1. Agricultural income of the respondent-Raja Jagdish Prasad Sahi - wasassessed by the Collector of Sultanpur to tax under the U.P. AgriculturalIncome-tax Act 3 of 1949 for the Fasli year 1359, corresponding to the periodJuly 1, 1951 to June 30, 1952, and he was directed to pay the amount due in fourequal instalments of Rs. 13,274-5-0 each. The respondent failed to pay thefirst and the second instalments which fell due respectively on December 9,1952 and February 9, 1953. The Revenue authorities imposed upon the respondentliability to pay Rs. 4,400 in the aggregate as penalty for default in paymentof the two instalments.
2. Pursuant to a certificate issued by the Deputy Commissioner of Sultanpur,proceedings were started against the respondent to recover Rs. 17,674-5-0 beingthe amount of the second instalment and penalty. The respondent then presenteda petition under Art. 226 of the Constitution before the High Court ofJudicature at Allahabad for a writ directing the Collectors of Sultanpur andAllahabad to refrain from recovering or taking any steps for recovery of amountclaimed under the certificate by coercive process, and in the alternative, ifthe amount or any portion thereof was held recoverable, for a writ directingthe Revenue authorities to adjust the amount found so payable against compensationbonds given to the respondent under the U.P. Zamindari Abolition and LandReforms Act No. 1 of 1951 - hereinafter called 'the Abolition Act.'The High Court held that the recovery of penalty not being based on ordersproperly passed under section 31 of the U.P. Agricultural Income-tax Act, 3 of1949, the threatened proceedings for sale were void, and that the Collector wasbound to accept in satisfaction of the instalments of tax due the compensationbonds payable to the respondent under the Abolition Act. The Court accordinglyquashed the proceedings for recovery of the amounts of penalty and directedthat the Revenue authorities do grant in respect of the instrument of tax duerelief to the respondent under Rule 8-A of the Zamindari Abolition and LandReforms Rules in the manner indicated in the judgment. Against that order, theCollectors of Sultanpur and Allahabad have appealed to this Court, with specialleave.
3. The claim to recover penalty has not been pressed before us and nothingneed be said in that behalf. The Revenue authorities, however, claim that anorder adjusting liability for the amount due as tax payable under the U.P.Agricultural Income-tax Act against compensation bonds cannot be made by theHigh Court. This plea is sought to be supported on three grounds : (i) thatcompensation due to the respondent has already been paid to him by the issue ofcompensation bonds under section 68 of Act 1 of 1951, and there is no machineryfor making adjustment of tax liability against compensation bonds alreadydelivered to the intermediary; (ii) that under Rule 8-A of the ZamindariAbolition and Land Reforms Rules the Collector has the option to adjustliability for tax due against the compensation payable, but he is not obligedat the instance of the intermediary to grant that relief; and (iii) that undersection 6 of Act 1 of 1951 the amount of tax payable for the period after July1, 1952 is not liable to be set off against compensation payable to theintermediary.
4. The first contention was not raised before the High Court. Nor are theresufficient materials on which a conclusion that all certificates due in respectof the compensation had been delivered to the respondent before he made a claimfor adjustment under Rule 8-A may be recorded. As early as 1953 the respondenthad made a claim that the amount of tax due be set off against the amount ofcompensation payable to him, and the case which the Revenue authorities seek tomake out in this Court is that compensation bonds were issued in the year 1955.Reliance was in that behalf is placed upon certain averments made in thepetition by the respondent before the High Court and upon recitals in theapplication for leave to appeal to this Court against the order passed by theHigh Court. In paragraph-36 clause (4) the respondent had claimed before theHigh Court that if the amount or any portion thereof is held to be recoverable,it may be directed to be adjusted by the Revenue authorities againstcompensation bonds of the face value of such amount given to the petitionerunder the Abolition Act. In the grounds mentioned in the application forcertificate that the case was fit for appeal to this Court, it was asserted bythe appellants that the bonds were given to the respondent under the AbolitionAct in payment of compensation and there remained no compensation money payablein the respondent. The admission in the petition relied upon is not so clearand unambiguous that we would be justified in acting upon it for the first timein this Court, even though no reliance was placed upon it in the High Court.Nor can reliance be placed upon the plea raised for the first time in thepetition for certificate under Art. 133 of the Constitution.
5. Mr. Agarwala appearing on behalf of the Revenue authorities of the Stateof U.P. also read out portions of a letter of the Collector, Allahabad, inwhich that officer has stated that after the order of the High Court, therespondent was called upon to surrender the amounts withdrawn by him under thecompensation bonds, but the respondent failed to do so, and the public debtoffice was in the circumstances unable, in pursuance of Rule 8-A of the Rulesframed under the Abolition Act, to allow adjustment of tax due againstcompensation bonds. We would not be justified in considering any suchadditional evidence at this stage. If there was any substance in the firstground, the matter should have been brought to the notice of the High Court andevidence in support thereof should have been tendered in that Court.
