A) ABSTRACT / HEADNOTE
This landmark decision of the Supreme Court in The Member for the Board of Agricultural Income-Tax, Assam v. Smt. Sindhurani Chaudhurani ([1957] SCR 1019) clarified a critical issue in Indian agricultural tax jurisprudence: whether salami, a lump-sum, non-recurring payment received by landlords at the inception of agricultural leases, qualifies as “agricultural income” under Section 2(a)(1) of the Assam Agricultural Income Tax Act, 1939. The apex court decisively ruled that such salami payments are capital receipts and do not constitute rent or revenue, thus not liable to agricultural income-tax. The court underscored two principal attributes of salami—its non-recurring nature and its payment prior to the establishment of the tenancy—which distinguished it from taxable agricultural income. The court meticulously examined earlier conflicting judgments and international jurisprudence, affirming that income must display regularity and periodicity. In contrast, salami is a one-time consideration for granting tenancy rights and lacks the recurring nature of income. This judgment had far-reaching implications for tax assessment of zamindari and estate revenues, and it established a coherent distinction between capital and revenue receipts in the context of agricultural leases.

Keywords:
Salami, Agricultural Income-Tax, Capital Receipt, Zamindari, Revenue from Land

B) CASE DETAILS

i) Judgement Cause Title
The Member for the Board of Agricultural Income-Tax, Assam v. Smt. Sindhurani Chaudhurani

ii) Case Number
Civil Appeals Nos. 162 of 1955 and 38–44 of 1956

iii) Judgement Date
April 24, 1957

iv) Court
Supreme Court of India

v) Quorum
Bhagwati, Venkatarama Ayyar, and J. L. Kapur, JJ.

vi) Author
Justice J. L. Kapur

vii) Citation
[1957] SCR 1019

viii) Legal Provisions Involved
Section 2(a)(1) of the Assam Agricultural Income Tax Act, 1939
Sections 68 and 69 of the Goalpara Tenancy Act

ix) Judgments Overruled by the Case (if any)
The judgment of the Calcutta High Court (April 12, 1945) and Assam High Court (April 2, 1952)

x) Case is Related to which Law Subjects
Taxation Law, Agricultural Law, Revenue Law, Property Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT
The dispute revolved around the legal nature of “salami”—a lump-sum payment received by landlords from tenants upon the grant of agricultural leases. The taxing authorities in Assam had been treating such receipts as “agricultural income” under the Assam Agricultural Income Tax Act, 1939, thereby making them taxable. The assessees, including Smt. Sindhurani Chaudhurani, contested this classification, arguing that salami is a capital receipt, not subject to agricultural income-tax. The case initially reached the Calcutta and Assam High Courts, both of which had differing interpretations. Upon appeal, the Supreme Court was tasked with resolving whether salami constituted income from land, as defined by the Act. The judgment was delivered after a remand by the Federal Court (formerly the Privy Council) for reconsideration of essential facts regarding the nature, regularity, and purpose of salami payments.

D) FACTS OF THE CASE
The assessee, Smt. Sindhurani Chaudhurani, inherited a significant co-sharer interest in the Parbatjoar estate in Assam. During the assessment year 1941–42, she received approximately Rs. 9,331 as salami from 414 different holdings—278 on virgin land and 136 on auction-purchased land. The Assam Agricultural Income-Tax Officer assessed this as “agricultural income” under Section 2(a)(1) of the Act, allowing a deduction of 15% as collection charges. The appeal against this assessment was initially dismissed at several levels. The Federal Court, however, remanded the case back to the High Court for a detailed factual inquiry into the characteristics of salami. The subsequent findings clarified that salami varied based on land quality, was not tied to rent, and was not a periodic income, but rather a lump sum paid at the inception of a tenancy. Despite these findings, the Assam and Calcutta High Courts held the receipts as taxable agricultural income. The Supreme Court finally adjudicated on appeal.

E) LEGAL ISSUES RAISED

i) Whether salami, as a single, non-recurring payment made by tenants to landlords at the inception of the lease, qualifies as “agricultural income” under Section 2(a)(1) of the Assam Agricultural Income Tax Act, 1939?

ii) Whether such salami payments can be treated as revenue derived from land used for agricultural purposes, or whether they are capital receipts exempt from taxation?

F) PETITIONER/ APPELLANT’S ARGUMENTS

i) The counsels for the Petitioner, i.e., the Member for the Board of Agricultural Income-Tax, Assam, argued that salami constituted revenue arising from agricultural land. They claimed it formed part of the regular business of the zamindars whose primary occupation was the leasing of land. The petitioner contended that the regular occurrence of salami collection, combined with its link to land, made it indistinguishable from rent. Emphasizing that the rate of salami varied with land quality, the petitioner argued it directly reflected the land’s productive potential, making it a derivative of agricultural land value. They cited precedents such as Raja Rajendra Narayan Bhanja Deo v. Commissioner of Income Tax, (1929) ILR 9 Pat. 1 and Meher Bano Khanum v. Secretary of State, (1925) ILR 53 Cal. 34, to assert that salami forms part of agricultural income because it is linked with tenancy transactions and received due to land ownership.

