JUDGMENT
1. This appeal is by the Rajah of Ramnad against the decree of the Additional Subordinate Judge of Ramnad at Madura dismissing his suit for the recovery of certain amounts paid by him as income-tax for three years. The Rajah of Ramnad was asked by the Income-tax Officer to make a return of his income taxable under the Income-tax Act (VII of 1918) under Section 17(2) read with Section 2, Clause (13). He submitted a return for the years 1919-1920, 1920-1921 and 1921-1922, in which he showed the income derived by him from forests and fisheries. The Income-tax Officer, on the basis of the return, proceeded to assess the income from forests and fisheries under Section 18 of the Act. The Rajah paid the tax on 5th July, 1920, 25th April, 1921, and 21st April, 1922. He brought the suit on 22th June, 1925 for the recovery of the three sums paid on the dates abovementioned on the ground that the income from forests and fisheries derived from his permanently settled zamindari was not taxable under the Income-tax Act.
2. The first point urged by Mr. Krishnaswami Aiyar for the appellant is that the income derived from a permanently settled estate is outside the scope of the Income-tax Act by reason of the Permanent Settlement Regulation XXV of 1802 and the sanad issued under the Act, and, the act of the Income-tax Officer being ultra vires, he is entitled to a refund of the amount paid by him. In the view we take of the next point, it is unnecessary to discuss all the authorities bearing on this point in deail. In The Chief Commissioner of Income-tax v. Zamindar of Singampatti (1922) I.L.R. 45 Mad. 518 (F.B.), a Full Bench of this Court held that, where the peishcush of a permanently settled estate was fixed in commutation, not only of the rentals of the cultivated lands but also of all income which might be derived from forests or fisheries, both under the terms of the sanad and of Section 1 of Regulation XXV of 1802, these incomes were exempt from further taxation by the Government, and Section 3 of the Income-tax Act did not abrogate this exemption. The learned Judges considered the effect of the Permanent Settlement Regulation of 1802 and the terms of the grant to which the grant in the present case is similar and came to the conclusion that the income derived from forests and fisheries in the permanently settled estate was not liable to be taxed under the Income-tax Act. The learned Government Pleader attacks the correctness of this decision and contends that income from forests and fisheries is taxable unless it comes within the exceptions provided in the Income-tax Act. He urges that there must be specific legislation exempting such income and that it cannot be exempted by implication. Sitting as a Division Bench, we are bound by the decision of the Full Bench. We may observe that we entirely concur with the reasoning and conclusion of the learned Judges who were members of the Full Bench. Reliance is placed by the learned Government Pleader on Emperor v. Probhat Chandra Barua (1924) I.L.R. 51 Cal. 504, Emperor v. Indu Bhusan Sarkar (1926) I.L.R. 53 Cal. 524, Emperor v. Probhat Chandra Barua (1927) I.L.R. 54 Cal. 863 (F.B.), and Maharajadhiraj of Dharbanga v. The Commissioner of Income-tax (1924) I.L.R. 3 Pat. 470, as supporting his contention that The Chief Commissioner of Income-tax v. Zamindar of Singampatti (1922) I.L.R. 45 Mad. 518 (F.B.) was not correctly decided. In Emperor v. Probhat Chandra Barua (1924) I.L.R. 51 Cal. 504 there was a difference of opinion between Rankin J. and Page J., Page J., approving of the decision in The Chief Commissioner of Income-tax v. Zamindar of Singampaiti (1922) I.L.R. 45 Mad. 518 (F.B.). In Emperor v. Indu Bhusan Sarkar (1926) I.L.R. 53 Cal. 524, The Chief Commissioner of Income-tax v. Zamindar of Singampatti (1922) I.L.R. 45 Mad. 518 (F.B.) and Maharajadhiraj of Dharbanga v. The Commissioner of Income-tax (1924) I.L.R. 3 Pat. 470 were followed by a Bench of the Calcutta High Court. In Emperor v. Probhat Chandra Barua (1927) I.L.R. 54 Cal. 863 (F.B.) there was a difference of opinion, two Judges approving the Madras view and three Judges following the view of Rankin, J., in Emperor v. Probhat Chandra Barua (1924) I.L.R. 51 Cal. 504. In Maharajadhiraj of Dharbanga v. The Commissioner of Income-tax (1924) I.L.R. 3 Pat. 470 Dawson Miller, C. J., after an exhaustive examination of the Permanent Settlement Regulation and its effect observed : “I see no reason to take a different view from that held by the Madras High Court,” while Mullick, J., took a different view. We find this point in favour of the appellant.
3. It is contended by the learned Government Pleader that no civil suit would lie to recover an amount paid as income-tax. A civil suit is barred under Section 52 of the Income-tax Act of 1918. If the tax was levied under the Act, no doubt a suit would be barred, but if the assessment was made in respect of an item of income which is not assessable under the Act, a civil suit would lie to recover it, inasmuch as the officer making the assessment had no jurisdiction to make it. In cases in which the Income-tax Officer has to decide whether a certain item of income is assessable or not, his decision cannot be said to be ultra vires even if it is illegal. But, where a certain income is outside the scope of the Act, such as agricultural income or income not earned in or brought into British India, any assessment in respect of such income would be outside the scope of the Act and a civil suit to recover it would not be barred by reason of Section 52. We do not discuss this point at length as we find the next point against the appellant.
