M.A. Mammoo (Decd.) vs Deputy Commissioner of Agricultural Income Tax and Sales Tax

V.V. Kamat, J.—The question referred for our decision in these references is as follows :

"Whether the gifts as per documents Nos. 210 and 211 of 1972 are independent and unconnected and will fall within the ambit of Section 9(2) of the Agricultural Income Tax Act, 1950 ?"

The three assessment years in these references are 1973-74, 1974-75 and 1975-76. Initially, the assessment was completed u/s 18(3) of the Agricultural Income Tax Act, 1950, by the Agricultural Income Tax Officer. The orders were passed on June 24, 1974, July 14, 1975, and July 2, 1976, respectively for the above years. It appears that documents Nos. 210 and 211 of 1972 dated February 19, 1972, required the Deputy Commissioner of Agricultural Income Tax and Sales Tax, North Zone, Kozhi-kode, to exercise powers u/s 34 of the Act--suo motu revision. This was initiated on the basis of the notice dated January 3, 1982, in view of the position that according to Section 9(2)(a)(iii) of the Agricultural Income Tax Act, income for the purpose of assessment of a wife or minor child of an assessee, arising directly or indirectly as a result of the transfer by the above documents required the exercise of such power.

Under the Agricultural Income Tax Act, 1950, the total agricultural income of an assessee is to be calculated. Section 9(2) thereof refers to the process of computation of agricultural income of a wife or a minor child directly or indirectly receiving the same either from the membership of the wife in a firm of which her husband is a partner, and/or from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner.

In paragraph 5 of the order, the Deputy Commissioner, while exercising powers u/s 34 of the Act, on examination of the concerned documents has recorded a conclusion that the transfers are effected in such a way as to benefit the respective parties--wife and minors--as a device to get over the mischief of the provision available u/s 9(2) of the Act. The Deputy Commissioner has found that the assessee has transferred his share of property in the firm Valuk Rubber Estate to the minor children of his brother and the wife of the assessee respectively. It is observed that this is by the diagonal process effected. It is also recorded that this is an indirect method of getting over the statutory provisions of Section 9(2) of the Act.

As a consequence thereof, resort to the provisions of Section 34 of the Act is sought be justified by the Deputy Commissioner placing reliance on the Full Bench decision of this court in Madras Rubber Factory Ltd. Vs. The State of Kerala, to the effect that so long as the grounds for exercise of power u/s 34 of the Act are made out showing that the initial order was vitiated with illegality, irregularity or impropriety, such an exercise of powers u/s 34 of the Act gets justification.

It is necessary to state that the application of the assessee for reference was rejected by the Deputy Commissioner by the order dated October 1, 1982. This court in O. P. No. 9228 of 1982 with regard to the present references directed reference of the question stated at the outset, to bring the matter before us.

In our judgment, the facts are abundantly clear to show that the transactions were not considered by the Agricultural Income Tax Officer at the initial stage when the orders were passed, of its leading to the conclusion that exercise of powers u/s 34 gets well justified.

Learned counsel wanted to submit that in fact documents Nos. 210 and 211 really transfers the shares also of others in the firm Valuk Rubber Estate. We are afraid that we cannot permit ourselves to transgress the limits of the question we are expected to answer. All that has taken place is the consequence of the exercise of powers u/s 34 of the Act and a consequential order for fresh disposal in the light of the observations and directions given by the Deputy Commissioner.

In our judgment, no other conclusion is possible other than the one reached by the Deputy Commissioner.

For the above reasons, we answer the question in the negative, in favour of the Revenue and against the assessee.

A copy of this judgment under the seal of the court and the signature of the Registrar shall be forwarded to the Deputy Commissioner of Agricultural Income Tax and Sales tax, Kozhikode, for passing consequential orders.