6. The second and the third grounds may be considered together. By the U.P.Agricultural Income Tax Act 3 of 1949, agricultural income-tax and super-tax atthe rates mentioned in the Schedule to the Act are made chargeable for eachyear, subject to the provisions of the Act and the Rules framed, on the totalagricultural income of the previous year of every person. The expression'previous year' is defined by section 2(13) as meaning twelve monthsending on the 30th day of June preceding the year for which the assessment isto be made. By section 6 of the Abolition Act on the issue of an appropriatenotification by the State Government, all estates vest in the State free fromall encumbrances. When such a notification is published in the State Gazette,notwithstanding anything contained in any contract or document or in any otherlaw for the time being in force and save as otherwise provided in the Act, theconsequences set out in section 6, from the beginning of the date of vestingensue in the area to which the notification relates. By clause (d) of section6, one of the consequences is that :
'all arrears of revenue, cesses or other dues inrespect of any estate so acquired and due from the intermediary or an arrear onaccount of tax on agricultural income assessed under the U.P. AgriculturalIncome Tax Act, 1948 for any period prior to the date of vesting shall continueto be recoverable from such intermediary and may, without prejudice to anyother mode of recovery be realized by deducting the amount from thecompensation money payable to such intermediary under Chapter III :'
7. Section 26 authorises the State Government to make rules for the purposeof carrying into effect the provisions of Ch. II of the Act in which section 6occurs. Chapter III of the Act deals with the assessment of compensation.Section 68, which occurs in Ch. IV, provides that compensation payable underthe Act shall be given in cash or in bonds, or partly in cash and partly inbonds as may be prescribed. Under section 26 read with section 6(d), Rule 8-Awas framed by the State Government. That Rule, which came into force fromAugust 17, 1954, provides :
'Without prejudice to theright of the State Government to recover the dues mentioned below by such othermeans, as may be open to it under law :
(1) all arrear of land revenuein respect of the estates which have vested in the State Government as a resultof the notification under Section 4 of the Uttar Pradesh Zamindari Abolitionand Land Reforms Act, 1950 (Act I of 1951), and of tax on agricultural incomeassessed under the U.P. Agricultural Income Tax Act, 1948 (U.P. Act III of1949), due from an intermediary for any period prior to the date of vestingshall be realized :
(a) in the case of anintermediary who was assessed to a land revenue of Rs. 10,000 or more from theamount of interim compensation due to him, and
(b) in the case of anintermediary who was assessed to a land revenue of less than Rs. 10,000 perannum by deduction from the amount of compensation payable to him;
(2) . . . . . . . . . .'
8. The argument raised by the State Government that Rule 8-A invests theCollector merely with an option to recover amounts due as land revenue or asagricultural income-tax by adjustment against compensation and does not obligehim to give a set off, cannot in our judgment be accepted. In terms Rule 8-Astates that the amount due from an intermediary for any period prior to thedate of vesting shall be realized in the manner indicated in cls. (a) &(b). The Rule is in terms mandatory and obliges the Collector to realize thetax in the manner provided. The expression 'Without prejudice to the rightof the State Government to recover dues' with which the Rule opens doesnot transform that duty into an option. The clause merely provides that the obligationimposed upon the Collector of adjusting the dues against compensation will notprejudice the right of the State Government to recover the dues by other means.If, for any reason, the adjustment cannot be made effective and the amount dueto the State as tax or as land revenue cannot be recovered by adjustment, theright of the State Government to recover the dues in any other manner permittedby law is not to be prejudiced. The High Court was, therefore, right in holdingthat the Collector had no option in the matter of adjustment of the liabilityto pay agricultural income-tax against compensation amount due to therespondent, which in the view of the High Court was 'still due'.
9. It was urged, however, that Rule 8-A is framed in exercise of the powerreserved under section 26 of the Abolition Act to effectuate the provisions ofclause (d) of section 6, and adjustment under the Rule can only be made inrespect of agricultural income-tax payable for any period prior to the date ofvesting. The scheme of the Act, it was said, is that notwithstanding thevesting of the estate in the State by section 6, arrears of land revenue ofother dues and agricultural income-tax continue to remain recoverable and theamount so continuing to remain recoverable is liable under the Rules to beadjusted against compensation payable for compulsory termination of the rightsof the intermediary. Relying upon the clause 'an arrear on account of taxon agricultural income assessed under the U.P. Agricultural Income Tax Act, 1948for any period prior to the date of vesting' in section 6(d) it was urgedthat even if under section 3 of the U.P. Agricultural Income Tax Act, 1948, taxis recoverable on the total agricultural income of the previous year, it isstill tax due for the year of assessment and therefore tax assessed on therespondent for the period July 1, 1952 to June 30, 1953, does not fall withinthe terms of section 6(d) of the Act and resort cannot be had to Rule 8-A forclaiming adjustment of liability to pay tax against the amount of compensation.We are unable to accept this plea. Section 3 of the U.P. AgriculturalIncome-tax Act emphatically charges the total agricultural income of theprevious year to tax. It is true that assessment under the Act is made afterthe close of the previous year, but the income which is liable to tax is theincome of the previous year. The Legislature has unambiguously expressed itsintention to impose liability to charge agricultural income of the previousyear. The tax assessed is therefore for the period of the previous year i.e.,for the period which ended on June 30, 1952. The case clearly fell within theterms of section 6(d) and the benefit of Rule 8-A was admissible to therespondent.
10. Rule 8-A requires the Collector to adjust the liability to payagricultural income-tax due by the intermediary against compensation payable tohim. This order, the High Court has directed the Collector to make in favour ofthe respondent, but in making the order the High Court has proceeded on theassumption that compensation bonds remain to be delivered to the respondent.For reasons already set out, there are no materials on which the truth of theassumption may be ascertained. We, therefore, set aside the order passed by theHigh Court and remand the case to the High Court for deciding whether there areany compensation bonds remaining to be delivered, and if not, whether by anyappropriate order or direction, adjustment of tax liability againstcompensation due to the respondent, which has been directed by the High Court,under Rule 8-A can be made effective. The High Court will dispose of thepetition on the evidence already on record, or such other evidence as may bebrought on the record by the parties.
11. There will be no order as to costs of this appeal.
12. Case remanded.