Commissioner of Agricultural Income Tax vs G. Subramanian and Others

G. Sivarajan, J.—The sole question in these sixteen referred cases at the instance of the Department for consideration and answer by this court is as follows :

" Whether, on the facts and in the circumstances of the case, the Tribunal is justified in its finding that separate orders have to be passed and communicated to the applicants on the application for registration of sub-partnership firms made u/s 27 of the Agricultural Income Tax Act, 1950, read with Rule 4(2) and rule 7 of the Agricultural Income Tax Rules, 1951 ?"

The assessees are partners of Subramaniam Rubber Estates, Punalur. All these eight assessees had formed separate sub-partnership firms with certain other individuals. For the assessment year 1980-81, they had applied for registration u/s 27 of the Agricultural Income Tax Act. The Agricultural Income Tax Officer, Pathanamthitta, rejected the applications for registration of sub-partnership firms and assessed the partners of Subramaniam Rubber Estates on their respective individual share of agricultural income received from the said firm as per eight separate orders dated June 26, 1985. In this context, it is to be noted that both the rejection of the applications for registration and the assessment were by a common order.

Aggrieved by the said assessment orders rejecting the applications for registration and completing the assessment as individual, the assessees filed appeals before the Additional Appellate Assistant Commissioner, Kollam. Both the appeals were dismissed by the appellate authority.

The assessees carried the matter in second appeals before the Sales tax Appellate Tribunal. The main contention urged before the Tribunal was, that the sub-partnership firm is constituted under a written instrument of partnership entered into between the appellants and their sub-partners on July 1, 1974, specifying the shares of profits and losses and the firm, having been treated as genuine, the assessing authority granted registration for all the previous years from 1976-77 to 1979-80. But, for the assessment year 1980-81, the assessing authority has rejected the applications for registration. The assessees also raised a preliminary objection before the Tribunal that the orders of the assessing authority are unsustainable in law, as the assessing authority has not passed and issued a separate order on the application filed for registration u/s 27 of the Act, as provided under rule 4(2) and rule 7 of the Agricultural Income Tax Rules. The Appellate Tribunal considered the above preliminary objection and held that the contention of the appellants that separate orders are mandatory on the applications for registration, has some force. But the Appellate Tribunal found that the assessing authority has not properly disposed of the applications for registration made u/s 27 of the Act and for that purpose, the matter must go back to the assessing authority for a proper disposal of the applications. It is also observed by the Tribunal that from a reading of the assessment orders, it is not clear why the assessing authority has deviated from the earlier position during the year under dispute. Accordingly, the Tribunal has remitted the files relating to registration of sub-partnership firms to the assessing authority for a proper disposal of the same. It was also specifically directed that the assessing authority has to pass separate orders on the application and communicate the same to the appellants before proceeding to finalise the assessment for the year.

It is against the specific direction of the Tribunal to the assessing authority to pass separate orders on the application for registration that the Department has come up in reference before this court. We have perused the assessment orders (one such assessment order is at page 14 of the paper book) wherein, we find that though the order is a composite one regarding the determination of income and also disposing of the application for registration that the assessing authority has considered the application for registration in very great depth. The assessee''s contention, notwithstanding, is that the order on the application for registration must be a separate one independent of the assessment and it must be communicated separately. The said contention was based on the provisions of Rule 4(2) and rule 7 of the Kerala Agricultural Income Tax Rules, 1951.

" Rule 4(2). -- If the Agricultural Income Tax Officer is not so satisfied, he, shall pass an order in writing refusing to recognise the instrument of partnership, or the certified copy thereof, and furnish a copy of such order to the applicants."

"Rule 7. -- On receipt of an application under Rule 6 the Agricultural Income Tax Officer may, if he is satisfied that the application is in order and that there is or was a firm in existence constituted as shown in the instrument of partnership, grant to the assessee a certificate signed and dated by him in the following form :--....

If the Agricultural Income Tax Officer is not so satisfied, he shall pass an order in writing, refusing to renew the registration of the firm."

It is not disputed that against the order rejecting the applications for registration, separate appeals are provided under the Act. On a consideration of the provisions of Rule 4(2) and Rule 7 of the Rules and also the provision for appeal, we also feel that separate orders are contemplated under the Act and the Rules in the matter of grant or refusal of registration. Needless to say that it is also convenient for the maintenance of separate records for registration as well as for assessment. It is worthwhile to note here that the Department has also not seriously disputed the above legal position. What the State representative has submitted before the Tribunal was that even though no separate orders on the registration applications have been passed by the assessing authority, the matter has been elaborately discussed and a specific finding recorded in the regular assessment orders refusing registration to the sub-partnership firm. What the Tribunal has done is to remit the matter for fresh consideration of the applications for registration in all its aspects by the assessing authority. While doing so, even apart from the directions issued by the Tribunal, it was open to the assessing authority to pass separate orders. What has to be done is only to pass orders in two separate sheets instead of it being made by a composite order.

In view of the facts and circumstances stated hereinabove, we are of the view that the question referred at the instance of the Department for our answer has to be answered in the affirmative, that is in favour of the assessee and against the Revenue.

A copy of this judgment under the seal of this court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Trivandrum, for passing consequential orders.