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Raja Jagdambika Pratap NaraIn Singh Vs. Deputy Commissioner - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberWrit Petition No. 2421 of 1969
Judge
Reported in[1971]81ITR544(All)
ActsUttar Pradesh Agricultural Income Tax Act, 1948 - Sections 2(1), 2(11) and 3
AppellantRaja Jagdambika Pratap NaraIn Singh
RespondentDeputy Commissioner
Appellant AdvocateB.L. Gupta and ;K.R. Gulati, Advs.
Respondent AdvocateStanding Counsel
Excerpt:
- - to overcome the doubts raised, the state legislature enacted section 3 of the u. the agricultural income must be of a 'person '15. the substance of the argument on behalf of the petitioner runs like this:.....in section 2(11) makes no reference to the period and time when the person should have owned or held property. in his view it was not necessary at all that during the year of assessment a person must own or hold property in order to attract section 3.12. subsequently, in runway trivikram narain singh v. state of uttar pradesh, [1959] a.l.j 796 (all.) a bench consisting of v. bhargava and j. sahai jj. held that, even if during the assessment year the assessee no longer owned or held the agricultural land from which income had been derived during the relevant previous year, he must nevertheless be considered a 'person' as defined by section 2(11) of the act provided he owned or held other agricultural land. the learned judges repelled the contention that the capacity of the assessee as.....
Judgment:

Pathak, J.

1. In view of an apparent conflict between different Benches of this court on the import of the word 'person' in Section 3 of the U. P. Agricultural Income-tax Act, this case has been referred by a Division Bench to a larger Bench. And that is how it has been placed before us.

2. The petitioner was a Talukdar of an estate consisting of several villages in the districts of Faizabad, Gonda, Sultanpur, Barabanki and Lucknow. On July 1, 1952, the greater part of that estate vested in the State of Uttar Pradesh by virtue of a notification issued under the U.P. Zamindari Abolition and Land Reforms Act. What remained to the petitioner were pans of some villages within the municipal limits of Faizabad and Gonda.

3. During the years 1360, 1361 and 1363 Fasli, the petitioner realised arrears of rent in respect of that part of the estate which had ceased tobelong to him. The arrears represented rent accruing in 1359 Fasli and earlier years.

4. In proceedings under the U. P. Agricultural Income-tax Act, 1948, the petitioner was assessed for the assessment years 1361, 1362 and 1364 Fasli in respect of the arrears of rent received during the relevant previous years 1360, 1361 and 1363 Fasli. The petitioner appealed, and the Commissioner allowed the appeals and directed the assessing authority to make fresh assessments. During the pendency of the assessment proceedings consequent upon remand, the petitioner raised an objection before the assessing authority to the assessment of the arrears of rent, contending that as he had been divested of the property yielding that income with effect from July 1, 1952, he did not own or hold that property in the relevant previous years and assessment years, and was, therefore, not a 'person' within the meaning of the Act. That objection has been rejected by the assessing authority. Accordingly, the petitioner has now petitioned this court for relief under Article 226 of the Constitution.

5. The U. P. Agricultural Income-tax Act provides, as its title indicates, for the imposition of a tax on agricultural income. Section 3 of the Act declares:

'3. Charge of agricultural income-tax.--(1) Agricultural income-tax and super-tax at the rate or rates specified in the Schedule shall be charged for each year in accordance with and subject to the provisions of this Act and the rules framed under Clauses (a), (b) and (c) of Sub-section (2) of Section 44 on the total agricultural income of the previous year of every person. ...'

'Agricultural income' has been defined by Section 2(1) of the Act in the following terms :

'2. (1) 'agricultural income' has the same meaning as is assigned to it in the Indian Income-tax Act, 1922, and which, in its adopted form, is reproduced below:

'agricultural income' means-

(a) any rent or revenue derived from land which is used for agricultural purposes and is either assessed to land revenue in the United Provinces or is subject to a local rate or cess assessed and collected by an officer of the Provincial Government;

(b) any income derived from such land by-

(i) agriculture, or

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in Sub-clause (ii);

(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind of any land with respect to which or the produce of which any operation mentioned in paragraphs (ii) and (iii) of Sub-clause (b) is carried on : Provided that the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator or the receiver of the rent-in-kind by reason of his connection with the land, requires as a dwelling house, or as a store-house or other out-building.'

6. A ' person ' has been defined by Section 2(11) to mean :

'An individual or association of individuals, owning or holding property for himself or for any other, or partly for his own benefit and partly for that of another either as owner, trustee, receiver, manager, administrator or executor or in any capacity recognized by law, and includes an undivided Hindu family, firm or company but does not include a local authority.'

