
many taluqs or under farms for 'salami' or fees paid
down .... "
Thus all these definitions show that salami is a payment
by the tenant as a present or as price for parting
by the . landlord with his rights under the lease of a
holding. It is a lump sum
payment as consideration
for what the landlord transfers to the tenant.
The manner in which the leases were dealt with
and the fact that in no case was a non-occupancy
tenant evicted and his tenure was allowed to mature
into an occupancy holding shows that the leases were
•in practice not so precarious as was suggested by the
· Board, but had an element of stability and permanency attached to them. Therefore, when a tenant paid
salami he did so in order to get in return an estate in
the land owned by the zamindar. Salami is thus not
rent and both parties have proceeded on that basis and
it could not be called revenue within the meaning of
the word used in the definition of agricultural income
under s. 2(l)(a) of the Act because it was a payment to
the landlord by the tenant as a consideration for the
transfer of a right in zamindari lands owned by the
landlord. It has therefore all the charactenstics of a
capital payment and is not revenue.
In the result appeal No. 162 of 1955 brought by the
State of Assam is dismissed with costs throughout and
the appeals brought by the assessees in C.A. Nos. 38 to
44 of 1956 are allowed, the judgment of the High Court
set aside and the referred questions answered in the
negative. The assessees will have their costs in this
court in one set and the courts below except in appeal
No. 42 of 1956 where the appellant was not present.
~IS. C. India/59
Tiii Member for lh1
Board sf
..4gri&u/lurtil
Incom1 Ta:c, Ars•m
v.
Smt. Sindhurani
CAautlhurai
Kapur J
1957
Flu Member for l/u
Board of
Agrici.:ltural
Income Tax, A.Ham
v.
Smt. Sindhurani
Chaudhurani
Kapur J.
1957
Apil, 25
1032
SUPREME COURT REPORTS
fl957]
but it appears that she could not be served and given
notice of the hearing of the appeal and, therefore,
although her appeal is allowed, as it is based on a point
com,non to other appeals, the parties will bear their
own co'ts in that appeal.
Appeal No. J(,2 of 1955 dismissed.
Appeals Nos. 38 to 44 of 7956 allowed.
BASH!RUDDIN ASHRAF
v.
THE STATE OF BIHAR
( S. R. DAS C.J., JAF!'AR IMAM, s. K. DAS, GOV!NDA
MENON and A. K. SARKAR JJ.)
i\!t!tatvalli-A.fajlis,
powers
of-Budgct-Mutatva//i's
fai/u,·e
to prcpart• and send copy to Afaj/is-Coni·ictio'1-Validity-Sentence
of fine, in default imprisonment-Legali:y-l?ihar TVaqfs Act, 1947
(Bi*ar Act 8 of 1948), ss. 58, 65-Con.ctitution
of India, Art.,.
19 (!) (g).
The appellant failed to prepare a bud_gct of the Waqf Estate
of \Yhich he \Vas the mutawalli, for the year 1952-53 and send a
copy of it to the Majlis· before J:-inuary 15, 1952, :is he was hound
to Jo unJt•r s.
58( I)
of the llihar
Waqfs Act,
1947,
ond \•:as
convicted hy the Magistrate under s.
6--5( I)
of the
J\ct
:inJ
stntcncc<l to pay a fine of Rs. iOO, in default to nn(~crgo fifteen
cbyc;
-~iriplc imprisonment.
It was contended for
him that the
con\·iction and sentence \Vere nor \·al id ber:iuse (I) s. ;g l)[ thi.:
Act contravened Art. I9(1)(g) of the Constilution of India, :?.'i
it
g:ivc unrestricted po\ver to the Majlis to alter or modify the
budget prepared by the muta\valli without a right
of
appc:II
against the action of the ?i.1ajlis and so in1poscd an unreasonable
restriction on the muta\valli in
c1rrying on
hi.o;
occup:ition as
such, :Ind (2) s. 65 of the
Act did not provide for any impri~on
ment in default of payment of fine.
lleld, that
hav1ng regard to the fact
th:-it
a
muta\\':tlii
occupies the position of a man:igcr or custodian and
the
supervisin:i over him by the :tvfaj!i<; with the respect to due administration of
the \vaqf property is neccss:iry and that the 11owers of the !'vfajlis
to olter or modify the budget prepared by the mutawalli are
controlled by sub-s. ( 6) of s. 58 of the Act.
the
restrictions
imros-:d by
s.
58 of the
Act on
the
exercise
of his powers