Sankaracharyar Mutt vs State of Tamil Nadu. (Commissioner of Agricultural Income Tax)

Swamikkannu, J.—This tax case revision is filed by Sri Sankaracharyar Mutt by Sri Karyam and Agent, Kumbakonam, against the order of

the Tamil Nadu Agricultural Income Tax Appellate Tribunal, Madras, dated April 27, 1978, passed in ATA No. 158 of 1977 with respect to the

assessment year 1976-77 remanding the matter. The appeal before the Tamil Nadu Agricultural Income Tax Appellate Tribunal, Madras, was filed

by the petitioner herein against the order of the Assistant Commissioner of Agricultural Income Tax, Thanjavur, dated July 30, 1977, for the

assessment year 1976-77 in A. No. 80 of 1977E.

Now, this revision is confined to the following order of the Tribunal wherein it was held that the petitioner has not obtained any such statutory

exemption under the Tamil Nadu Agricultural Income Tax Act from the Government of Tamil Nadu, and that there is no provision in the Tamil

Nadu Agricultural Income Tax Act enabling the Agricultural Income Tax Officer to grant exemption in the case of the assessees who are enjoying

exemption under the Income Tax Act. It is this aspect which is agitated in this revision because the rejection of the contention that had been put

forward on behalf of the petitioner before the Tribunal that the Mutt has been exempted by the Central Government from the assessment year

1972-73 from levy of Income Tax u/s 10(23C)(v) of the Income Tax Act and that the Mutt must be deemed to have been exempted under the

Tamil Nadu Agricultural Income Tax Act also, was rejected by the Tribunal.

A notice was issued u/s 16(2) of the Tamil Nadu Agricultural Income Tax Act to the petitioner herein, and for that, the petitioner herein

furnished a blank return dated ""Nil"" and enclosed a statement showing the details of income and expenditure for the accounting year ended June

30, 1975. After perusal of the accounts and records, the Agricultural Income Tax Officer, Kumbakonam, determined the net agricultural income of

the trust at Rs. 23,047 for the year 1976-77. The appeal to the Assistant Commissioner of Agricultural Income Tax, Thanjavur, was dismissed.

Hence, an appeal was preferred before the Tribunal. The contention that was put forward before the Tribunal on behalf of the petitioner herein was

that the income derived by the assessee in farm property was held under trust wholly for charitable and religious purposes and that the Mutt has

been notified as exempt from Income Tax on its income u/s 10(23C) of the Central Income Tax Act. Consequently, the Mutt is exempted from the

levy of agricultural Income Tax also u/s 4(b) of the Act. It was also submitted before the Tribunal that the entire amount of expenses incurred in

connection with ""pannai cultivation"" should have been allowed by the lower authorities, and that the dry lands in ""Sirumalai"" are under ""pannai

cultivation"" and this fact should have been taken into account for fixing the cultivation expenses. The Agricultural Income Tax Officer has allowed

pannai expenditure"" only in respect of 22.04-2/3 acres. It was also submitted before the Tribunal that the Agricultural Income Tax Officer has

failed to take into account 165.13 standard acres of dry lands in ""Sirumalai"" village which was also under ""pannai cultivation"" and that the

Agricultural Income Tax Officer has taken into account the income derived from these lands, but has failed to give any deduction for cultivation

expenses. According to the petitioner herein, as was represented before the Tribunal, it is not liable for any assessment even if a correct

computation is made by the authorities.

On the other hand, on behalf of the Revenue, it was contended that the amounts spent for trust purposes alone will be exempt from tax after the

amendment of the Act, that the non-agricultural income will include all receipts other than agricultural income, that the Agricultural Income Tax

Officer has not taxed any non-agricultural income, that only for arriving at the net agricultural income, he has taken into account the non-agricultural

income and that the expenditure incurred for running the establishment should be treated as trust expenditure.

As regards the claim relating to ""pannai"" cultivation, the Tribunal found that the Agricultural Income Tax Officer has allowed Rs. 400 per acre

for double crop lands to the extent of 12.08-2/3 acres and Rs. 300 per acre for single crop lands to the extent of 9.96 acres. The Tribunal has also

observed in the order under revision that before the Assistant Commissioner, the petitioner herein has claimed that the expenses incurred to the

extent of Rs. 15,941.94 for agricultural operations in the plantations in ""Sirumalai"" estate, which was under ""pannai cultivation"", should be allowed.