7. The person by whom agricultural income-tax is payable is, by virtue of Section 2(5), referred to as the ' assessee '.

8. It cannot be disputed, we think, that the agricultural income charged to tax under Section 3 must arise from property owned or held by the assessee. There may be a number of distinct properties giving rise to separate amounts of agricultural income. And it may be that before the relevant previous year the assessee ceases to own or hold one of the properties giving rise to one of the amounts of agricultural iacome received during that previous year. The dispute before us is whether, for the purposes of Section 3, the agricultural income from such property can be charged to tax in the hands of the assessee, who, though ceasing to own or hold such property before the relevant previous year, nevertheless continue to own or hold the remaining properties.

9. There was at one time considerable debate on the point whether Section 3 could be applied in respect of a person who though owning or holding property in the previous year was divested of it and did not own or hold it during the assessment year. To overcome the doubts raised, the State legislature enacted Section 3 of the U. P. Agricultural Income-tax (Amendment) Act, 1953 (XIV of 1953), which declared :

'Whereas doubts have arisen as to the liability of a person to assessment of agricultural income-tax under the principal Act where such person while owning or holding property in the previous year has ceased to own or hold it subsequently, it is hereby declared that the words 'owningor holding property' in Clause (11) of Section 2 of the principal Act shall be deemed never to have required such person to continue to own or hold the property in the year for which the tax is to be charged,'

10. That provision, as its terms plainly show, is attracted where the agricultural income arises out of property owned or held in the previous year but which is no longer owned or held in the assessment year. It will not apply in a case where the agricultural income arises out of property which was not owned or held by such person either in the previous year or in the assessment year. Such is the case before us. Here, the arrears of income received in the relevant previous years relate to property which was owned or held by the petitioner during a period prior to the relevant previous years. It ceased to be owned or held by him when the estate vested in the State of Uttar Pradesh.

11. In Radhey Shyam v. Agricultural Income-tax Officer, [1955] A.L J. 325 (All.) Daval J. held that, apart from the declaration enacted by Section 3 of the U. P. Agricultural Income-tax (Amendment) Act, 1953, the word 'person' in Section 2(11) makes no reference to the period and time when the person should have owned or held property. In his view it was not necessary at all that during the year of assessment a person must own or hold property in order to attract Section 3.

12. Subsequently, in Runway Trivikram Narain Singh v. State of Uttar Pradesh, [1959] A.L.J 796 (All.) a Bench consisting of V. Bhargava and J. Sahai JJ. held that, even if during the assessment year the assessee no longer owned or held the agricultural land from which income had been derived during the relevant previous year, he must nevertheless be considered a 'person' as defined by Section 2(11) of the Act provided he owned or held other agricultural land. The learned judges repelled the contention that the capacity of the assessee as a 'person' should be considered for the purposes of the Act with reference to the property from which the agricultural income sought to be taxed was derived and not with reference to all the properties owned or held by him. They observed that when considering whether the assessee was a 'person' for the purposes of the Act, it was not at all necessary that the capacity of the assessee as a person must be established with reference to each item of agricultural income sought to be taxed. This decision was considered in Maharani Rajalakshmi Devi v. State of U. P., Misc. Case (A.I.T.) No. 299 of 1959 as settling the law on the point.

13. In Raja Jagdish Pratap Sahi v. Deputy Commissioner, [1961] A.L.J. 880. a learned single judge of this court took the view that inasmuch as the Act required the 'owning or holding' of property an essential condition of an individualbeing a 'person ', it was necessary that he should own or hold during the assessment year the agricultural land from which the income sought to be assessed had proceeded. It appears that the decision of the Division Bench in Kunwar Trivikraw Narain Singh was not placed before him. The case was carried in appeal, and the judgment of the learned single judge was affirmed by a Bench in Deputy Commissioner v. Raja Jagdish Pratap Sahi, Special Appeal No. 607 of 1961. The principal question, however, which seems to have been debated before the learned judges was whether sections of the U. P. Agricultural Income-tax (Amendment) Act, 1953, could have any operation in respect of arrears of rent recovered during the previous year when the property which had yielded the rent was no longer owned or held by the assessee during the previous year. In regard to the question whether an assessee was a 'person' if he held or owned some agricultural land in the assessment year although not the agricultural land which yielded the income sought to be taxed, the learned judge does not appear to have expressed any positive opinion. Again, the attention of the learned judge was not invited to the decision in Kunwar Trivikram Narain Singh.

14. Section 3 of the Act is the charging provision. It levies a charge for each assessment year. The charge is levied on the total agricultural income of the previous year. The agricultural income must be of a ' person '.