4. The next point is whether the appellant is entitled to recover the money paid under a mistake of law. As already observed, three payments were made on 5th July, 1920, 25th April, 1921 and 21st April, 1922 and the suit was brought on 22nd June, 1925. The suit in respect of the first two payments is clearly barred as it was brought more than three years after the date of payment. As the Court of institution closed on 20th April, 1925 and re-opened on 22nd June, 1925, the last payment was within the period of limitation. Granting that Section 14 does not apply to the case, the question is whether the amount paid on 21st April, 1922 could be recovered in the circumstances of the case. It is well established that a payment made under a mistake of law cannot be recovered, but it is urged for the appellant that the payment was made under duress or coercion and therefore the amount is recoverable. The decision in The Chief Commissioner of Income-tax v. Zamindar of Singampatti (1922) I.L.R. 45 Mad. 518 (F.B.) was on 21st February, 1922. The assessment notice was dated, 31st March, 1922 and payment was made on 21st April, 1922. The Rajah of Ramnad in his return of taxable1 income made in pursuance of the Income-tax Act included wrongly the items of income derived from forests and fisheries.
5. He says this return was made owing to a mistake, and, on the figures submitted by the Rajah, the Income-tax Officer assessed the income under the Income-tax Act. The question is whether the payment was made under duress in order to take it out of the principle that payments under mistake of law cannot be recovered. It is contended for the appellant that the sending of notice by the taxing authority and his assessment amount to duress or coercion in law. The Rajah, of his own accord, and, it may be, owing to ignorance of law, included, in the items shown as taxable under the Income-tax Act, the income from fisheries and forests and the Income-tax Officer on the basis of that return made the assessment under the Act. There is no evidence that the Income-tax Officer required the appellant to make a return of the income from forests and fisheries. The appellant like all other assessees was required to make a return of his income for purposes of Income-tax Act and if he chose to include in the return an item of income which was not assessable under the Act and if on the basis of that return the Income-tax Officer assessed the income, and, on notice being given, the assessee paid the tax, it cannot be said that it was paid under duress. In William Whiteley, Ltd. v. The King (1909) 101 L.T. 741 the facts were : William Whiteley, Ltd., who carried on a large business in which they employed a large number of assistants who had all their meals on the premises and for the service of those meals they employed a large number of men as cooks and waiters, and on the suggestion of the Inland Revenue authorities that the waiters were “male servants” in respect of whom duties were payable paid for a number of years the duties in respect of such waiters. From 1903 they paid the duties with a protest that the waiters were not “male servants” within the meaning of the Act. In 1906 they refused to pay and upon proceedings being taken for penalties, the Divisional Court held that the waiters were not “male servants” and that the duties were not payable. They then preferred a petition of right to recover back the moneys so paid. Walton, J., held that the moneys having been paid under a mistake, not of fact, but of law, could not be recovered back either on the ground that they were paid under duress or compulsion or on the ground that they were paid in discharge of a demand illegally made under colour of an office. At page 745 he observes:
The suppliants knew all the facts. They had present to their minds plainly, when these payments were made, that there was a question as to whether upon such servants as those in question, duty was payable. They themselves raised that question and they paid the duties. They could have resisted payment. They must have known that if proceedings were taken for penalties, it would be open to them in such proceedings to raise the question as to whether the duties were payable or not as they did in fact in 1906…I think the most that took place was this, that the Officer of Inland Revenue told the suppliants that in his opinion and in the opinion of the Commissioners of Inland Revenue the duties were payable.
6. With regard to the cases of duress, the learned Judge observes after referring to certain passages in Leake on Contracts:
In all those cases, in order to have that done which the person making the payment was entitled to have done without a payment, he had to make the payment and some one, who was bound to do something which the person paying the money desired to have done, refused to do his duty unless he was paid the money. If in those circumstances money was paid, then it can be recovered back. There is an element of duress.