The Appellate Assistant Commissioner has rejected the claim on the ground that the petitioner herein has not produced proper accounts or

vouchers. The Tribunal also found that the petitioner herein has not claimed that the lands in ""Sirumalai"" estate were under ""pannai cultivation"". In

the statement given by Sri Karyam and Agent of the petitioner-Mutt, it is not stated that ""Sirumalai"" estate was under ""pannai cultivation"" and the

said point was raised before the Assistant Commissioner for the first time. In the said statement, it was claimed on behalf of the petitioner herein

that a sum of Rs. 17,812.94 was incurred under the head, and out of the said sum of Rs. 17,812.94, the Agricultural Income Tax Officer has

allowed only a sum of Rs. 7,894. The petitioner herein has not produced the vouchers before the Appellate Assistant Commissioner to show the

expenses relating to ""Sirumalai"" estate. on behalf of the petitioner herein, it was submitted before the Tribunal that vouchers were available to prove

the expenses relating to Sirumalai lands. It is under those circumstances that the Tribunal found it expedient to remand the matter to the Agricultural

Income Tax Officer for verification of the claim afresh.

It was also contended on behalf of the petitioner herein that the lower authorities were not justified in taking into account the receipts from

hundial agra sambhavanai and pada puja under non-agricultural income. In this regard, the decision in Thakur Das Shyam Sunder Vs. Additional

Commissioner of Income Tax and Another, was referred to before the Tribunal The Tribunal observed in paragraph 6 of the order which is under

revision that the non-agricultural income is not taxed. As the trust expenditure is met both from agricultural and non-agricultural income to find out

the proportion in which income was received from the two sources, it is necessary to fix the non-agricultural income. Therefore, the Tribunal held

that there is no ground for interfering with the conclusion arrived at by the lower authorities. In other words, the Tribunal held that the lower

authorities have rightly included the amounts under the head ""Non-agricultural income.

The next point that has been urged on behalf of the revision petitioner herein before the Tribunal was that the Mutt has been exempted by the

Central Government from the assessment year 1972-73 from levy of Income Tax u/s 10(23C)(v) of the Income Tax Act and that the Mutt must be

deemed to have been exempted under the Tamil Nadu Agricultural Income Tax Act also. It is this aspect of the case that we are concerned with in

the instant revision before us.

In this regard, Mr. Swaminathan, learned counsel for the petitioner herein, brought to our notice ''Notification No. S.O. 1921, dated April 1,

1976 - Income Tax Act, 1961 - and Notification u/s 10(23C)(v), published in the Gazette of India, Part II, section 3(ii), page 1975, dated June

12, 1976, which runs as follows :

In exercise of the powers conferred by clause (v) of sub-section (23C) of section 10 of the Income Tax Act, 1961 (43 of 1961), the Central

Government hereby notifies Sri Sankaracharya Swamigal Mutt Samasthanam, Kumbakonam, for the purpose of the said section for and from

assessment year(s) 1972-73.

and the above passage was reported in [1976] 104 ITR 13.

Learned counsel for the petitioner herein also relies on the decision in His Holiness Silasri Kasivasi Muthukumaraswami Thambiran and

Another Vs. Agricultural Income Tax Officer, Kumbakonam and Others, , for the scope and ambit of section 4(b) of the Tamil Nadu Agricultural

Income Tax Act, 1955, and refers to the following observation of Mohan J., which occurs at pages 891 and 892 :

Mr. K. Venkataswami, learned Additional Government Pleader in meeting this submission states that my judgment in W.P. Nos. 422 and 423 of

1975 (Rajam chettiar Annadhana etc., Charities v. Agricultural Income Tax Officer) requires reconsideration, since when the amending Act

introduced section 4(b), it was with the avowed object of subjecting agricultural income derived by a charitable and religious trust to tax, and all

the more so, when the very purpose of the Act, namely, the Tamil Nadu Agricultural Income Tax Act, is to levy tax on agricultural income.

