Dr. Baby Mathew vs Agricultural Income Tax Officer and Others

T.L. Viswanatha Iyer J.

The petitioner is a doctor by profession. He is now faced with proceedings under the Revenue Recovery Act ("R. R. Act", for brevity) for realisation of certain amounts due by way of tax under the Kerala Agricultural Income Tax Act, 1950, from the third respondent, which is a co-operative society registered under the Kerala Co-operative Societies Act, 1969, to which I shall hereinafter refer as "the society". The tax is due for the assessment years 1979-80 to 1982-83 corresponding to the accounting years 1978-79 to 1981-82. The petitioner was the president of the society for a term of three years 1979-80 to 1981-82. The tax is sought to be recovered from him because of this connection. The society was assessed to tax under the Agricultural Income Tax Act for the assessment years 1979-80 to 1982-83 by the proceedings, exhibit P-3, dated March 12, 1985. The amount of tax demanded pursuant thereto was not paid. Though the assessment was made in the name of the society, a copy of the order of assessment was served on the petitioner personally, on June 19, 1985, though he had ceased to be its president as early as in 1982. The petitioner objected and informed the first respondent-assessing authority accordingly, pointing out that he had no personal liability for the amount of tax assessed and that it has to be recovered from the society. He was, however, pursued with proceedings for recovery and the notice, exhibit P-6, issued under the Revenue Recovery Act, where he was mentioned as the defaulter for the society (whatever it means). The petitioner filed this writ petition challenging the proceedings so initiated against him for recovery of the tax due from the society.

There is no dispute that it was the society that owned the agricultural land and that it was the society that derived and enjoyed the income therefrom, which was brought to assessment in its name under the order of assessment, exhibit P-3. Only the proceedings for recovery are pursued against the petitioner, who was the president of the managing committee of the society during three out of the four years concerned. Does a member of the society, whether an office-bearer or otherwise, have any personal liability for the amount of agricultural Income Tax due from the society ? that is the question.

The levy under the Act is on the total agricultural income of the "previous year" of a person. "Person" is defined in Section 2(m) of the Act thus :

"''person'' means any individual or association of individuals, owning, possessing or holding property for himself or for any other, or

The status of the third respondent is shown in the order of assessment as "co-operative society". A co-operative society registered under the Co-operative Societies Act, 1969, is u/s 9 thereof, a body corporate, with perpetual succession, and a common seal, with power to hold property, enter into contracts, institute and defend suits, and other legal proceedings, and to do all things necessary for the purpose for which it was constituted. The third respondent society was one registered with limited liability (vide exhibit P-1), that is, the liability of the members is limited to the extent of their share, which, so far as the petitioner is concerned, is fully paid up. The question is whether the petitioner could be made liable for payment of the dues of a corporate body like this society, merely because of his having been its president for some time. I do not find any ground, in law or in fact, to make the petitioner liable for payment of the dues of the society under exhibit P-3. It was held by this court in Punalur Paper Mills Ltd. v. District Collector [1985] KLT 758, that the director of a company was not liable personally for the arrears of sales-tax due from the, company. This is for the reason that a company has a legal personality of its own, distinct from its members, and, therefore, in the absence of a contract, or a statutory provision, making the director personally liable for the dues of the company, he cannot be proceeded against for realisation of those dues. This principle was invoked by me in the decision T.K. Jacob v. Divisional Forest Officer [1993] 2 KLJ 915 where I held that damages due to the Government from a limited company caused by its default in fulfilling its obligations under a forest auction, cannot be recovered from its directors. In K. Paramasivam Pillai v. Board of Revenue [1963] 14 STC 972 (Mad), Veeraswami J. of the Madras High Court, held that sales tax assessed under the Madras General Sales Tax Act, 1959, on a canteen attached to a recreation club of members of the gazetted and non-gazetted staff of the Tirunelveli Collectorate was not realisable personally from the honorary secretary of the canteen, since the liability was not personal to him. Precisely, the same view was taken by Govindan Nair J. of this court in Swami Satchitanand and Others Vs. The 2nd Addl. Income Tax Officer, Kozhikode and Others, , where he held that the members of a society registered under the Societies Registration Act, 1860, were not personally liable for the debts of the society. The society being a legal entity, tax imposed on it in the status of an "association of persons" was a tax on the society as such, and not on its members. The case nearer the point is that of the Punjab and Haryana High Court in State of Punjab v. Amolak Ram Kapoor [1990] 79 STC 315, which related to a society registered under the Societies Registration Act, where the learned judge held on similar grounds that arrears of sales tax due from the society could not be recovered personally from an ex-president of the society.

The third respondent society which is one registered under the Cooperative Societies Act, 1969, is a legal entity invested with a corporate personality, which makes it distinct and different from the various members constituting it. The liability of the society is its own and not that of its members, and has to be met by the society itself, in the absence of any provision in the statute creating the liability or in the Co-operative Societies Act, 1969, casting liability on any one other than the society itself or unless the person concerned has undertaken personal liability by his own conduct. This principle is well entrenched in the jurisprudence of this country so that it is not possible to fasten any liability on the members or office bearers of a society merely on the strength of their position as such. I do not find anything in Section 26 of the Co-operative Societies Act, 1969, which was incidentally referred to casting any such personal liability on the members of a co-operative society. The proceedings initiated against the petitioner for recovery of the agricultural Income Tax due from the third respondent society are, therefore, incompetent.

The original petition is, therefore, allowed and exhibit P-6 is quashed; but this will not preclude respondents Nos. 1 and 2 from proceeding against the assets of the society for realisation "of the amounts due from it. No costs.