7. The appellant made the return thinking that he was liable. Whatever might have been the state of the law before 21st February, 1922, after the decision in Chief Commissioner of Income-tax v. Zamindar of Singampatti (1922) I.L.R. 45 M. 518 (F.B.) it could not be said that there was any doubt as to the non-liability of income from forests and fisheries arising out of permanently settled estates. The notice of assessment was on 31st March, 1922. The appellant could have preferred an objection to the assessment on the strength of The Chief Commissioner of Income-tax v. Zamindar of Singampatti (1922) I.L.R. 45 M. 518 (F.B.) and could have refused to pay the amount, even if he was unsuccessful in his representation to the Income-tax authorities that the income from forests and fisheries was not liable to be assessed under the Income-tax Act, and he chose to do none of these things but paid the amount on 21st April, 1922, i.e., two months after the decision in The Chief Commissioner of Income-tax v. Zamindar of Singampatti (1922) I.L.R. 45 M. 518 (F.B.). In Slater v. Mayor, etc., of Burnley (1888) 59 L.T. 636 the facts were : A water rate £8-15-4 for one quarter’s rate in respect of certain houses was demanded by the defendants, the sanitary authority, and paid by the plaintiff, such sum being S per cent, on the gross rental of the houses. After this payment, the defendants altered their basis of assessment from gross rental to rateable value as the proper basis of assessment, they being entitled to charge 5 per cent, on the annual value. If the rate had been calculated on the rateable value it would have been £7-3-10. The plaintiff brought an action in a County Court to recover the overcharge of £1-11-6, the difference between the two sums, as being money paid under compulsion. There was no power to distrain for these rates (except when they did not exceed £1 a quarter which did not apply to the present case), but the defendants had the power to cut off the water-supply on non-payment of the rate. The County Court Judges held the payment to be a compulsory one, as the defendants had the power to cut off water and gave judgment for the plaintiff. Cave and Wills, JJ., held that the payment was a voluntary payment and could not be recovered back. Cave, J., observed at page 639:
There is no case which lays it down that a payment under these circumstances is a compulsory payment. If it were so the consequences would be very far-reaching. If that were so, no payment of rent to a landlord would be a voluntary payment.
8. Wills, J., observed:
It seems to me, in these circumstances, that it is idle to say that there is anything like duress, there was nothing in the nature of a threat used; it is simply the ordinary case of a person raising a contention when a demand is made upon him. That is not sufficient to constitute duress so as to prevent a payment being a voluntary one.
9. The case would be different if for the purpose of getting an official act done a person pays something more than what is proper, for in order to get the act done he must pay the amount demanded otherwise the act would not be done. In such cases it can be said that the payment is not a voluntary payment, nor is it a payment made under a mistake of law. The case in Hooper v. Mayor and Corporation of Exeter (1887) 56 L.J.Q.B. (N.S.) 457 and the case in Steele v. Williams (1853) 8 Exch. 625 : 155 E.R. 1502 are cases where, in order to get a certain thing done, the plaintiff had to pay the amount demanded. In Hooper v. Mayor and Corporation of Exeter (1887) 56 L.J.Q.B. (N.S.) 457 the Corporation of Exeter exacted harbour dues from the plaintiff in respect of exempted articles. The plaintiff paid in ignorance of the exemption. It was held that the plaintiff was entitled to recover back the money so paid. Lord Coleridge, C.J., observed at page 458:
From the case cited in the course of the” argument it is shown that the principle has been laid down that where one exacts money from another and it turns out that, although acquiesced in for years, such exaction is illegal, the money may be recovered as money had and received since such payment could not be considered as voluntary so as to preclude its recovery.
10. The plaintiff in this case could not have landed his limestone, the article exempted, without paying harbour dues. In Steel v. Williams9 the facts were that the plaintiff’s clerk applied to the defendant, a parish clerk, for liberty to search the register book of burials and baptisms. He told the defendant that he did not want certificates, but only to make extracts. The defendant said the charge would be the same whether he made extracts or had certificates. The clerk searched through four years and made 25 extracts, for which the defendant charged him 3s. 6d. each and he accordingly paid the defendant £4-7-6. It was held first that the charge for extracts was illegal since 6 and 7 Will. IV. Clause 86, Section 35 only authorises a charge for a search and for a certified copy and secondly that the payment was not voluntary so as to preclude the plaintiff from recovering back the excess. Parke, B., observed:
In the first place I think that there is evidence that this payment was not voluntary but necessary for the exercise of a legal right, and further, I by no means pledge myself to say that the defendant would not have been guilty of extortion in insisting upon it, even without that species of duress, viz., the refusal to allow the party to exercise his legal right, but colore officii.
11. Martin, B., observed:
It is the duty of a person to whom an Act of Parliament gives fees, to receive what is allowed and nothing more. This is more like the case of money paid without consideration – to call it a voluntary payment is an abuse of language.
12. In both these cases the plaintiff could not have got what he wanted without the payment, and therefore his payment could not be said to be voluntary, but a payment under duress. This point was the subject of decision by a Bench of this Court in a recent case. Ramesam and Jackson, JJ., held in C.R.P. No. 535 of 1926 as follows:
The Indian Law seems to be clear, namely, that a mistake, in the sense that it is a pure mistake as to law in India, resulting in the payment by one person to another and making it inequitable that the payee should retain the money is no ground for relief.
13. They refer to an observation of Lord Sumner in Sinclair v. Brougham (1914) A.C. 398 at 456. The learned Lord observes:
There is now no ground left for suggesting as a recognizable ‘equity’ the right to recover money in personam merely because it would be the right, and fair thing that it should be refunded to the payer.
14. We hold that the amount paid on 21st April, 1922 which is not barred under the three years’ rule was made under a mistake of law and of the general law of British India, applicable to all persons in appellant’s position holding permanently settled estates, and therefore cannot be recovered. In the result the appeal fails and is dismissed with costs.
15. The respondent has preferred a memorandum of objections against the order of the Subordinate Judge disallowing his costs. Having regard to all the circumstances in which these payments were made we think that the plaintiff was rightly held not liable for the costs of the suit. The memorandum of objections is also dismissed.