Therefore, if section 10 of the Indian Income Tax Act alone got incorporated, the agricultural income held by a religious or a charitable trust would

be exempt. That would frustrate the very amendment. Consequently. what have to be looked into are sections 11, 12 and 13 of the Income Tax

Act, 1961. Having regard to the language of section 4(b) of the Act, namely,'' to the same extent to which income derived from property held

under trust wholly or partly for charitable or religious purposes'', it should have reference only to the non-agricultural income. In other words, what

has to be found out is whether under the Income Tax Act, income derived from non-agricultural property held by a charitable or religious trust is

taxable to the same extent agricultural income would be taxable u/s 4(b) of the Act. Any other interpretation would lead to utter confusion. It

would amount to attributing unwisdom to the Legislature as if the Legislature was not aware of section 10(1) of the Income Tax Act, which confers

a specific exemption as far as the agricultural income is concerned.

Man grows wiser by experience; and this principle is aptly illustrated in this case. In my judgment in W. P. Nos. 422 and 423 of 1975 (Rajam

Chettiar Annadhana, etc., Charities v. Agrl. ITO), the aspect which is now put forth by the learned Additional Government Pleader was not urged.

By stating so, I do not propose to disown the responsibility for my judgment. In fact, the interpretation sought to be placed by learned counsel for

the petitioner found acceptance at my hands as a result of which I held that the agricultural income would be exempt. By such an interpretation, the

very object and the purpose of section 4(b) of the Act got thwarted. As rightly contended by the learned Additional Government Pleader, the

object of the Agricultural Income Tax Act is to tax agricultural income. Such an income derived from a charitable or religious trust was exempt till

the amending Act 4 of 1973. It was this exemption which was sought to be withdrawn so that, that income also would become liable for taxation.

Could it be said, under those circumstances, that the Tamil Nadu Legislature looked at section 10(1) alone and wanted to incorporate that

provision of the Income Tax Act ? If that be so, how could this purpose be achieved ? Of course, it may be possible to contend that, however well

intentioned it might have been, it was not carried out in effecting the amendment. In fact, that is the contention urged on behalf of the petitioner. I

am unable to accept this contention since it would lead not only to frustrate the object of the section but also it does not even appear to be a good

construction. As to why I held so will be evident from the following. Section 4 defines the scope of total agricultural income. Originally, all

agricultural income derived from land situated within the State, which is received by the assessee or which accrued to him within or without the

State, was assessable. But that income did not include, in view of clause (b) as it stood then, any agricultural income derived from property held

under trust or other legal obligation wholly for religious or charitable purpose, and in the case of property so held in part only for such purpose, the

income applied thereto. This exemption is withdrawn by amending section 4(b). That amendment reads :

''any agricultural income derived from property held under trust, wholly or partly for charitable or religious purposes to the same extent to which

income derived from property held under trust wholly or partly for charitable or religious purpose, is not included in the total income for purposes

of the Income Tax Act, 1961 (Central Act 43 of 1961).''

What does ''the income derived from the property held under trust wholly or partly for charitable or religious purposes'' mean ? Is it to mean only

non-agricultural income ? Otherwise, the Legislature could have either said agricultural income or, to avoid redundancy, such income, meaning

thereby agricultural income, and this is spoken to in the beginning of this clause. If this is the interpretation, reference to section 10(1) of the Income

Tax Act was not in contemplation. What then are the sections of the Income Tax Act that are sought to be incorporated ? It is where sections 11,

12 and 13 of the Income Tax Act required to be looked at. These sections occur under Chapter III which deals with incomes which do not form

part of the total income.

Learned counsel for the petitioner also refers to the provisions of section 10(1) of the Income Tax Act, 1961 (Act No. XLIII of 1961), which

reads as follows :

In computing the total income of a previous year of any person any income falling within any of the following clauses shall not be included -

(1) agricultural income;

He also refers to section 10(23C)(v) of the Income Tax Act, 1961 (Act No. XLIII of 1961), which reads as follows :

(23C) any income received by any person on behalf of -...

(v) any trust (including any other legal obligation) or institution, being a trust or institution wholly for public religious purposes or wholly for public

religious and charitable purposes, which may be notified by the Central Government in the Official Gazette, having regard to the manner in which

the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the

purposes thereof :

Provided that any notification issued by the Central Government under sub-clause (iv) or sub-clause (v) shall have effect for such assessment year

or years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the

notification.

