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Puttamma and ors. Vs. Agricultural Income-tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberWrit Petition Nos. 12180 and 12184 of 1978
Judge
Reported in[1980]121ITR863(KAR); [1980]121ITR863(Karn); 1980(1)KarLJ293
ActsKarnataka Agrl. Income Tax Act, 1957 - Sections 3(3), 10(1), 10(2) and 67
AppellantPuttamma and ors.
RespondentAgricultural Income-tax Officer and anr.
Appellant AdvocateNoor Hussain, Adv.
Respondent AdvocateS. Rajendra Babu, Adv.
Excerpt:
.....any law or by an order of court or by written agreement, is entitled to receive on behalf of any person, the tax shall be levied upon and recoverable from the court of wards, administrator-general, official trustee, or from such receiver, administrator, executor, trustee, guardian or manager, as the case may be, in the like manner and to the same amount as it would be leviable upon the recoverable from the person on whose behalf such agricultural income is receivable and all the provisions of this act shall apply accordingly. 10(1)(a) of the act that in the case of properties in a case where the manager has been appointed by agreement of the parties, it is open to the assessing authorities to make an assessment on such manager, but the assessment would have to be made in like manner and..........the properties and other affairs pertaining to the petitioners' family and the income derived from agricultural properties was divided among them equally. for the assessment years abovementioned, the agrl. ito proposed to assessee them in what is stated as status of 'tenants-in-common'; what he intended to do is clear from his order. he made the assessments on k. m. muniswamappa, the power-of-attorney holder of the petitioners, and on the basis of the entire agricultural properties held by him in his capacity as the power-of-attorney holder and treating the entire income received as the income liable to tax. the petitioners responded to the notice and filed their objections contending that they had definite and specific shares in the properties and their assessment should be made only in.....
Judgment:

Srinivasa Iyengar, J.

1. In these two writ petitions the parties are common. The petitioners have challenged the order of the Agrl. ITO, Bangalore, made for the assessment years 1976-77 and 1978-79. Though separate orders are made by the Agrl. ITO, the contents of the same are identical.

2. The petitioners are the heirs of K. C. Ramaiah who passed away on June 26, 1971. They are his wife and daughters. The said K. C. Ramaiah left behind him considerable property including agricultural lands. The petitioners have been assessed to income-tax and wealth-tax, on the basis of the status of individuals even though some of the properties have not been actually divided by metes and bounds. They have been treated as having specific shares in the properties. The petitioners had appointed one K. M. Muniswamappa, the son-in-law of the deceased, K. C. Ramaiah, as the power-of-attorney holder to manage the properties and other affairs pertaining to the petitioners' family and the income derived from agricultural properties was divided among them equally. For the assessment years abovementioned, the Agrl. ITO proposed to assessee them in what is stated as status of 'tenants-in-common'; what he intended to do is clear from his order. He made the assessments on K. M. Muniswamappa, the power-of-attorney holder of the petitioners, and on the basis of the entire agricultural properties held by him in his capacity as the power-of-attorney holder and treating the entire income received as the income liable to tax. The petitioners responded to the notice and filed their objections contending that they had definite and specific shares in the properties and their assessment should be made only in the status of the individuals on the basis of the shares held by them and on the income attributable to their share in the properties. The also filed an application under s. 67 of the Karnataka Agricultural Income-tax Act, 1957 (hereinafter referred to as 'the Act'), and further pleaded that if correct computation is made, there would be no liability to pay any tax.

3. However, the Agrl. ITO in his order stated that he was going to take the status of the petitioners as tenants-in-common. But he took the entire area of land held by all the petitioners and worked out the tax on composition in an amount of Rs. 6,505.95 for each of the years. It is these orders that are challenged in these writ petitions.

4. The contention on behalf of the petitioners is that they held definite shares in the properties and the income was received by the manager on their behalf and they were dividing the profits from the land equally in accordance with their shares and the assessment made, i.e., the tax payable by way of composition being worked out on the basis that the entire income from the property should be taken as one unit is erroneous. Mr. Mir Noor Hussain, learned counsel for the petitioners, submitted that even on the basis that the petitioners were treated as tenants-in-common, the proper provision that will be applicable is s. 10(1)(a) of the Act and the order of the Agrl. ITO is not warranted by law. He has relied upon the decision of this court in the case of B.T.R. Punja v. Commr. of Agrl. I.T. : [1967]63ITR442(KAR) and also the Full Bench decision of this court in the case of State of Karnataka v. C. P. Chandrasekhar : [1979]116ITR84(KAR) . The petitioners succeeded to the estate of K. C. Ramaiah and they had definite shares in the properties. The averments in the writ petitions that the profits from the properties were being divided equally and for the purposes of convenience a manager had been appointed, has not been controverted. Section 3 of the Act is the charging section and sub-s. (3) thereof provides :

'In the case of persons holding 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.'

