H. N. Kempai Gowder and Another vs Commissioner of Agricultural Income Tax, Madras

Jagadisan, J.—These revision petitions arise out of proceedings under the Madras Agricultural Income Tax Act. The petitions filed

applications before the Agricultural Income Tax officer, Ooatacamund, u/s 65 of the Act for composition of the tax on their agricultural income and

levy of the appropriate fee in lieu of regular assessment to tax. These applications were rejected by the officer and the petitioners preferred revision

petitions before the Commissioner of Agricultural Income Tax, Madras. These revision petitions also were dismissed as the Commissioner agreed

with the view taken by the subordinate officer. In this batch of revision petitions the petitions urge the contention that they are entitled to the benefit

of composition under the Act and that the competent authorities failed to exercise their statutory jurisdiction properly. These petitions can be dealt

with and disposed of together as they raise a common question of law.

A block of property consisting of tea plantations in Ooatacamund called the Doddabetta Tea Plantations and another block of arecanut

plantations in Odathurai village belonged originally to six sharers, H. A. Rangaswami, H. N. Nanjiah, H. N. Kepiah, H. B. Nanjiah, H. M. Lingiah

and H. S. Siddiah. Each of them had on one-sixth share in these properties. Each of them was permitted to compound the agricultural Income Tax

payable in respect of their respective shares for the account year ended March 31, 1959, relevant to the assessment year 1959-60 in terms of

standard acres. The particulars of the holding of the shares were as set out below :

The petitioner in T. C. No. 13 of 1962 - AC. 68-83

The petitioner in T. C. No. 26 of 1962 - AC. 70-91.

The petitioner in T. C. No. 27 OF 1962 - AC. 65-09

The petitioner in T. C. No. 28 of 1962 - AC. 68-06.

The petitioner in T. C. No. 29 OF 1962 - AC. 67-86 and

The petitioner in T. C. No. 30 of 1962 - AC. 69-40.

The petitioners held the tea and arecanut plantations as tenants-in-common without division by metes and bounds. Each of them also owned,

besides plantations, wet and dry lands. The total extent of the standard acres set out above comprise their shares in the plantations as well as their

separate holdings. In or about December, 1959, each sharer effected a division by a registered partition deed between the members of their

respective families. Rangaswami effected a partition between himself and his two brothers, Nanjiah, between himself and his four sons, Siddiah,

between himself and his two sons, Lingiah, between himself and his two sons, H. B. Nanjiah, between himself and his two, sons, and Kempiah

between himself and his two sons. The result was that one-sixth share of each of the sharers in turn became disintegrated and divided. It was on

the basis of this division that applications were preferred before the Agricultural Income Tax officer for composition for the assessment year 1960-

It is not necessary to specify the share of each one of the applications for composition as nothing turns upon the extent of holding of each

sharer.

The Agricultural Income Tax officer rejected the applications on the following grounds :

(1) The properties have not been separately sub-divided and registered in the revenue accounts.

(2) No separate accounts have been maintained by the parties.

(3) No separate tea quota certificates have been obtained.

(4) All the persons are living in one and the same house.

The officer observed that he was not convinced that a real partition had taken place. In revision the Commissioner no doubt affirmed the view of

the Income Tax Officer, but was also of the opinion that physical division of the plantations was necessary before an application for composition

u/s 65 could be sustained. It does not appear that the Commissioner disbelieved the truth of the partition. The substantial ground on which the

Commissioner negatived the relief to the petitioner is thus stated in his order :

In these batch of revision cases the only point for consideration is whether the composition applications filed u/s 65 were properly rejected on the

grounds that the revision petitioners have railed to prove partition of the holdings held by them. In these cases, the property involved lends itself to

physical division or division by metes and bounds. Such division is necessary to hold that a definite partition has taken place. It has to be decided

by the facts and circumstances of each case as to whether such division has been effected.

We must observe even at the outset that the learned counsel for the department did not contend that the partition deeds, which are registered

documents, are instruments created without intending to give effect to them. Though the observations of the officer in his order that he was not

convinced that a real partition had taken place might be construed as a finding that the partition was not true, as stated already, there is nothing in

the order of the Commissioner showing that he was inclined to accept that view. There is no reason to suppose that the partition deeds were

brought into existence nominally without intending to give effect to them and to disrupt the joint status of the members of the family of each sharer.

Assuming that the object and purpose of these partition deeds were to bring about a reduction of the incidence of taxation under the Act that

would not militate against the truth or genuineness of the transactions. We shall therefore deal with the revision on the basis of an effective and

subsisting division brought about between the members of the family of each one-sixth sharer.

Section 3(3) of the Act read along with section 65 would seem to apply and govern the rights of parties in the present case. Section 3(3) is part

of the charging section and it clearly lays down that :

(3) In the case of persons holdings property as tenants-in-common and deriving agricultural income, the tax shall be assessed at the rate

applicable to the agricultural income of each tenant-in-common.