Learned counsel for the petitioner also pointed out to us section 11(1)(a) of the Income Tax Act, 1961 (Act No. XLIII of 1961), which reads

as follows :

(1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the

person in receipt of the income -

(a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such

purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the

income so accumulated or set apart is not in excess of twenty-five per cent. of the income from such property.

According to learned counsel for the petitioner, a combined reading of section 4(b) of the Tamil Nadu Agricultural Income Tax Act, 1955

(Tamil Nadu Act V of 1955), and section 10(23C)(v) and section 11(1)(a) of the Income Tax Act, 1961 (Act No. XLIII of 1961) will clearly

show that any agricultural income derived from property held under trust, wholly or partly for charitable or religious purposes, to the same extent to

which income derived from property held under trust wholly or partly for charitable or religious purposes, is not included in the total income for

purposes of the Income Tax Act, 1961 (Central Act XLIII of 1961), is exempt, and the agricultural income so derived by the trust cannot be

taxed.

Learned counsel for the petitioner further submits that there is no question of an statutory exemption being obtained by the petitioner herein

under the Tamil Nadu Agricultural Income Tax Act from the Government of Tamil Nadu or there is any power vested with any authority under the

Government of Tamil Nadu to grant exemption, especially, when the exemption u/s 4(b) is given under the Tamil Nadu Agricultural Income Tax

Act, 1955, which is tagged on to the provisions of the Indian Income Tax Act. The observations made in paragraph 7 by the Tribunal, under

revision, according to learned counsel for the petitioner discloses complete ignorance of the Tribunal in not having applied its mind regarding the

application of the provision of section 4(b) of the Act. The observation in paragraph 7 of the order of the Tribunal which contains the above finding

by it, namely, that the petitioner herein has not obtained any such statutory exemption under the Tamil Nadu Agricultural Income Tax Act from the

Government of Tamil Nadu is quite against the ratio in His Holiness Silasri Kasivasi Muthukumaraswami Thambiran and Another Vs. Agricultural

Income Tax Officer, Kumbakonam and Others, .

The learned Government Pleader (Taxes) on behalf of the Revenue has also submitted his argument with respect to the observation of Mohan

J., in His Holiness Silasri Kasivasi Muthukumaraswami Thambiran and Another Vs. Agricultural Income Tax Officer, Kumbakonam and Others, ,

wherein the original opinion held by His Lordship has further been elucidated and a definite opinion regarding the scope of section 4(b) has been

laid down by the court. He also brought to the notice of this court that section 4(b), after amendment by the Tamil Nadu Act IV of 1973, dated

January 10, 1973, is applicable to the facts of the instant case before us. There is no grievance for the Revenue in applying the ratio in His Holiness

Silasri Kasivasi Muthukumaraswami Thambiran and Another Vs. Agricultural Income Tax Officer, Kumbakonam and Others, to the facts of the

instant case before us.

Thus, on the question that arises for determination in this revision, we are inclined to observe, inasmuch as by a notification, the Central

Government had exempted the petitioner herein from taxation and in view of the specific provision of section 4(b) of the Tamil Nadu Agricultural

Income Tax Act, 1955, further enlightened by the observation of Mohan J., in His Holiness Silasri Kasivasi Muthukumaraswami Thambiran and

Another Vs. Agricultural Income Tax Officer, Kumbakonam and Others, , that if a religious or charitable trust has been held to be exempt under

the Central Act for a particular year, then no assessment is possible under the State Act in respect of agricultural income of that year. We also hold

that if the agricultural income is found to be exempt in part under the Central Act, then the agricultural income will be exempt to the same extent,

that is, in the same proportion.

In the instant case before us, in view of the notification referred to above, namely, Notification No. S. O. 1921, dated April 1, 1976 - Income

Tax Act, 1961 : Notification u/s 10(23C)(v), published in the Gazette of India, Part II, section 3(ii), page 1975, dated June 12, 1976, we hold that

the petitioner herein is exempted from tax of the total income for the assessment year.

Accordingly, this tax case revision is allowed, granting exemption on the entire income. The order of the Tribunal is set aside and relief is

granted to the petitioner herein for the entire income. Under the circumstances, there is no order as to costs.