15. The substance of the argument on behalf of the petitioner runs like this: Tax is charged in respect of a 'person' only and a 'person' in Section 2(11) is one who owns or holds property, and as he must be a person during the assessment year he must be one who owns or holds property during the assessment year. 'Agricultural income', by the definition in Section 2(1), must arise from property. It must be property owned or held by such person. As the requirement is that the property must be owned or held by the person during the assessment year, agricultural income arising from property not owned or held by the person during the assessment year cannot be taxed in his hands. The submission attempts to involve a relationship between the concept of 'agricultural income' and that of a 'person'. It seems to us that there is no warrant for confusing the two concepts. What constitutes agricultural income must be determined by reference to Clauses (a), (b) and (c) of Section 2(1). The terms of the definition nowhere require that the property yielding the income should be owned or held by the 'person' during the relevant previous year or the assessment year. All that is contemplated is that there should be rent or revenue derived from land described in clause (a) or income derived from land by any of the operations mentioned in clause (b) or income derived from a building of the description set out in Clause (c). So far as the computation of agricultural income is concerned, what one must do is to consider the receipts of the previous year which fall within one or mere of the clauses of Section 2(1) and thus determine the agricultural income of the previous year. It does not seem necessary to consider further whether the income proceeds from land owned or held by a person during the previous year or the assessment year. It is when we turn to determining who is the 'person' to be taxed, that the owning or holding of land becomes relevant. As we have already pointed out, the definition in Section 2(11) requires that he must own or hold property. If during the assessment year he owns or holds property, he, is a ' person ' for that; assessment year. If he owns or holds some property, that is sufficient to constitute him a ' person ' for that assessment year. It is not necessary that the property owned or held by him in the assessment year must include all the property from which the agricultural income of the previous year is derived. The owning or holding of property and the assessment year are considerations which go together. The receipt of agricultural income and the previous year are, on their part, considerations which go together. To bridge the gap between these two sets of considerations, and relate the owning or holding of property to the previous year is'not justified by anything in the statute. To do so would be to read into the respective definitions of 'person' and ' agricultural income', a relationship which does not exist.

16. The submission on behalf of the petitioner also implies that the capacity of the assessee as a 'person' must be considered in respect of each receipt of agricultural income. Now, it will be noticed that under Section 3 the charge is levied in respect of a 'person' on the total agricultural income. It is not levied on individual items of his agricultural income. It is a single tax levied on the total agricultural income. The agricultural income must first be aggregated in accordance with the provisions of the Act and the Rules, and it is on the total amount so reached that the charge is levied. It is not a collection of distinct charges levied separately on each receipt of agricultural income. The question was considered in England in relation to income-tax levied there, and Lord Macnaghten in London County Council v. Attorney-General, [1900] T.C. 265, 293-4 (H.L.). observed :

'Income tax, if I may be pardoned for saying so, is a tax on income. It is not meant to be a tax on anything else. It is one tax, not a collection of taxes essentially distinct. '

17. And then, in Salisbury House Estate v. Fry, [1950] 15 T.C. 266, 306 (H.L.) Viscount Duledin said :

'Now, the cardinal consideration in my judgment is that the income tax is only one tax, a tax on the income of the person whom it is sought to assess, and that the different Schedules are the modes in which the statute directs this to be levied. '

18. The principle so propounded by the House of Lords was adopted by the Supreme Court in this country in United Commercial Batik Ltd. v. Commissioner of Income-tax, [1957] 52 I.T.R. 688 ; [1958] S.C.R. 79 (S.C.). and E. I. Housing & Land Development Trust v. Commissioner of Income-tax, [1961] 42 I.T.R. 49 (S.C.). .

19. The same principle, in our opinion, governs Section 3 of the Act before us. When the different receipts of agricultural income have been taken together and the total agricultural income has been determined, and the stage of applying the rate of tax is reached, any considerations peculiar to the individual receipts lose their relevance altogether. The total agricultural income is assessed in the hands of the person to whom it belongs and, who must, as we have shown, hold or own some property during the assessment year, which property may not include the property giving rise to a part of the agricultural income.

20. It seems to us that the observations in Kunwar Trivikram Narain Singh lay down the law correctly. That was also the view taken in Raja Anand Brahm Shah v. State, Since reported in [1971] 81 I.T.R.540 (All.)where it was held that the arrears of rent received by the assessee during the relevant previous year were taxable- in the assessment year even though the assessee owned or held only a part of the original estate belonging to him and had ceased to own or hold, before the commencement of the previous year, the land to which the arrears of rent were related.

21. No other contention has been raised before us.

22. The petition fails and is dismissed with costs, which is assessed at Rs. 150.


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