The tax liability in regard to agricultural income of a tenant-in-common holding property is only in regard to his share of the total income. Section

65, the provision for composition of agricultural Income Tax, is an enabling provisions by which the assessee may seek permission to compound

the tax payable by him at the rate or rates specified in Part II of the Schedule in lieu of a regular assessment. The right of a tenant-in-common to

obtain the benefit of composition under the Act has been considered by a division bench of this court, to which one of us was a party, reported as

Ramaswami v. Commissioner of Agricultural Income Tax. In that case a tenant-in-common applied u/s 65 of the Act for composition of the

agricultural Income Tax payable by him. The Commissioner of Income Tax refused to grant the permission. It was urged by the department that a

tenant-in-common was not a person in possession or enjoyment of the state and that therefore he was not within the definition of the word ""person

in the Act. The Division Bench held that tenant-in-common cannot be said to be a person not in possession or enjoyment of the estate and that

when the interest of each tenant is specified and determined there can be no objection for holding that he is entitled to possess and enjoy such

fractional interest in the estate or holding though no distinct part of it might be set apart for his exclusive enjoyment. In view of this decision, and,

having regard to the plain terms of the statutory provisions already referred to, section 3(3) and section 65. We have no doubt that the application

of each one of the petitioners claiming to be a tenant-in-common by reason of the partition deeds executed in December, 1959, should have been

ordered.

When the Commissioner of Agricultural Income Tax referred to a physical division in his order, obviously he had in mind section 29 of the Act.

We have now to consider the question as to whether section 29 of the Act would apply and whether a physical division of the properties by metes

and bounds is a sine qua non for a claim u/s 65 of the Act. Section 29 of the Act, in so far as it is relevant for the present discussion, may now be

extracted :

Section 29(1) : Where at the time of making an assessment u/s 17, it is claimed by or or behalf of any member of a Hindu undivided family,....

hitherto assessed as undivided that a partition has taken place among the members or groups of members of such family,... the Agricultural Income

Tax officer shall make such inquiry thereinto as he may think fit, and if he is satisfied that the joint family property has been partitioned among the

various members... in definite portions, he shall record an order to that effect : ....

(2) Where such an order has been passed, the Agricultural Income Tax officer shall make an assessment of the total agricultural income received

by or on behalf of the family... as if no partition had taken place, and each member or group of members shall, in addition to any agricultural

Income Tax for which he or it may be separately liable,... be liable for a share of the tax on the income so assessed according to the portion of the

family,.... allotted to him or it, and the Agricultural Income Tax Officer shall make assessments accordingly on the various members.... in

accordance with the provisions of section 17 : ...

(3) Where such an order has not been passed in respect of a Hindu family,... hitherto assessed as undivided, such family,... shall be deemed for the

purpose of this Act to continue to be an undivided family,...

Even a cursory look at this provisions clearly reveals that there are at least two essential ingredients which must be present for its operation.

One is that the claim should be preferred at the time of assessment u/s 17 of the Act, and the other is that there must have been a family which must

have suffered assessment in its status as an undivided family. Section 17 of the Act is the assessment section by which the total agricultural income

of the assessee is computed and assessed to tax. This is the ordinary or normal machinery of assessment. The composition prescribed u/s 65 of the

Act is a substitute for the assessment u/s 17, and it is something in the nature of a commutation by the department of the tax liability of the assessee

on a graduated scale of payment depending on the extent of holding without reference to the actual income derived. The scheme of Act is

sufficiently clear to draw a distinction between an assessment proceeding u/s 17 and a proceeding for composition u/s 65. It cannot possibly be

contended that a composition arrangement is also a mode of assessment to tax. In fact, such a contention was raised in the case reported as

Commissioner of Agricultural Income Tax v. A. Subbiah Gounder, and we repelled it. The point raised in that case was whether an order of

composition u/s 65 was appealable u/s 31 of the Act. We held that in a proceeding u/s 65 there is no ""assessment"" of the income of the assessee

or an assessment of tax as such within the meaning of section 31. We were of opinion that such an order was not appealable and did not fall within

the ambit of section 31. At page 525, we observed as follows :

It seems to us that an order granting permission to compound and fixing the amounts to be paid by a person holding agricultural land in lieu of the

agricultural Income Tax does not amount to an order of assessment.

It is, therefore, perfectly plain that section 29 cannot stand in the way of the petitioners as they did not put forward a plea for separate

assessment based upon a division, in the course of an assessment proceeding u/s 17, but only invoked the jurisdiction of the officer for the levying

of a composition fee under an independent proceeding u/s 65 of the Act. It is of course true that the division contemplated in section 29 is not a

national division in status, but a physical division by metes and bounds. But section 29 has no application in the present context and nothing

contained in that section can defeat the petitioners claim for composition.

We do not agree with the view of the Commissioner that the absence of a division by metes and bounds of the tea and arecanut plantations is

fatal to the maintainability of the application u/s 65. There is also another circumstances which would render section 29 inapplicable. It is conceded

on behalf of the department that in the prior years of assessment each one-sixth sharer was assessed only in the status of an individual and not in

the status of a Hindu undivided family. As pointed out already, one of the essential conditions for the operation of section 29 is that the family, in

respect of which a division is put forward, and a claim for separate assessment is made by the quondam members of the family, should have been

assessed as such family previously. We do not think that it would be permissible for the department to contend that although the assessee was

described as an individual in regard to his status he must be deemed to have been assessed as the karta of a Hindu undivided family.

We are, therefore, of opinion that the Commissioner was not right in rejecting the applications for composition on the ground that division by

metes and bounds had not been proved or established. There is no legal impediment in the way of the petitioners in obtaining relief by way of

composition u/s 65 of the Act. In the result, these revision petitions are allowed and the orders of the subordinate Tribunals are hereby set aside

and the applications for composition are directed to be dealt with by the Agricultural Income Tax officer as proper and valid applications preferred

u/s 65 of the Act. The department will pay the petitioner in T.C. No. 13 of 1962 his costs. Counsels fee Rs. 100. There will be no order as to

costs in the other revision petitions.

Petitions allowed.