MANOHAR LALL, AG. C.J. and DAS, J. - The Appellate Tribunal has referred the following two questions at the instance of the assessee :-

"(1) Whether the assessees net receipts from the sale of forest trees are the assessees income liable to Income Tax or merely capital receipts

(2) Whether the statutory notice u/s 22(1) [of the Act as amended in 1939] was validly and properly issued in respect of the appellants assessment for 1942-43 "

The third question for our decision referred at the instance of the Commissioner is a follows :-

"Whether interest on arrears of rent and cess relating to agricultural lands is agricultural income within the meaning of Section 2(1) of the Act and, as such, exempt from tax u/s 4(3)(viii) "

For the assessment year 1942-43 the assessee, Raja Bahadur Kamakshaya Narain Singh of Ramgarh, was assessed on a total sum of Rs. 7,84,565 which includes a sum of Rs. 84,993 on account of price realised by the sale of forest trees in his zemindary. The claim of the assessee that the sale of forest trees should be treated as a sale of capital asset has been rejected by the Income Tax authorities.

The question was examined by a Special Bench of this Court in the case of Maharaja Pratap Udai Nath Sahi Deo. We referred with approval to the Madras case of Manavedan Tirumalpad and another Madras case of Srimath Jagathguru Sringeri and the Full Bench case of the Allahabad High Court in Kesho Prashad Singh; the latter case was approved by their Lordships of the Judicial Committee in ILR 46 Allahabad 831.

Mr. L.K. Jha appearing for the assessee contended that the sale of the forest trees must necessarily result in the diminution of the value of the estate of the assessee and, therefore, the amount realised should be treated as a capital receipt. This argument has been unsuccessfully advanced on a number of occasions as pointed out above an is similar to the argument advanced on behalf of this very assessee that royalties from coal mine should not be assessed to Income Tax as the amount received resulted in diminution of the value of the mine by extracting so much coal therefrom.

In our opinion the Income Tax authorities have taken the correct view.

With regard to the invalidity of the notice issued u/s 22(1) of the Income Tax Act, the facts are these. On the 22nd of April, 1942, the Commissioner of Income Tax issued a notice in pursuance of Section 22(1) of the Income Tax Act. It was contended that this was not a notice contemplated u/s 22(1) as the notice was not signed by the Income Tax Officer of the place having jurisdiction in a particular area. But it was not contended that the contents of the notice were not in the proper form or that the notice did not substantially comply with the provisions of Section 22(1). The Appellate Tribunal did not accept the argument of the assessee in these words : "It appears that the notice purports to be on behalf of the Income Tax Officer though it is signed in the end by the Commissioner of Income Tax. It appears that the various Income Tax Officers have combined to issue a common notice and have specified the area within the jurisdiction of each one of the officers. The combined notice is merely for the sake of economy. The Income Tax Officer, the area under his jurisdiction and the fact that the notice is by the respective Income Tax Officers against whom his jurisdiction is mentioned are all published and in substance the notice is by the Income Tax Officer u/s 22(1) as is mentioned in the notice itself."

As in this particular case, the assessee was admittedly served with a notice u/s 22(2) of the Act and he filed a return, it follows, in our opinion, that it does not lie in the mouth of this assessee to object to the assessment merely on the ground that the notice u/s 22(1) was issued irregularly, assuming that this was so. In our opinion, the question does not arise for decision, and we decline to answer the question.

It was agreed by the standing counsel that the answer to the third question must be as given by the Special Bench of this Court in the case of Srimati Lakshmi Daiji, where we held that interest on arrears of rent was agricultural income within the meaning of Section 2(1)(a) of the Indian Income Tax Act. No fresh argument has been advanced before us to induce us to take a view different from that expressed by that Special Bench. For the same reasoning interest on arrears of cess relating to agricultural lands must be held to be agricultural income within the meaning of Section 2(1) of the Income Tax Act.

The answers to the questions are, therefore, as follows :-

Question No. 1. - The assessees net receipts from the sale of forest trees are liable to Income Tax and are, therefore, not capital receipts.

Question No. 2. - We decline to answer this question.

Question No. 3. - Interest on arrears of rent and cess relating to agricultural lands is agricultural income within the meaning of Section 2(1) of the Indian Income Tax Act and, as such, exempt from tax u/s 4(3)(viii).

In view of the divided success of both parties, we direct that each party will bear his own costs in this Court.

Reference answered accordingly.