G) RESPONDENT’S ARGUMENTS

i) The counsels for the Respondent, Smt. Sindhurani Chaudhurani, maintained that salami is a capital receipt as it is a one-time payment made by a tenant before the creation of tenancy rights. They emphasized that salami lacks periodicity and does not arise from ongoing agricultural operations or productivity. Citing Kamakshya Narain Singh v. Commissioner of Income Tax (1943) LR 70 IA 180, they argued that such receipts are not revenue but compensation for parting with a portion of the landlord’s estate in land. They further clarified that salami is distinct from rent, as it is not based on any recurrent payment model. The payment is compulsory and precedes tenancy creation, and hence, cannot be characterized as “income”, which implies regularity and continuity. They rejected the contention that the frequency of leases transforms the payment’s nature, stating that volume does not convert capital receipts into revenue.

H) RELATED LEGAL PROVISIONS

i) Section 2(a)(1) of the Assam Agricultural Income Tax Act, 1939 – Defines “agricultural income” as “any rent or revenue derived from land used for agricultural purposes.”

ii) Section 68 & 69 of the Goalpara Tenancy Act – Pertains to eviction procedures and tenant protection. Notably, Section 68 enables landlords to re-enter lands and re-let them upon rent default, which often triggered a new salami payment.

I) JUDGEMENT

a. RATIO DECIDENDI

i) The Supreme Court held that salami is not rent nor revenue, and therefore not “agricultural income” under the Act. It emphasized the capital nature of salami payments, identifying two characteristics: non-recurring nature and payment prior to lease commencement. The Court stated that income must possess regularity and periodicity, citing Commissioner of Income Tax v. Shaw Wallace & Co., (1932) LR 59 IA 206 and Kamakshya Narain Singh v. CIT, (1943) LR 70 IA 180. It concluded that a payment for the acquisition of tenancy rights is a capital asset, and its proceeds are not taxable.

b. OBITER DICTA

i) The Court observed that the assumption of salami being part of “business activity” of letting land does not transform it into revenue. The nature of the receipt must be examined independently. Additionally, the Court remarked that auction settlement or variation of salami by land quality is immaterial in determining whether it is a capital or revenue receipt.

c. GUIDELINES 

• Salami is not rent or revenue.

• It must be distinguished from periodic income.

• Its character is determined by:

  • Timing: Paid before the lease.

  • Nature: One-time, lump sum.

  • Purpose: Paid to acquire rights in land.

• Salami does not reflect ongoing income-producing ability of land.

• Volume of such payments does not make them income.

J) CONCLUSION & COMMENTS

The judgment clarified an enduring ambiguity in agricultural tax jurisprudence by definitively classifying salami as a capital receipt, exempt from the purview of agricultural income taxation. The Court’s reasoning elegantly dismantled the idea that frequency or volume alone could convert capital receipts into income. By reinforcing the distinction between transfer of estate (capital transaction) and usufruct or benefits from land (revenue transaction), the decision contributed to the broader understanding of taxable agricultural income. This precedent continues to guide interpretations in agricultural and property tax cases, particularly in regions with legacy zamindari structures.

K) REFERENCES

a. Important Cases Referred

1. Kamakshya Narain Singh v. Commissioner of Income Tax, (1943) LR 70 IA 180 [1]

2. Commissioner of Income Tax v. Shaw Wallace & Co., (1932) LR 59 IA 206 [2]

3. Captain Maharaja Kumar Gopal Saran Narain Singh v. CIT, (1935) LR 62 IA 207 [3]

4. Raja Rajendra Narayan Bhanja Deo v. CIT, (1929) ILR 9 Patna 1 [4]

5. Meher Bano Khanum v. Secretary of State, (1925) ILR 53 Cal. 34 [5]

6. H.H. Maharaja Sir Bir Bikram Kishore Manikya v. Province of Assam, (1948) 53 CWN 164 [6]

7. S.M. Bose v. Secretary, Board of Revenue, AIR 1955 Orissa 288 [7]

8. Province of Bihar v. Maharaja Pratap Uday Nath Sahi Deo, (1947) ILR 20 Pat 699 [8]

b. Important Statutes Referred

1. Assam Agricultural Income Tax Act, 1939, Section 2(a)(1)

2. Goalpara Tenancy Act, Sections 68, 69