5. Section 10(1)(a) provides :

'In the case of agricultural income taxable under this Act, which the court of wards, administrator-general or official trustee or any receiver, administrator, executor, trustee, guardian or manager appointed by or under any law or by an order of court or by written agreement, is entitled to receive on behalf of any person, the tax shall be levied upon and recoverable from the court of wards, administrator-general, official trustee, or from such receiver, administrator, executor, trustee, guardian or manager, as the case may be, in the like manner and to the same amount as it would be leviable upon the recoverable from the person on whose behalf such agricultural income is receivable and all the provisions of this Act shall apply accordingly.'

6. It may also be relevant to notice s. 10(2)(a), which is as follows :

'Save as provided in sub-section (1), if a person holds land from which agricultural income is derived partly for his own benefit and partly for the benefit of others or wholly for the benefit of others, agricultural income-tax shall be assessed on the total agricultural income derived from such land at the rate which would be applicable if such person had held the land exclusively for his own benefit.'

7. It is seen from the provisions in s. 10(1)(a) of the Act that in the case of properties in a case where the manager has been appointed by agreement of the parties, it is open to the assessing authorities to make an assessment on such manager, but the assessment would have to be made in like manner and for the same amount as it would be leviable upon and recoverable from the person on whose behalf such agricultural income is receivable and all the provisions of the Act would apply accordingly. In effect, the income of each individual would be brought to tax in hands of the manager but only to the extent to which the owner of the property would have been liable. Even on the basis that the petitioners were tenants-in-common, the provisions of s. 3(3) of the Act would be attracted and the tax would be assessed at the rate applicable to the agricultural income of each tenant-in-common. Therefore, in a case of tenant-in-common, where a manager is appointed, the tax would have to be assessed on a combined reading of s. 3(3) and s. 10(1)(a) of the Act. The Agrl. ITO referred to Punja's case as reported in : [1967]63ITR442(KAR) only for the purposes of reaching a conclusion that the petitioners were to be treated as tenants-in-common but ignored the other conclusions reached in that particular case. This court pointed out that the assessment would have to be made under s. 3(3) of the Act and the same would be the result by applying s. 10(1)(a) of the Act. In ignoring the latter conclusion, the Agrl. ITO was clearly wrong.

8. Some doubts had been entertained by a Bench of this court in regard to the decision in Punja's case and the matter had been referred to a Full Bench. The decision of the Full Bench is reported in State of Karnataka v. C. P. Chandrasekhar : [1979]116ITR84(KAR) . The doubt that had been entertained was that the decision may be inconsistent with the decision of the Supreme Court reported in the case of K. K. Handique v. Member, Board of Agrl. I.T. : [1966]60ITR216(SC) . This court held that there was no such inconsistency and held that s. 10(2)(a) would be attracted if a case did not fall under s. 10(1)(a) of the Act. In Punja's case : [1967]63ITR442(KAR) a manager had been appointed to manage the estate under a will in which the shares of the legatees had been specified. In those circumstances, this court held that s. 10(1)(a) of the Act was also attracted. It was observed therein that (p. 446) :

'If that manager managed the property which produced agricultural income, the clear meaning of section 10(1)(a) is that the income of each one of the persons on whose behalf there was such management is what could be assessed.'

9. In the light of the aforesaid decisions of this court, it is clear that what the Agrl. ITO has done in this case, namely, to proceed on the basis that the entire income from all the lands managed by the power-of-attorney holder should be the basis for the purposes of assessment and/or composition, is erroneous.

10. Accordingly, the orders made by the Agrl. ITO are quashed. He shall be at liberty to consider the application for composition filed by the petitioners on the basis that what would be assessable is the individual share of each of the petitioners, and in the light of the observations made above.

11. Sri Rajendra Babu, learned High Court Government Pleader, is permitted to file his memo of appearance in Writ Petition No. 12180 of 1978 within four weeks from today.


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